Key facts about school district cash balances

As final school district financial reports for the 2017-18 school year and budget year are being posted by the Kansas State Department of Education, KASB is updating information as well. Here is an update on school district cash balances.

Key Points:

July 1 statewide cash balances dropped this year as a percent of school district expenditures.

Almost all of the increase in cash balances in 2018 was in restricted school district funds, not available for general operations.

Statewide July 1 cash balances are at levels experts say is appropriate for moderate financial risk.

School district operating balance percentages are similar to the ending balances and internal borrowing for the State General Fund, approved by the Legislature and Governor.

School district cash balances vary significantly by month because of cash flow issues.

In Depth:

July 1 statewide cash balances dropped this year as a percent of school district expenditures

The statewide July 1, 2018, total of cash on hand in all funds increased this year, but total school expenditures increased even more. As a result, total cash balances dropped from 33.1 percent to 32.5 percent. The largest share of school district balances is in restricted funds, particularly bond and interest funds to pay for bond payments, and in capital outlay funds, in which districts accumulate cash to pay for capital projects like construction, remodeling and equipment without debt.

Other restricted funds include federal funds, gift and grant funds such as scholarship endowments, insurance reserves and student materials.

The remaining funds have fewer restrictions and are used to support general school district operations. These generally unrestricted funds dropped from 11.3 percent to 10.8 percent of total expenditures, the lowest since 2014 and approaching levels prior to the Great Recession in 2008.

Almost all of the increase in cash balances in 2018 was in restricted school district funds, not available for general operations

Total school districts cash balances increased from $2.016 billion to $2.109 bill from July 1, 2017 to July 2, 2018, but almost of that $93 million was in restricted funds that cannot general education purposes. Cash balances in unrestricted funds changed little and dropped as a percentage of expenditures because school funding increased.

Here the major changes in school district balances from 2017 to 2018:

Overall total, all funds: up $93 million (4.6%)

Capital Outlay: up $36 million (7.3%). Partially due to higher assessed valuation, which meant capital outlay levies raised more revenue than expected. State law limits these funds to building, equipment and maintenance costs, and certain limited building operating costs. Capital outlay levies are subject to voter protest petition.

Bond and Interest: up $26 million (4.6%). These funds are levied to pay for school construction bonds issue approved by local voters, which have increased.

Federal Funds: up $6.1 million (14.5%). These are primarily federal programs to assist disadvantaged students and improve teaching. Cash balances in these funds follow federal requirements.

Gifts and Grants: up $8.5 million (21.5%). These are funds received outside of the school finance formula, such as scholarship endowments and bequests, which are usually tied to specific programs.
Special Reserves: up $6.6 million (5.4%). These funds are reserve for self-insured school district insurance programs, based on actuarial needs.

All other funds: up $9.8 million (2.1%).

Increase in total expenditures: $408.1 million (6.7%).

Statewide July 1 cash balances are at levels experts say is appropriate for moderate financial risk

Unrestricted fund balances are about 11 percent of total expenditures, but a more appropriate comparison is to operating expenditures. From 2017 to 2018, unrestricted cash balances dropped from 16.6 to 16.1 percent of general operating budgets (general fund, local option budget and special education aid). The highest level was 17.5 percent in 2012.

A state efficiency report commissioned by the Kansas Legislature cited a report from the Governmental Finance Officers Association recommending operating reserve levels of 10 percent or less for low economic risk; 10-15 percent for low to moderate risk; 15-25 percent for moderate to high risk and 25 percent of more for high risk. At 16.1 percent, July 1 district cash reserves were 1.1 percent above the line between low to moderate and moderate to high risk.

School district operating balance percentages are similar to the ending balances and internal borrowing for the State General Fund, approved by the Legislature and Governor

While school district July 1 cash balances in operating budgets dropped from 16.6 to 16.1 percent general operating expenditures in 2018, the state general fund ending balance increased from 1.7 to 6.7 percent, and the state used $900 million in internal borrowing through “certificates of indebtedness” for total of 20 percent.

Total school district ending balances in operating funds are comparable to the state general fund ending balance plus certificates that borrow from other state funds. Both provide for contingencies such as reductions in revenue or unexpected expenses and to manage cash flow.

In fact, since 2011 school districts have generally maintained a similar level of cash balances as the state general fund:

School district cash balances vary significantly by month because of cash flow issues

July 1 cash balances are somewhat misleading because they are a “one-time snapshot.” Balances fluctuate significantly through the year because school districts receive revenue in certain months but must pay bills throughout the year. As a result, some funds have high balances when revenue is received but districts must make those funds last over the following months until additional revenue arrives, or to cover shortfall in other funds.

