1. Understanding funding for Kansas public schools
Past,
Present,
And Future

2. A little history 1 MILL OF LOCAL TAXES
Kansas Constitution: the State of Kansas must provide adequate and equitable education for all.
Adequate = enough money to provide a quality education
Equitable = each student gets the same quality of education
Pre-1970s: District budgets based on local taxation - wide disparities in per-pupil spending
BURLINGTON
$398,000
GALENA
$16,900
1 MILL OF LOCAL TAXES
A little history

3. School District Equalization Act (1973)
First attempt at equalization
Districts with less local tax resources (poorer districts) received more education money from the state than districts with more local tax resources (wealthier districts)
Law was flawed: Per-pupil spending still ranged from $2,700 to $12,000
School District Equalization Act (1973)

4. 1992 - School District Finance and Quality Performance Act
Designed to equalize educational opportunities statewide
Statewide property tax for K-12 education (originally 35 mills, but gradually reduced to 20 mills)
Two types of state funding: Base state aid and equalization aid
Law in effect until switch to “block grant” system in 2015
Kansas Supreme Court has found the old finance law constitutional when it is fully funded
The old finance law (1992)

5. types of state aid BASE STATE AID PER PUPIL
Schools received a base amount of funding (chosen by Legislature) per student
Amount from state = Base state aid per pupil X weighted enrollment count
In English: Schools received more or less additional money based on the needs of their students.
Weighting factors: Transportation, special education, family income levels, and more
Two parts to the old finance formula: Base state aid and Equalization Aid
Base state aid started at $3600, went up to $4400 in 08-09, now $3852.
types of state aid

6. types of state aid BASE STATE AID PER PUPIL
Two parts to the old finance formula: Base state aid and Equalization Aid
Base state aid started at $3600, went up to $4400 in 08-09, now $3852.
Original formula figured Capital Outlay and Bond and Interest using one method and LOB by a different method.
CO and B&I are basically for capital improvements. LOB started as a fund for extras but now combines with the General Fund for funding basic operations like salaries, utilities, school supplies, etc.
types of state aid

7. types of state aid EQUALIZATION AID
Additional funding for poorer schools based on property values in the district
Meant to allow for similar learning opportunities across all districts, rich or poor
Provided three types of aid:
Local Option Budget (originally meant for extras above and beyond basic education)
Capital Outlay (for repairing buildings, buying equipment, etc.)
Bond and Interest (state assistance in paying off bonds approved by local voters for building new facilities)
Original formula figured Capital Outlay and Bond and Interest using one method and LOB by a different method.
CO and B&I are basically for capital improvements. LOB started as a fund for extras but now combines with the General Fund for funding basic operations like salaries, utilities, school supplies, etc.
types of state aid

8. operating funds General Fund Local Option Budget (LOB)
Money for day-to-day operations
Local Option Budget (LOB)
Also known as Supplemental General Fund
Districts levy tax to get an LOB of up to 30% of the district’s state financial aid amount.
Originally for “extras,” now used for day-to-day operations
operating funds

9. FLOW OF MONEY: 1992-2014 State of Kansas Local Taxes Federal Gov.
KPERS (State Retirement Fund)
20 mills
How money flows from the state to school districts has changed significantly over the year and changes periodically. This graphic shows how it started.
Local taxes collected for General Fund, Supplemental General, Capital Outlay and Bond and Interest. These dollars are sent directly to the district.
General state aid sent from State into District General Fund.
Equalization aid sent from state to each fund.
Special Education money send directly to Special Education Fund
KPERS retirement money sent directly to State Retirement and not to district.
Federal funds – some flow through the state and some flow directly to the district
Other Operating Funds are funded through transfers from either the General Fund and/or the Supplemental General Fund
Special Ed.
General Fund
Local Option Budget
Capital Outlay
Bond & Interest
Fed Prog. (Title, Grants, Etc.)
LOCAL SCHOOL DISTRICT FUNDS
Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.
(Food Reimbursement)

