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Walking the Path to Cuts

I’ve heard it said that the only way to digest a dinosaur is by eating it one bite at a time.  Trying to wrap your mind around the topic of school finance in Kansas right now is very much the same way.  The goal of this post is to provide some framework to help you understand why our school district in Eudora is talking about budget cuts and increased fees, and the reason for the special board meeting scheduled for this Wednesday evening.

In March, Governor Brownback signed a bill passed by the Kansas Legislature that replaces the school finance formula with a “block grant” system of funding for the next two years. (This was done with Senate Bill 7.)  The previous formula distributed money to school districts based on the number students in our schools on September 20th each year.  Let me point out that this formula has been litigated just twice since it was passed into law in 1992.  In both instances, it was not the formula that was called into question, but rather the legislature’s unwillingness to fund the formula as the law is written.

I want to begin this discussion of our district’s situation with my three biggest concerns about the block grant system and its effect on Eudora Schools:

  • First, frozen funding, regardless of enrollment.  Under the old formula, Eudora and all Kansas districts would receive more funding if district enrollment goes up, and less funding if enrollment goes down. Under the block grant, the amount of money is “frozen” for two years.  In a district like ours, where enrollment continues to slowly increase every year, we will have to spread a set number of  dollars out over a larger number of students.  If the old formula were still in place, our district could have realized as much as $100,000 in new money next year, simply based on projected increases in enrollment.
  • Next, I’m concerned with a decrease in equalization on state aid. State aid is based on the property wealth of a school district, divided by the number of students enrolled in the district.  Because our district’s assessed valuation per pupil is among the lowest in the state, we receive a substantial amount of state aid for our Capital Outlay and Local Option Budget (LOB).  In Eudora, this decrease in equalization results in a net loss of $134,000 in operational funds for next year.  Given that the block grant system is written to last for two years, we will also lose $134,000 in operational funds the following  year.
  • My third concern is that the block grant bill was written as a policy bill, not appropriations. This means the legislature must find the money to fund this each year.  And as of today, the Legislature has not appropriated any dollars to pay for the new block grant formula. Economists and financial experts across the state agree that the Legislature must increase state revenue in order to have the resources to fund the block grant.  A lack of adequate revenue will almost assuredly result in additional cuts to K-12 education over the next month or two, as the state cannot carry a negative cash balance.

When you consider these three concerns, it becomes clear that we in Eudora must plan for substantial measures to our district operating budget for the 2015-2016 school year.

Budget cuts and increased fees are painful, and they are the direct result of the failure of the Kansas Legislature to uphold its Constitutional duty to adequately fund public schools.

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$1 million in new money?

There is a lot of information being passed around that shows the Eudora School District receiving over $1 million in new money over the life of the block grant.  It would be a tremendous investment, if it were true.

The block grant system passed in March includes KPERS funding in its calculations.  The Kansas Public Employees Retirement System is a statewide defined benefit system for state and local public employees.  Every district employee has KPERS contributions deducted from their monthly paychecks, and the state has responsibility to fund the employer portion.  Together, that money is distributed to employees after retirement.  Right now, the state of Kansas sends us the employer portion of KPERS payments ($891,000 this year), and we are required to send that money right back to Topeka for payment to retirees.  Each school district has to count that money as part of their state aid, yet it is money that we neither control nor spend.

Property tax relief is another factor here. Last year when you received your property tax statement from Douglas County, it included a marked decrease in the school district’s overall mill rate.  The local option budget mill rate was decreased by the board’s action by 11.830 mills last summer.  This substantial decrease was the result of legislation passed last spring when the Kansas Legislature approved an increase in state aid for the LOB and Capital Outlay funds.  For a large number of districts (including Eudora), the appropriation of state aid to school districts was passed on to patrons as property tax relief.   We could not spend the money, since we were already at our statutory limit of 30%, so the funds were passed on to our patrons and businesses in the form of lower property tax.

When you add up the KPERS payments — funds that we are unable to spend on operational expenses — and the tax relief that resulted from a lowered district mill rate in August 2014, you’ll see how some people might argue that districts are receiving more money than they have in the past. But if you take a moment to understand what those dollars represent, you’ll quickly determine that they do nothing to offset the significant total of operational funds we’re losing.

In this shell game, Eudora’s students, employees, and schools lose. Big time.

And our costs keep rising…

Keyboard arrowsIf you manage a household budget, or work in a business environment, you know as well as I do: The cost of doing business goes up a little every year.  Depending on the item, it may go up a lot.

Schools are no different.  When the price of a gallon of milk goes up at the grocery store, we see the same increase for our food service program.  Our district has benefited — as we all have — from the substantial decrease in motor fuel costs this year.  (If only gas prices would stay that low!)  In addition to projecting increases in fuel costs, we have been told to expect an increase of 5% in our electrical and natural gas expenses.

The school district will see an increase in expenses next year, simply by opening our doors.  One of the most significant increases in operations will come in the form of special education expenses.  We know that some of our students require more support than other students, but the funding that we receive for special education programs does not cover the costs of the supports these children truly need.  We are partners with the Baldwin and Wellsville school districts to form the East Central Kansas Special Education Cooperative in Education.  Participating in this co-op helps spread the costs of services for our students to, in turn, help keep all three partners’ costs down.  However, we are increasing our financial investment in the special education co-op annually in order to provide those services, despite little to no increase in special education funding from the state.

When we consider increasing costs of running a school district, we must include the rising costs of insurance, one of those “necessary evils.”  While most people don’t don’t necessarily like to pay it, we know that when the time comes that we really need it, we want it to be there for us.  Every year the costs associated with insurance continue to rise.  We have been told by our provider that we should plan on an increase, and the current industry standard increase is somewhere between 8-10%.  This applies to our health insurance, as well as our property insurance.

The cold, hard truth 

Flat funding with growing enrollment, together with increased operational expenses — have placed us in a position where we must consider a combination of district budget cuts and student fee increases.  Flat funding is a product of the Kansas Legislature and our Governor.

Changes in tax policy will be needed in order to prevent the state from falling into a deeper deficit.  But until the leaders in Topeka pursue this course of action, the budget crisis created from reckless tax cuts in 2012 will continue to be balanced on the backs of Kansas students, families, schools and communities.

YOU can make a difference

Contact your elected officials — as often as you are able — and tell them that the state must find ways to increase revenue. Our students, schools,and community will continue to suffer until funding is restored.

 

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