Some examples:
To manage the state’s cash flow, districts are required to account for the final state aid payment each year as if it were received in June, but the state does not actually send the money until after July 1. This amount fluctuates between $200 million and $300 million each year.

School districts must provide special education programs from the beginning of the school year, but state special education aid payments do not begin until October. As a result, districts have high balances in the special education fund to start the year (around $175 million), but those balances fall below $40 million during the year. Districts maintain some reserves for unexpected high cost for students, which can exceed tens of thousands of dollars per year.

Districts have almost $300 million in local option budget funds in March after receiving property tax distributions and state aid, but those balances are almost entirely spent down to zero at other points in the year.

Note:
KASB considers restricted funds to include: capital outlay, bond and interest, special liability, no fund warrants, special assessment and adult education (each of which is funded by restricted mill levies), plus federal funds, gifts and grants, school retirement, special reserve (insurance) and the student materials revolving fund.

Unrestricted funds are: special education, special education cooperatives, summer school, food service, contingency reserve, general fund, supplemental general fund (local option budget), virtual education, declining enrollment, cost of living, ancillary, professional development, activities, at-risk four-year-old, at-risk K-12, bilingual, extraordinary school programs, vocational education, parent education, adult supplemental education and driver training.

Latest reports show both short-term and long-term gains in Kansas education outcomes; positive impact on Kansas economy

Summary: Many people ask what Kansans are getting for their spending on public education. Despite what you might hear about no change in educational outcomes, the latest data from the U.S. census shows that Kansas education levels HAVE improved, and the state is reaping economic benefits. (Link to American Community Survey)

Key Points:

Short-term results: for Kansans aged 18-24 - the age group most recently in our public schools - the numbers who have completed high school, participated in postsecondary education and completed a four-year degree have increased more than the population increase.

Long-term results: the percent of Kansans age 25 and over reaching higher educational levels have improved since 1990, especially in terms of postsecondary education. Education levels have been steadily increasing since the Census began reporting data in 1940.

Because Kansans with higher educational attainment earn substantially more, the improved education levels since 1990 equal almost $7 billion in additional earnings in 2017, compared to what earnings would be at 1990 levels – more than the entire amount spent on K-12 education.

The same calculation also means increased education levels equals a reduction of nearly 40,000 Kansas in poverty, or 18.5%.

Conclusion: As funding has increased, school districts have invested in programs and staff that have helped more students complete high school, participate in postecondary education, and reach higher education levels. This, in turn, increases earnings and reduces poverty. That's why K-12 funding an investment that returns long-term benefits greater than the cost.

In depth

The latest update from the U.S. Census Bureau’s American Community Survey contains state estimates of educational levels, earning and poverty for 2017. The data shows Kansas educational levels have reached all-time high levels. This is important context for considering Kansas school funding, which has also increased over the long term.

First, short-term results. Consider Kansans aged 18-24 - the age group most recently in public schools. The numbers who have completed high school, participated in postsecondary education and completed a four-year degree have increased more than the population increase.

The number of Kansans in this age group increased by about 35,000 between 2005 and 2017. The number of young adults with any postsecondary participation, up to completion of a two-year degree, increased by 31,000 and those completing a four-year degree or more increased by over 5,000. The number of only a high school degree was almost unchanged, the number who had not completed high school dropped.

 Next, long-term results. Since 1990, the percent of Kansans age 25 and over reaching higher educational levels has improved, especially in terms of postsecondary education. Kansans with at least a high school diploma increased from 8 in 10 to over 9 in 10.

Kansans with any postsecondary education, from a few credits to a one- or two-year degree or certificate, to four years and beyond, increased from less than one-half to almost two thirds, and those with a four-year or advance degree increased just over 20 percent to nearly 34 percent.

These continue long-term trends for almost 80 years. Census data has reported high school completion and four-year degree completion since 1940. At that time, only bout about one-third of Kansans had completed high school and only five percent of Kansas had a four-year degree.

Next, consider the impact on this change on Kansas economic well-being. Because Kansans with higher educational attainment earn substantially more, the improved education levels since 1990 equal almost $7 billion in additional earnings, compared what earnings would be at 1990 levels – more than the entire amount spent on K-12 education.

The same calculation also means increased education levels equals a reduction of nearly 40,000 Kansas in poverty, or 18.5%.

Conclusion: This information is a measurement of how the Kansas public school system has been accomplishing its constitutional responsibility for intellectual, education, vocational and scientific improvement.

It also provides important context for school funding discussions. It is sometimes suggested that there has been not much change in Kansas educational outcomes, despite increased funding; with a further suggestion that additional funding will not result in improved outcomes.

