School Finance, State Budget Grab Center Stage (A blog by the KS Association of School Boards)

Two major events occur Friday that will set the direction of the 2016 Legislative Session, the next election and perhaps the education of a generation of Kansas schoolchildren.

At 9 a.m. oral arguments will be held before the Kansas Supreme Court in the long running Gannon school finance lawsuit.

The court proceedings can be viewed online here.

The court will consider whether the state needs to come up with approximately $50 million in equity funding for poor school districts. A three-judge panel ordered the funding, but the state appealed.

Documents in the case can be accessed here.

The larger question of whether overall funding to Kansas schools is adequate will be addressed next year by the state Supreme Court. Again, the three-judge panel has ruled the state has failed to provide adequate funding. A ruling against the state by the Supreme Court in this dispute could mean upwards of a $500 million increase for schools.

The lawsuit was brought in 2010 by plaintiff school districts after state budget reductions started in 2009.

Then later Friday, state budget experts will meet to re-calculate revenue projections for the remainder of the current fiscal year, which ends July 1, and the next fiscal year.

For the first four months of this fiscal year, tax receipts have fallen $78 million below previous projections, according to this memo from the Kansas Legislative Research Department.  

Key legislators have said they expect the Legislature will need to make $100 million in adjustments to balance the budget when the 2016 session starts in January. Some legislators have speculated that Gov. Sam Brownback may have to make budget cuts before the session to keep state finances afloat.

Talk of budget adjustments likely means budget cuts and fund transfers since legislators facing re-election in 2016 won’t want to have to defend another tax increase on top of the one they approved in 2015, when Brownback allies raised the state sales tax from 6.15 percent to 6.5 percent and increased cigarette and alcohol taxes.

KASB Blog: Most Kansans Don't Like Block Grant Funding System for Public Schools

The new block grant system to fund schools has received a failing grade from the public, according to the latest Kansas Speaks survey.

Sixty-four percent of respondents — nearly two thirds — said the block grant system resulted in a lower quality of education for children in their school districts, while 29 percent felt there was no change in the quality of education and 7 percent said it resulted in a higher quality of education.

The block grant system received an even worse grade from people who had school-age children at home with 73 percent of them saying it resulted in a lower quality of education; 20 percent saying it had no effect; and 7 percent saying it improved the quality of education.

The Kansas Speaks survey is an annual poll conducted by the Docking Institute of Public Affairs at Fort Hays State University. The poll, taken between Sept. 14 and Oct. 5, questioned a random sample of 1,252 adult Kansans on a wide variety of subjects, including the quality of life in Kansas, economy, taxes, state government, public policies and voting. The poll has a margin of error of plus or minus 3.9 percent. Here is a link to the survey.

Gov. Sam Brownback signed the block grant funding system into law during the last legislative session saying it would provide stable funding and serve as a temporary method until a more permanent finance formula could be devised. A three-judge panel has ruled the block grant system unconstitutional. The state has appealed that decision to the Kansas Supreme Court, which will hold oral arguments in the case on Friday, November 6.

The block grant essentially froze the level of school spending, which has squeezed many school districts that have faced increased enrollment and other increased expenses.

What Does Financial Health Look Like?

What Does Financial Health Look Like? By Kansas Center for Economic Growth Senior Fellow Duane Goossen Kansas is in a perpetual budget crisis! In October, general fund revenue fell below estimates - again. The October results mean that Kansas will not have enough money to cover expenses in the approved FY 2016 budget. Without more revenue, Kansans face mid-fiscal year cuts to an already beleaguered budget. If the state's general fund was actually healthy, what would that look like? Step 1:  Programs for which the state is responsible would be adequately funded. Public schools are a prime example. A financially healthy state provides enough resources for schools to allow them to grow and improve. Kansas, however, hovers on the verge of losing a court case for inadequate funding. School funding has been switched to a block grant, not because that's a more equitable way to distribute funding, or because it is what students need, but because it limits state spending on schools. The same kind of story pervades other parts of the budget-human service programs, higher education, the arts, the state workforce, and economic development. Step 2:  Ongoing revenue would at least equal expenses. When yearly, ongoing revenue equals expenses, a budget is in "structural balance." Kansas lost structural balance with the income tax cuts of 2012, and has not regained it, even after subsequently eliminating income tax credits and deductions, raising the sales tax rate twice, and upping cigarette taxes. The FY 2016 budget is still heavily dependent on one-time money transferred in from the highway fund and many other funds in state government. Step 3:  Kansas would have a rainy day fund and a healthy ending balance. Almost every state has a rainy-day fund, but not Kansas. Plus, states also normally carry a balance from fiscal year to fiscal year. Across the 50 states, the average total balance - rainy day fund plus carryover - at the end of FY 2014 was 9.9 percent of expenditures. According to the National Association of State Budget Officers that average was projected to be a slightly lower figure of 7.1 percent at the end of FY 2016. Kansas law does have a requirement that the year-end carryover balance be 7.5 percent of expenditures. If Kansas actually met that requirement the ending balance would be at least $475 million, not zero. Without a rainy day fund or an ending balance, Kansas is ill-prepared to face the next recession. Kansas is a long, long way from financial health. Hundreds and hundreds of millions of dollars away. The state lives from paycheck to paycheck, with no reserves. All of the state's energy goes to cutting back, downsizing, and trying to make a growing set of expenses fit within an anemic revenue stream, rather than investing in the future.  If that's the new normal, Kansans should be very concerned. # # # See KCEG's latest research & analysis, including briefs, infographics and other blogs, on our website.

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