Monday, August 11, 2014

Facts about Kansas school funding: up, down or flat?

As the 2014 election campaign heats up and school boards adopt budgets for the current year, KASB has been receiving more and more questions about what has really happened to Kansas school funding in recent years.

Questions about school funding will continue to grow because the Kansas Supreme Court has held the test of constitutionally adequate funding is the so-called “Rose” standards for preparing students to be successful in their lives beyond high school. Before the state can decide how much money is needed to reach those standards, there must be an agreement on what we are already spending.

To help answer this question, we started with two documents the Kansas Budget Division - which is headed by Governor Brownback’s budget director - recently posted on its website. First is the budget Comparison Report. This document reflects final legislative action on the state budget for the the fiscal year that ended June 30 and the current fiscal year that began July 1. Page 60 contains a chart showing state aid programs for K-12 education, including federal stimulus funding during the recession years, from Fiscal Year 2010 to the current year FY 2015 (2014-15 school year).  Page 62 contains a chart showing state and federal funding for FY 2013 through FY 2015. The second document is a spreadsheet entitled State and Federal Support of Elementary and Secondary Education in Kansas, which covers the years from 2009 to 2015.

There are two major differences between these reports. The Comparison Report shows the shift of the 20 mill statewide levy from local revenue to state aid, which indicates that state aid increased 23 percent from last year to this year. The second document does not (as of August 3) show that change, which indicates total state and federal support increased just 4.6 percent this year. The second document also includes funding for Governor Brownback’s initiatives that impact K-12 students and districts but are not under the Kansas State Department of Education or included in district budgets: secondary technical education tuition funding through the Kansas Board of Regents and funding for the Read to Succeed program, Reading Roadmap and Jobs for America’s Graduates under the Department of Children and Families.

Missing from both of the documents is local school district funding. To show total changes in total school funding, KASB used total school district expenditure levels as provided by KSDE for 2009 through 2013, and KASB estimates for 2014 (final actual spending is not yet reported) and 2015 (budgets are not yet adopted) to develop the following data. NOTE: All numbers in these tables and charts are in thousands of dollars.)

Several items stand out. First, total school district support declined from 2009 to 2011 during the Great Recession. Second, total funding has risen each year from 2011 to 2015. Third, funding from the state general fund - the state’s general purpose “checkbook” of revenue from income and sales taxes - has remained essentially unchanged for five years even though the state economy has recovered, largely because state income tax cuts have reduced available revenue. Fourth, other state funding and federal funding increased from less than $500 million in 2009 to $850 million in 2014, largely because of federal stimulus funding in 2010 and 2011, and the use of state highway funding and expanded lottery revenues for education programs in 2014.

Because the statewide 20 mill levy will be collected by the state, rather than local districts, beginning in 2015, it produces a major increase in “other state and federal funding.” However, this change does not provide an increase in total school funding, because the 20 mill revenue disappears as a local revenue source. Finally, other local revenues are expected to decrease by about $20 million in 2015 because fully funding local option budget state aid will reduce LOB property tax requirements in many districts. These changes are displayed graphically below.

This data shows school funding has increased every year during Governor Brownback's administration. However, when adjusted for inflation, the picture looks somewhat different. KASB used the state’s April Consensus Revenue Estimate predictions for changes in the consumer price index in 2014 and 2015, and then adjusted the previous years’ funding to projected 2015 dollars.

As the following chart shows, when adjusted for inflation, total K-12 revenue has been essentially flat for the past five years, and is still below 2009 and 2010 levels.

Total revenues by source, however, does not explain how funding has changed for different programs within district budgets. In fact, most of the increase in school funding has not been available for “this year” expenditures for teachers, administrators, and support staff positions or salaries, or other annual operating costs. Instead, most of the increase has gone to pension and building costs.

Most funding for operating costs is in four areas that make up about 75 percent of total school budgets. First is the school district general fund, determined by the base state aid per pupil multiplied by student enrollment as adjusted with pupil weightings, plus special education state aid. Except for a few minor local revenues, this is funded entirely by state aid and the 20 mill statewide levy.

Second is the local option budget, funded by local property taxes and in about 80 percent of districts, by state LOB aid based on the district’s per pupil property wealth. Third is funding for federal educational programs like special education and Title I (No Child Left Behind), but excluding student meal support and federal stimulus funding included in the general fund and LOB funding. Fourth, we included funding for Governor Brownback’s technical education and reading initiatives.

In actual dollars, school district general funds and special education aid have been reduced by about $160 million, but local option budgets have increased by about the same amount. Federal education programs have been reduced by about $40 million, but funding for the Governor’s targeted programs increased by about the same amount. As a result, net funding for these programs, after dropping over $200 million in 2010, has recovered to about the same level as it was six years ago.