In fact, as recent KASB posts have discussed, Kansas funding historically has increased more than inflation (except from 2010 through 2017). As funding increased, school districts have invested in programs and staff that have helped more students complete high school, participate in postecondary education, and reach higher education levels. This, in turn, increases earnings and reduces poverty.

Although K-12 funding has increased more than inflation, it has not increased at a faster rate than total personal income in the state. That's why school leaders consider K-12 funding a classic example of an investment, not simply an expense: “purchase of goods that are not consumed today but are used in the future to create wealth.”

Improved educational outcomes create far more than economic benefits: preparing students to be participate in democratic institutions, improving health, understanding and appreciating cultural heritage and the arts, to cite some of state’s educational goals (Rose capacities) set by the Kansas Supreme Court and Legislature. But fundamentally, improving education has both a cost and pay-back in long-term economic benefits.

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.

Mini-post: question about principals

After today’s post, a local board member sent me the following question from a constituent: “What has changed in the last 30 years requiring more asst. principals today than when I was in high school?” 

KASB doesn't have specific data back 30 years easily accessible, but we can dig deep if needed. We have Kansas staff data back to 1997, or 20 years, rather than 30. 

In 1997, Kansas had 1,673.5 principals and assistant principals and 466,368, or 278.7 students per principal/AP. 

In 2018, Kansas had 1,792.7 P/APs and 495,356 students, or 276.3 students per principal/AP. 

In other words, we have more principals because we have more students - the ratio has changed very little in 20 years. 

However, there are several other reasons for more principals (and other administrators): 

• Schools have added many more teachers, paras, aides, and other positions working with students. Principals help supervise, evaluate and lead other staff members in the school building. 
• Expectations for school leaders have changed. We expected more students to be successful; that means changing the way school operate. Principals have to be instructional leaders, not just facility managers. 
• There are much greater concerns about non-academic issues facing students, from building security to bullying and suicide prevention, and effective discipline. These tasks usually fall to principals. 

Too many principals in Kansas schools? Not for successful students

A spokesperson for Kris Kobach’s campaign for Governor says that twelve principals and assistant principals for two Wichita schools is “clearly excessive.”

However, data shows that compared to state and national averages, those two schools actually have fewer principals than would be expected, based on enrollment.

According to reports requested from the Kansas State Department of Education’s Data Central (link), Wichita East and Wichita North High Schools have a combined enrollment of 4,508 (2,331 plus 2,177). That means 12 principals and assistant principals would be responsible for 376 students each. (4,508 divided by 12).

Statewide enrollment reports indicate a total of 518,712 headcount students in Kansas. State personnel reports show 1,187.5 principals and 606.2 assistant principals statewide, for a total of 1,793.7. That means on average, Kansas principals and assistant principals are responsible for 289 students. (518,712 divided by 1,793.7) In other words, if there are 12 principals with over 4,500 students in two high schools, those buildings have fewer building leaders for the number of students compared to the state as a whole (376 versus 289).

How does Kansas compare to national data? The most recent reports are from 2014-2015. At that time, Kansas had nearly 100 more principals and assistant principals (1,899) with lower total enrollment (496,444), or 261 students for every principal and assistant principal. Nationally, the ratio was slightly higher (287 student for every principal) than Kansas in 2015, but almost identical to what was last year. The national average was also far less that the average at Wichita East and North.

However, the top achieving states on 15 educational outcomes had an average student/principal ratio of 260, below that national average and Kansas. The ten lowest achieving states had an average ratio of 306, higher than the national average.

In other words, the top achieving states have more principals compared to their enrollment, and the lowest achieving states have fewer.

Why would more principals and assistant principals be associated with higher student performance?
Research shows school leadership makes a difference in student achievement. Scholars at McREL, a non-profit education and research center in Denver, analyzed 70 studies involving approximately 1.1 million students and 14,000 teachers, and found a substantial relationship between leadership and student achievement.

Principals have these key roles in school buildings: providing overall leadership for all staff in the building, guiding, evaluating and supporting teachers, and dealing with students in areas such as discipline, safety, policies and activities.

A first-person description of what assist principals do today in today’s public school system is provided here (link).

Here is most recent national data on the number of principals and other school staff. (Link) Here is national enrollment data. (Link)

It should be noted Kobach's initial claim during a debate broadcast live throughout the state was that one Wichita high school had 12 assistant principals. The Wichita Eagle found that to be incorrect. Kobach has yet to publicly acknowledge his mistake. But a campaign spokesperson after acknowledging the initial claim was wrong, still contended 12 principals and assistants for two large high schools was excessive. The question becomes, excessive compared to what? The facts show that the number is much lower compared to the rest of the state and nation.