Monday, September 24, 2018

Updated school finance information: funding increase, inflation adjustments, share of personal income and general state budget

Kansas school district expenditures hit a new high last year – but not after adjusting for inflation

The most recent update from the Kansas State Department of Education shows that total school district expenditures last year (20187-18) were $6.49 billion, or about $410 million more than 2017. About $325 million of the increase was state aid, and $130 million of THAT was to restore contributions for the Kansas Public Employees Retirement System that has been reduced the previous year.

Local funding increased by $94 million, party because an error in drafting the 2017 school finance bill reduced state aid for local option budgets, requiring more local funding, and party because of increased local funding for capital outlay and school bond payments.

Although $6.49 billion in total expenditures was the highest ever for Kansas school districts, when adjusted for inflation, it remains below the 2009 level. Total expenditures in 2018 were $124.3 million below inflation-adjusted 2009. That means total spending is less than it was a decade ago. (KASB adjusted for inflation using the Kansas consensus revenue estimate for inflation for 2018.)

Total expenditures include all dollars flowing through school district budgets.

KASB also tracks the total of school district general fund and local option budgets, plus special education state aid, which provide a basic state and local “operating” budget for educational programs. The final legal maximum budget reports posted by KSDE show these funds totaled $4.34 billion in 2018, up from $4.15 billion in 2017. That nearly $200 million increase was mainly due to higher base state and weightings as the Legislature responded to the Supreme Court’s decision on school finance.

When adjusted for inflation, general fund, LOB and special education in 2018 were $460 million below 2009. In fact, these funds in 2018 were lower than the 2007 level. The Legislature acknowledged this gap in its response to the Kansas Supreme Court in the Gannon school finance case. The Court ruled that the Legislature’s $500 million-plus, five-year school finance plan passed this session would be acceptable, but only if adjusted for inflation over the time it is phased-in.

School district general fund levels and special education is determined by the state through base aid, weighting factors and appropriations. The state also caps the amount of local option budgets.

Total expenditures include bond and interest payments approved by local voters, capital outlay funds raised by local mill levies (plus state aid for both programs); KPERS contributions which were underfunded in previous decades and now are increasing more rapidly as the Legislature tries to catch up; all federal funds; most food service costs; and other any local revenues like student fees for meals, materials and transportation. Most of these funds cannot be use for regular operating costs like teacher salaries.

A 10-year history of total expenditures statewide and for individual districts is available at KSDE’s Data Central School Finance Reports link. Select Total Expenditures from the drop-down menu.


Per pupil funding remains below 2006 and 2007 levels after adjusting for inflation

The latest information provided by the Kansas State Department of Education show that both total school district expenditures and the combined general fund, local option budget and special education state aid reached new high levels last year, following significantly increased state funding. However, when adjusted for inflation, both remain below previous high marks.

Because student enrollment has also increased in recent years, per pupil funding has increased less and remains farther behind inflation than overall spending. On a headcount basis (counting each enrolled student as one student), total expenditures per pupil was $13,106 in 2018. That remains below the level of $13,356 in 2007. General fund, local option budget and special education aid per headcount student was $8,771, lower than the 2006 level of $8,989.

In other words, even after substantial increases in funding last year, per pupil purchasing power is still less than it was 11 to 12 years ago.

In fact, total expenditures per pupil in 2018 was $962 below inflation-adjusted 2009, or a total of $476.5 million. General fund, LOB and special education aid operating funds were $1,444 per pupil below inflation-adjusted 2009, or a total of $715.3 million. That is a major reason the Kansas Supreme Court ruled that the Legislature’s $500 million-plus school finance proposal would be acceptable, but only if adjusted for inflation over the time it is phased-in.

In addition, the number of students with greater learning challenges due to poverty and disability has grown faster than the regular enrollment, and educational expectations on schools has also increased.

Note: KASB uses “headcount” enrollment to calculate a per pupil amount because until 2018, the full-time equivalent number reported by KSDE counted all kindergarten students as half-time students, even if they were attending full-time. The FTE number continues to count only preschool students funded by the state, not those funded by local districts. Because of the growth in such students, KASB believes the headcount number provides a more consistent comparison over the years and a more accurate count of the number of students the district is educating. Federal reports also use headcount.

School funding remains low compared to previous share of Kansans’ total personal income 

Kansas personal income is the total income the people living in the state receive from wages, proprietors' income, dividends, interest, rents, and government benefits. Comparing educational expenditures to that amount is an indicator of how much of people’s income is going to support public schools.

With increased state aid and more local revenue authority, in 2018 total school district expenditures increased to 4.51 percent of state personal income from 4.39 percent the previous two years. It was the highest level since 2011 (4.58 percent), but still well below the 20-year average from 1990 to 2010 (4.74 percent).

School district general funds, local option budgets and special education state aid were 3.02 percent of state personal income, up from 2.99 percent in 2017, but far below the 1990-2010 average of 3.65 percent.

This means that Kansans are currently spending or investing a lower percentage of total annual income to support public education than in previous decades, even after significant increases in funding last year.

Note: The 2018 levels are based on estimates of Kansas personal income growth projected by the state Consensus Revenue Estimating process. The April CRE projected Kansas personal income would increase 3.9 percent from $138.6 billion in 20127.

The share of state general funding spending going to K-12 state aid has remained stable for 25 years

Despite increases in state aid approved for 2018 and 2019, K-12 funding is not taking a larger share of the Kansas state general fund budget.

From the passage of the School District Equalization Act to the 1992 School District Finance and Quality Performance Act, the state constantly allocated about 40 percent of the general fund budget to K-12 aid. The 1992 law, fully implemented in 1994, raised state aid to reduce and equalize local property taxes for schools. As a result, K-12 aid increased from approximately 40 percent of the state general fund to approximately 50 percent.

Since 1994, K-12 aid has averaged 49.7 percent of the state general fund. In 2018, it was estimated to be 50.5 percent; in 2019, state aid is predicted to be 49.7 percent of SGF.

In other words, despite several decades of school finance litigation including the recent Gannon case, and increased state aid as result of these cases, school district aid is not taking a larger share of the state general fund budget.

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