When adjusted for inflation, however, as the following table and graph show, the state’s base support for K-12 education through school district general fund budgets has declined almost $600 million, and Local Option Budgets did no more than keep up with inflation until 2015, when the Legislature increased the maximum LOB districts can adopt. Federal education program funding declined $75 million, or over 20 percent, during this timeframe.

These figures illustrate why school leaders continue to express deep concerns about the adequacy of school funding, despite increases that have been provided in certain areas. When measured against changes in the cost of living, funding for educational programs that can actually be spent on teachers, administrators and student support programs has declined by $500 million since 2009, and even the increases in these areas provided by the 2014 Legislature for 2015 will be less than the projected rate of inflation.

The remaining one-quarter of total school funding looks much different. This includes KPERS pension contributions made by the state for local school employees, which pass through school budgets but cannot be used for regular operating costs or current salaries. In response to significant underfunding in the state retirement system, the state increased this funding by over $150 million in the past six years. Second, state aid for bond payments and capital outlay for low property wealth districts increased by over $60 million. Third, federal food assistance to support free- and reduced-price meals for low income students increased by over $70 million.

The final and largest area is “all other” state and local funding, primarily school district payments for capital costs and debt service: building, remodeling, equipment and bond payments, which increased $230 million. (This area also includes the costs of “paid” student meals.)

These increases are reduced when adjusted for inflation, as the following table and chart shows:

This data hopefully clarifies some of the competing claims about school funding.  Total school funding has been increasing in real terms, but has essentially been flat when adjusted for inflation.  Within total budgets, support for current educational costs - salaries for teachers, administrators and student support positions and other student services - has been declining, while funding for student meals and long-term costs for buildings and retirement pensions has been increasing.

School districts have very little control over these budget trends. The district general fund (base per pupil and weightings), special education aid, KPERS funding and all federal funds are determined at the state and federal level. The state caps the amount of LOB and capital outlay funds that can be raised. Just about the only part of the budget entirely controlled at the local level are construction bonds, which must be approved by local voters.

A final comparison is to see what might have happened if school funding had followed the state economic recovery. Since 1990, total school funding in Kansas has averaged about 4.74 percent of total personal income in the state, which is the annual income of all Kansas residents. In 2009 and 2010, it was over 5 percent, as a result of additional funding provided after the Kansas Supreme Court Montoy school finance decision found the state was not providing constitutionally suitable finance, and a drop in personal income during the Great Recession.

However, as the state began to recover from the recession, school funding has fallen behind growth in personal income. Based on the Consensus Revenue Estimate projection for personal income growth in 2014 and 2015, KASB estimates total personal income will have increased 25 percent from 2009 to 2015, but K-12 funding will have increased less than 8 percent.  Total funding would be $422 million more next year if equal to the historical average percent of total Kansas personal income (4.74 percent), and over $750 million more if the level reached after the Montoy settlement had been maintained (5 percent).

If even the lower revenue level was available, the Legislature could have come close to funding the base budget per pupil at the previously approved level of $4,492, at a cost of $440 million. At the higher level, the state could also have funded all day kindergarten for all students, expanded preschool programs and provided other educational enhancements to help meet the new Rose standards for successful students.

Friday, July 18, 2014

Five questions for the new performance and efficiency commission

The Kansas K-12 Student Performance and Efficiency Commission holds its first meeting today.  After the first two appointments by House Speaker Ray Merrick - Dave Trabert of the Kansas Policy Institute and former House Speaker Mike O’Neal of the Kansas Chamber of Commerce and Industry - raised some eyebrows due to their long-standing criticism of many aspects of school districts’ operations, other appointments have created a fairly diverse group.

The Commission now includes two other former legislators widely seen as strong supporters of public education (Senate Vice President John Vratil and Assistant Minority Leader Janis Lee); two superintendents (Shawnee Mission’s Jim Henson and Concordia’s Bev Mortimer); two principals (Meg Wilson of Hoisington High School and Ken Thiessen of Wichita East High School), and Sam Williams, former chairman of the Wichita Metro Chamber of Commerce and a retired advertising executive.  The election of a chair from among these members will be a early sign of the commission’s direction.

(In addition to the voting members, the commissioner of education, the director of the budget, the revisor of statutes, the legislative post auditor and the director of the Legislative Research Department are nonvoting, ex-officio members of the commission.)

Here are some questions the Commission will have to confront:

1.  Is the primary goal to reduce spending or to improve results?

Could Kansas spend less on education?  Kansas ranked 27th in the nation in total revenue per pupil in 2012 (the most recent year national data is available). That is about $800 below the national average.  That means 23 states spent less on each K-12 student.  However, past KASB research has found that each of those 23 states either had lower overall performance on national tests, graduation rates and attainment of educational credentials, or had fewer low income students (who have significantly lower achievement in every state) than Kansas.  KASB is updating this research with new funding and achievement data released this summer.