10. EQUALIZATION aid: 1992-2014 State of Kansas Local Taxes Federal Gov.
KPERS (State Retirement Fund)
20 mills
How money flows from the state to school districts has changed significantly over the year and changes periodically. This graphic shows how it started.
Local taxes collected for General Fund, Supplemental General, Capital Outlay and Bond and Interest. These dollars are sent directly to the district.
General state aid sent from State into District General Fund.
Equalization aid sent from state to each fund.
Special Education money send directly to Special Education Fund
KPERS retirement money sent directly to State Retirement and not to district.
Federal funds – some flow through the state and some flow directly to the district
Other Operating Funds are funded through transfers from either the General Fund and/or the Supplemental General Fund
Special Ed.
General Fund
Local Option Budget
Capital Outlay
Bond & Interest
Fed Prog. (Title, Grants, Etc.)
LOCAL SCHOOL DISTRICT FUNDS
Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.
(Food Reimbursement)

11. 2014 changes State K-12 funding cut during Great Recession
Coming out of recession, funds were not restored
March 2014: Kansas Supreme Court says schools are underfunded
Legislature ordered to restore equalization aid immediately
Court said base state aid too low, but did not prescribe fix
Legislature restored equalization aid
Other funds shifted so more money appeared to go to General Fund
2014 changes

12. FLOW OF MONEY: 2014 changes State of Kansas Local Taxes Federal Gov.
20 mills
(Food Reimbursement)
State distribution to General Fund now includes 20 mills in local taxes, special ed., and KPERS
KPERS (State Retirement Fund)
Changes:
 The flow of local property tax dollars, Special Education and KPERS money changed in This change created the appearance that the districts were getting more money because it was added to base state aid and went to the General Fund. 
Special Ed.
General Fund
Local Option Budget
Capital Outlay
Bond & Interest
Fed Prog. (Title, Grants, Etc.)
LOCAL SCHOOL DISTRICT FUNDS
Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.

13. Governor and legislators said 1992 law was in the courts too often
Introduced “block grants” to set static funding levels for two years ( and ) while Legislature makes a new funding formula
Base state aid per pupil = Whatever the district received in minus 0.4%
0.4% reduction set aside in Extraordinary Needs Fund
Equalization aid for Capital Outlay and LOB reduced to save money
All equalization money except Bond & Interest now goes to General Fund first
Block Grant locked funding for two years. Was promoted as “guaranteed funding” allowing districts to plan.
Block Grant was to allow time for legislature to develop new formula as they did not like the old formula because it was 1. Too complicated and hard to understand. 2. Cost was unpredictable and they always had surprises of additional cost.
After the Legislature agreed to fund schools using the old formula and the courts approved, equalization aid for Capital Outlay and for Supplemental General was prorated at 75% because the state had financial problems. Block grants reduced equalization money even though the Kansas Supreme Court said fully funding these satisfied the equity requirement.
0.4% of district’s funding was put into Extraordinary Needs Fund meant to help districts if they had big drops in valuation or gains in enrollment.
Block grants:

14. Equalization changes under block grants (2015-16)
State of Kansas
Local Taxes
Federal Gov.
20 mills
KPERS (State Retirement Fund)
All equalization money except Bond & Interest now goes to General Fund first
(LOB and Capital Outlay amounts were lowered)
Equalization aid must be transferred from general fund to LOB. Transfer from general fund to capital outlay is optional.
Special Ed.
General Fund
Local Option Budget
Capital Outlay
Bond & Interest
Fed Prog. (Title, Grants, Etc.)
Capital outlay transfer is optional
LOCAL SCHOOL DISTRICT FUNDS
Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.
(Food Reimbursement)

15. Supreme court intervention
Schools said the reduction in LOB and Capital Outlay violated equity requirement of the Kansas Constitution
Kansas Supreme Court agreed
Legislature has until June 30, 2016 to fix equity or they will shut schools down because no Constitutional funding system is in place
Supreme court intervention

