State aid distribution; local funding options not yet recommended

By Kansas Association of School Boards
January 21, 2015

State officials confirmed Tuesday the Brownback administration has not developed recommendations on how the proposed block grant of state aid would be distributed among districts, or what authority districts would have to raise local property taxes for school district operating expenditures.

The Governor has called for repealing or “sunsetting” the current school finance system and using a block grant system for two years while a new formula is developed and implemented. With the exception of the amount of the block grant, most details have either not yet been developed or released.

The proposed block grant for next year, Fiscal Year 2016, would combine four state aid sources: general state aid, local option budget state aid, capital outlay state aid and the revenue from the 20 state property tax levy, but would be reduced $127.4 million below the total of these funds in the current year, according to the Kansas State Department of Education. However, state funding for Kansas Public Employees Retirement System contributions would increase by $90.6 million over the current year, and bond and interest aid would increase $8 million.

The Department of Education report on the Governor’s budget is available here.

The reduction in block grant funding equals $186 in base state aid per pupil under current law ($127.4 million divided by a weighted enrollment of 686,000). Put another way, $127.4 million equals approximately 3.1 percent of this year’s estimated total of school district general funds, special education state aid and local option budgets ($4.12 billion).

However, the actual impact on school district budgets is still unknown for two reasons. First, the administration has not recommended how the block grant would be distributed to school districts if weighted enrollment is not used. Second, while the block grant includes funding currently distributed as local option budget and capital outlay aid, the administration has not addressed whether school districts would be able to continue to levy local property taxes for local option budgets and capital outlay, and what restrictions, if any, would be placed on those levies.

Last March, the Kansas Supreme Court ruled the school finance system was unconstitutional because the state was not fully funding state aid for those two programs. The Legislature responded by increasing state aid to those programs based on the estimated cost last spring, and a district court panel found the state had resolved the equity issue in the Gannon case.

This fall, however, state officials announced that fully funding those programs would require about $63 million more than estimated for two main reasons. First, changes in assessed valuation per pupil required a higher level of LOB aid to fund the formula. Second, districts adopted higher capital outlay levies than expected, requiring more state aid under the formula.

The Governor provided the additional funding for these programs in his current year (FY 2015) budget, but deducted a portion of this additional funding from the block grant amount in FY 2016 and 2017. In addition, increased funding for KPERS contributions are also subtracted from the block grant calculation. In effect, the additional KPERS costs are deducted from school operating budgets, rather than added on top of operating budgets as has been the practice in recent years.

The Governor’s plan also does not yet address locally funded weightings such as ancillary and cost of living.  Presumably, all weightings would be eliminated by “sunsetting” the formula.

If the authority for local option budget and capital outlay tax levies is repealed along with the rest of the school finance formula, or blocked by the courts without an equalization system, the reduction in school funding would be much higher than the $127 million figure. On the other hand, if local tax authority is increased because it would not be limited to a percentage of the current general fund, some districts might be able to increase their total funding.

The Governor’s plan does not make any changes to special education funding, or bond and interest state aid.