In fact, the data consistently shows the amount of spending per pupil has a moderate to strong positive correlation with higher academic results.  In other words, more money does TEND to equal higher academic performance.  It is not a perfect correlation by any means - some states get a better “bang for the buck” than others.  However, Kansas is already one of the highest achieving states for the money it spends and the type of students it educates. Specifically, Kansas spends below the national average and is very close to the national average in the percent of low income students, but scores above the national average on virtually every achievement measure KASB has tracked.

As the commission considers recommendations, it will be critically important to examine whether such proposals not only lower costs but also improve educational outcomes.  If Kansas wants better results, we need to look at what states with better performance are doing.

2.  Are there easy ways to reduce educational spending?  

The Kansas Division of Legislative Post Audit has been conducting school district efficiency audits for five years.  Unless the LPA has come up with a different message than it has presented in the past, it will explain that almost all of the “easy” steps to cut costs do not save much money. Significant savings only come from making very difficult choices likely to create significant community opposition: closing buildings, cutting teachers and student services, or outsourcing expenditures away from local employees and vendors.

The simple fact is that “administrative” or “backroom” operations are already a very small part of school district budgets.  Most districts are already involved in numerous cooperative programs. However, many districts continue to operate schools or programs that may seem less efficient than some alternatives because their patrons value those programs.  Which leads to the next question.

3.  Who decides the value of “efficient” or “inefficient” operations?

It is important to remember the state, not local school districts, largely determines how much money districts get to spend on operating budgets through the base budget and weightings and limits on the amount of local option budgets.  Local school boards then make decisions on how to use those funds.  It can be a helpful management tool to consider how one district’s expenditures in certain areas compare to others, but those numbers alone will not tell the whole story.

One district may spend more on student support programs like nurses, counselors and social workers because its community lacks those services from other sources.  Another may spend more on certain purchases like fuel, vehicles and insurance because it wants to support local businesses, even if the cost somewhat higher than alternatives.  Another may want to keep open a school with excess capacity or higher operating costs in order to keep an educational presence in a small community or neighborhood, as way to sustain parent and business involvement.

The issue is not whether these choices are right or wrong. The issue is who should make the choice: the local district through its elected school board or the state?  Who will have to live with the consequences?

4.  How is efficiency measured?

Efficiency is usually defined as getting the best outcomes for the lowest cost or inputs.  Total cost is relatively simple to measure; although the details can be more complicated.  However, measuring educational outcomes on a statewide basis is usually limited to state test scores in reading and math and a few other subjects tested sporadically.  KASB has consistently heard from school leaders and patrons that educational expectations are much broader than standardized tests can measure.

The same bill creating the Performance and Efficiency Commission, HB 2506, adopted new educational goals based on the “Rose” capacities identified by the Kansas Supreme Court.  These goals only directly mention written and oral communications skills among subjects currently tested by the state.  But they also include civic and social engagement, physical and mental health, arts and cultural appreciation, and both academic and vocational preparation for postsecondary education and the workplace.  None of these important educational outcomes - included in the new educational standards - are currently factored into calculations of efficiency.  That is a critical issue for the commission to consider.

Consider recent state legislation and regulations concerning bullying and emergency safety interventions, such as restraining or removing students who pose a threat to themselves or others.  These requirements add significant new costs for staff training and supervision, but are unlikely to improve state reading and math tests.  Therefore, these requirements may be consider “inefficient” because they add costs with improving the only results measured.  However, the Legislature and Kansas State Board of Education clearly value these steps to improve student safety, as do educators, school boards and parents.

5.  How can the state support districts to get better results with available funding?

None of these questions should suggest there is no value to the commission’s work; or that school districts shouldn’t constantly look for ways to get the maximum educational results for the dollars they spend.  One of the reasons the Kansas Association of School Boards exists is to help districts work together to provide more efficient - and effective - ways of operating.  The national performance and spending data described above suggests that Kansas school leaders already take this issue very seriously.  The commission - and the state - need to see local districts as partners looking to achieve the same goals, not obstacles to be overcome.

This means the commission should start with the principle ‘first, do no harm.’ Beware the unintended consequences of new policies.  Remember, Kansas is already a high performing state with below average costs.  What may seem like “inefficiencies” from one perspective (smaller class sizes, schools and districts than most states) could be among the factors contributing to higher achievement.