16. THE equalization ‘FIX’
The Legislature took action to “fix” the equity problem for the school year:
Funded Capital Outlay according to old formula
Cost to state: $23.5 million
Changed LOB formula to match Capital Outlay formula (reducing amount of aid)
Savings to state: $82.9 million
Created new payment type called “Hold Harmless” to prevent school districts from losing money due to new LOB formula
Cost: $61.8 million
Actual increase in equalization aid to districts: $2.4 million – but it’s not new
To be taken from undistributed money in the Extraordinary Needs Fund, which was taken from districts in the first place
The legislature used the old formula for Capital Outlay.
Threw out equalization formula for LOB and substituted same formula as Capital Outlay.
Previously LOB districts received equalization $$ if they fell below the 81% on assessed valuation per pupil. The farther below, the more state aid.
New formula- Median = 25% state aid. For each $1000 assessed valuation per pupil below median 1% is added. For each $1000 above 1% is reduced. (Example: $4,000 assessed valuation below median would mean 25% + 4% = 29% state aid.)
THE equalization ‘FIX’

17. The equalization ‘fix’
State of Kansas
Local Taxes
Federal Gov.
20 mills
Increased capital outlay aid
Reduced LOB aid
“Hold Harmless” funds make up the difference
KPERS (State Retirement Fund)
Hold
Harmless
The transfer of equalization aid from the general fund to capital outlay is no longer optional. Transfer of Hold Harmless funds to LOB is optional.
Special Ed.
General Fund
Local Option Budget
Capital Outlay
Bond & Interest
Fed Prog. (Title, Grants, Etc.)
Transfer of Hold Harmless to LOB is optional
LOCAL SCHOOL DISTRICT FUNDS
Other Operating Funds - Vocational, Professional Development, Virtual, Food Service, Etc.
(Food Reimbursement)

18. Effects of the equalization ‘fix’
Districts that don’t receive equalization aid (wealthier districts) are not affected.
For districts that do receive equalization aid:
Districts generally receive more state aid in Capital Outlay as it is fully funded
Districts generally receive less LOB aid as the formula was changed
“Hold Harmless” money goes to the General Fund and makes up the difference
There is almost no real change in total state aid.
©istock/Greg Nicholas
Effects of the equalization ‘fix’

19. Problems with the ‘fix’
The Legislature put no more money into schools. They only shifted it around to different funds.
In changing the LOB aid formula, they equalized downward.
The additional funding in Capital Outlay is in effect a reduction to LOB, which is operating money (salaries, etc.)
To have the same operating money they had before, districts receiving equalization aid have to raise local taxes.
Because of restriction on how Capital Outlay funds can be used, the gain in C.O. takes away from $$ for salaries, teaching supplies, utility bills, etc.
Problems with the ‘fix’

20. More Problems with the ‘fix’
In areas where residents will tolerate a tax increase, districts might leave hold harmless money in the General Fund, raise taxes to make up what they’ve lost in LOB, and actually have more money than before the changes.
In areas where residents will NOT tolerate a tax increase, districts will just have to make do with less.
This will likely have the effect of increasing inequity.
More Problems with the ‘fix’

21. Back to the supreme court
The Kansas Supreme Court will hold a hearing on May 10,
A decision will follow in a timeframe determined by the court.
Possible outcomes:
Court accepts the Legislature’s equity “fix” as-is
Court rejects the “fix” and tells Legislature to try again within a specified timeframe
Court rejects the “fix” and orders a specific solution
Back to the supreme court

22. Other considerations The State of Kansas is broke.
Revenues continue to come in below projections.
Revenue forecasts were just reduced by another $300 million.
Shortfalls are partially due to sluggish ag, oil and aviation markets, but mostly due to income tax cuts and business tax exemptions championed by Governor Brownback.
Governor Brownback has said he will veto tax increases.
What happens if the Court shuts down schools?
Money flow under the new law could be helpful or harmful, depending on the district and whether its patrons can stomach a tax increase.
Other considerations

23. Your local legislators
House
John Doe
(123)
Senate
Jane Doe
Your local legislators