State aid for school district bond projects: how it works, why it matters

Most people are aware that the state of Kansas provides help for some school districts to pay for construction bonds to build, remodel and equip schools and other district facilities. But they may not know the details of how the program works, or why it is important. Decades ago, before the state began assuming a larger role in school funding, schools were mostly funded through local property taxes. There are great differences among districts in the amount of taxable local wealth (called assessed valuation), especially when considering differences in the number of students each district enrolls and educates.

 Assessed valuation per pupil ranges from just over $1,000 in Ft. Leavenworth, a military installation with almost no taxable property, to over $500,000 in Burlington, home of the state’s only nuclear power plant. Even after throwing out those extremes, valuation per pupil ranges from about $25,000 to over $375,000.

This means lower wealth districts would require much higher property taxes to raise the same amount as wealthier districts. For example, according to the Kansas State Department of Education, the average school district bond payment last year was $1,202 per pupil. This is an average: many districts have no debt and no payments; others are higher.

 Again, excluding extremes, a district with $25,000 in assessed valuation per pupil (AVPP) would have to levy over 46 mills to raise $1,202 per pupil, compared to just over 3 mills for a district with $350,000 AVPP. The statewide average would be about 16 mills. Beginning in 1993, even before the Kansas Supreme Court ruled such differences would create unconstitutional inequities for students, the Kansas Legislature created a program to help lower-wealth districts pay for school construction bonds.

 The original formula was amended by the Legislature in 2015. Under the new formula, the LOWEST district in assessed valuation per pupil would receive 75 percent state aid, meaning the state would pay for 75 percent of the annual bond payment. The "aid ratio" drops by one percent for every $1,000 in increase in AVPP.

The next lowest AVPP district for last year, 2017-18, was $25,800. The difference between $25,800 and the lowest AVPP of $1,000 is approximately $25,000. Subtracting 25 percent (1 percent for each $1,000) from 75 percent, means the second lowest current district is eligible for about 50 percent state aid.

Without state aid, a district with AVPP of $25,000 would need to levy about 47 mills to raise the state average per pupil annual bond payment of $1,202. With 50 percent state, the required mill levy drops to about 23 mills.

The aid percentage continue to drop until AVPP reaches about $76,000. In other words, the rate drops from 75 percent at $1,000 per pupil to zero at $76,000 per pupil. There are about 140 districts below $76,000 in AVPP, out of 286, which means that approximately half of districts receive NO state aid, and half receive aid between 50 percent and zero. There are only about 20 districts below $40,000 AVPP, which means most districts that get state aid receive less than 35 percent.

It is important to remember that while lower wealth districts receive an increasing percentage of aid, it does not mean their taxpayers pay less in taxes. In fact, even with state aid, these districts still require a higher mill levy than wealthier districts.

The chart below shows the approximate mill levy required to raise the average bond and interest payment of $1,202 per pupil without any state aid (blue bars), and the levy required with the current state aid formula (orange bars). No aid is paid for districts over about $76,000 per pupil and as AVPP continues to rise, the mill levy continues to decrease.

As the table shows, this program is far from “fully equalized.” Wealthier districts can still raise more revenue per mill, or equal revenue at a lower tax rate; and the poorest districts still must pay more than to raise the same amount. However, it does allow those lower wealth per pupil districts to pay for school construction with tax rates closer to the state average.

Information about specific districts can be accessed through the Kansas State Department’s Data Central portal, here. You can select reports on assessed valuation, bonded indebtedness and bond proceeds.