Second, be consistent.  Ironically, some of the same advocates for consolidating school district operations at a “higher” administrative level also support creating independent charter schools or shifting authority to the building level that would not be required to coordinate anything with local districts.  Likewise, some proposals for additional school budgeting requirements would actually increase district administrative costs with no obvious benefit.  On one hand there are strong advocates for innovation, freedom and flexibility.  On the other hand, here are calls for more controls on how local districts operate.

Third, carrots usually work better than sticks.  KASB has consistently supported incentives for school district consolidation, cooperative and sharing of programs, but also believes the final decision should be made at the local level.  The best approach is not for the state to tell local districts what to do, but to help provide local leaders with the information, training and support to evaluate all options, decide on the best choices for their community; and build support among local patrons.

The commission has an important role for the simple fact that money will always be limited, and educational needs to continue to grow.  The Kansas Constitution requires a system of public schools for “intellectual, educational, vocational and scientific improvement.”  The goal should be finding ways to provide the best educational results for Kansas students. In other words, don’t forget that “Performance” comes before “Efficiency” in the commission’s title.

Tuesday, July 8, 2014

Enrollment projections point to higher costs and achievement challenges

KASB’s annual projection of Kansas school district enrollment for the next five years indicates more students will contribute to school funding costs. Over 90% of Kansas K-12 students continue to attend public schools, and changing demographics mean tougher challenges for student achievement.  Click for the full report from the KASB Research Department and the  KASB media release.  Here are four key points.

Kansas public school enrollment is growing

KASB projects total headcount enrollment will increase by nearly 25,000 students over the next five years, about 1% per year.  That may not sound like a big increase, but it is twice the growth of the last five years.  If all of these students were in one districts, it would be the fourth largest in the state (following Wichita, Olathe and Shawnee Mission).  A total enrollment of over 509,000 would also be the highest statewide public school enrollment since 1972, when the “baby boom” students began to decline.

Growing enrollment adds cost to the school finance system

At the current level of base state aid per pupil ($3,852), 25,000 students will require over $93 million in additional state aid just to keep up with headcount enrollment.  However, these students will also likely add other costs to the system.

Based on current economic statistics, about 10,000, or 40 percent, of these students will be eligible for free lunch, which would result increased at risk weighting.  Some of these students will enroll in career technical education courses, require bilingual or special education services, and transportation, all of which entail higher costs.

In fact, when all weighting adjustments are made, weighted enrollment is currently about 40 percent higher than headcount enrollment.  That means 25,000 additional students would likely result in approximately 35,000 weighted students, which would require about $135 million in five years, or $47 million more than headcount enrollment alone.  This would be the cost of simply keeping the base state aid per pupil at the same level, with no adjustment for inflation or expanded programs..

Public schools consistently enroll over 90% of Kansas students

Over 90% of the Kansas school-aged population has historically enrolled in public schools, which is higher than the national average of 86% to 88%.  Over the past five years, an average of 92.3% of resident live births enroll in Kansas public schools as first graders seven years later.  Also for the past five years, approximately 100% of students enrolled in public schools return for the next grade from first through eighth grade.

In ninth grade, public school enrollment jumps an average of nearly 6% each year; primarily because a number of students who attend nonpublic schools through eighth grade enroll in public high schools for ninth grade.

High school retention falls about 5% in both 10th and 11th grades, and 2% in 12th grade, largely because of students dropping out of school.  Approximately 15% of Kansas students fail to graduate high school by age 24, compared to a national average of about 20%.

The racial composition of Kansas students has changed dramatically, with a major impact on chances for student success.

Two decades ago, the Kansas public school population was 85% white, 8% black and less than 5% Hispanic.  White enrollment declined to 66% of the total enrollment for Kansas this year and is projected to be just 62% in 2019.  Black students enrollment has dropped slightly, and is projected to be less than 7% of the population in 2019.  Hispanic students have increased to nearly 18% of public school enrollment this year, and are projected to reach almost 22% in 2019.

This change alone helps explain the substantial increase in low income students eligible for free or reduced price meals; which rose from about one-third in 2011 to nearly half in 2013.  According to federal census data, Hispanic or Latino per capita income in Kansas is less than half of white income, and lower than any other racial or ethnic group.

The changing faces of Kansas students will make it more difficult for Kansas to improve or even maintain current levels of student achievement.  For example, 95 percent of middle and upper-income Kansas students graduate within four years, compared to just 76 percent of students eligible for free meals.  In both cases, Kansas far exceeds the national average.  (For details, see this report.)  In Kansas public schools, as in other states and private schools nationally and in Kansas, low income students, Hispanics and African Americans continue have lower educational achievement rates, although in most cases the gap has narrowed over the past decade.

The new enrollment projections are a reminder that state and local education and finance policies cannot be static; they must take into account the changing needs of Kansas students.