KASB:The $80 million issue in the school finance bill explained

The $80 million issue in the school finance bill explained

The school finance bill signed by Gov. Jeff Colyer this week wasn’t written as intended and will provide school districts $80 million less than expected. The Governor has called for the Legislature to correct this problem when it returns next week. 

Not only does the bill provide considerably less than intended (as described by proponents), the impact of the inadvertent changes has a different impact across Kansas school districts. 

First, here is a very brief recap of how the school finance formula works. Districts count their actual students, then add “weighted students” based on various costs factors for different student, program and district costs. This means the actual “full time equivalent” enrollment of around 480,000 students is increased to just under 700,000 when all “weighted students” are added. The adjusted enrollment is then multiplied by a base amount per pupil, $4,006 this year. 

Under SB 19, the school finance bill passed last session, the base state aid per pupil was supposed to increase from $4,006 to $4,128, or $122. Multiplied by just under 700,000 “weighted” students – actual students with adjustments for various weighting factors for – that meant districts were expected to receive about $85 million more next year, 2018-19. In addition, special education state aid would increase $7 million. 

Earlier this session, the Kansas House passed HB 2445 in response to the Supreme Court’s Gannon decision. That bill would have increased the base next year to $4,170, an additional $42 per pupil or $29 million, for a total “base increase” of about $115 million in general state aid next year, plus an additional $32 million in special education for a total of $44 million. 

In the final weekend of the regular session, the House amended a Senate bill, SB 423, to include provisions very similar to HB 2445, and the Senate concurred in those amendments, sending the bill to the Governor. Members were told it would provide the same level of school district funding as the original House bill. But it become apparent that the way the bill was written would have a very different impact. 

The new bill contained a provision that required every district to have a mandatory Local Option Budget of 15 percent. This funding – from both local property taxes and state supplemental general state aid – would then be added to general state to funding a base budget of $4,900, although districts would not receive any more money than they would without the 15 percent LOB and a base of $4,170. 

This concept has been championed for years by House Education Committee chair Clay Aurand, who readily admits the purpose is to allow the Legislature to claim before the Supreme Court a higher “guaranteed” base amount for each pupil by “mandating” a portion of the LOB. 

However, as the amendment was drafted, it included state special education aid as part of the total amount of the 15 percent required LOB. This increased the “required” LOB statewide from $510 million to $590 million. Because this amount is subtracted from the total as “local effort” to determine how much state funding a district received, it ended up reducing state aid by $80 million below the intended amount. 

In addition, this new language does not affect all districts equally. Districts that received higher amounts of special education, because of higher special education enrollment or more expensive services, will have a larger “deduction.” Also, the bill repeals the “artificial” LOB base, which “grandfathered” LOB authority in certain districts. 

Combined with the impact of declining enrollment and expiration of some previous weighting like extraordinary declining enrollment and new facilities weighting, a number of districts actually lose funding under the bill as passed. Very few would lose funding under the bill as intended. 

Here is a link to a KASB document showing the district-by-district impact of SB 423 as it was approved and as it was intended.

It will be up to the Legislature to determine whether to correct the unintended consequences by either dropping the “mandatory LOB” provision, or making technical changes to keep that concept but avoid the $80 million reduction – or do nothing.