There have been many questions about the Kansas State Board of Education’s proposal for an “inflation adjustment” that the Kansas Supreme Court said was necessary to approve the Legislature’s plan to restore constitutionally suitable funding.
The court said the Legislature’s increased school funding in 2018 and 2019 and a plan to further increase funding from 2020 to 2023 comes close to reaching inflation-adjusted 2009 funding levels, when the finance system was considered constitutional based on the Montoy school finance settlement. However, the court said a further adjustment for inflation was needed as the plan is phased in. The adjustment proposed by the State Board was recommended by Governor Laura Kelly in her budget request to the 2019 Legislature.
Here is a visualization of the plan based on the Governor’s budget request.
The chart begins with 2009, when the court, state and plaintiffs agreed the school finance system was constitutionally suitable (before budget cuts began). The dark green portion shows the actual total of school foundation aid, special education state and local option budget state aid ($3.54 billion). The light green portion shows the level adjusted by the estimated consumer price index for 2023 ($4.59 billion). KASB estimated the 2023 CPI using the Consensus Revenue Estimate inflation rate for 2019 to 2021 (2.2 percent) and 2.0 percent for 2022 and 2023.
The next six bars show actual state aid levels in 2018 and the Governor’s recommended levels for the current year (2019) and 2020 through 2023, the final four years of the Legislature’s school finance plan.
From the bottom: the dark blue portion is general state aid from the state general fund. The second block from the bottom is revenue from the statewide 20 mill levy and other local revenue in the state School District Finance Fund and Mineral Production Fund. Next, there is a light blue slice representing $96.6 million in 2018 and $45 million in 2019 transferred from the State Highway Fund. The Governor’s budget eliminates that funding beginning in 2020, which is $45 million replaced by state general fund dollars from 2020 to 2023. This change increases SGF expenditures but does not increase the amount of school district aid.
The next portion, in orange, is local option budget state aid, the “equalization” aid based on district wealth to fund a portion of local option budgets. The red portion is special education state aid, which is increased by $75 million per year.
All of this funding has already been approved under the school finance bill approved last year, increasing from $3.7 billion in 2018 to about $4.8 billion in 2023. The final portion of each bar, in yellow, is the increased base state aid proposed by the Governor for the inflationary adjustment (approximately $90 million per year) and an increase local option state aid based an estimated increase in LOB use over the next four years.
With the inflationary adjustment, total aid under these programs would be $4.48 billion. That is about $100 million below the estimated inflation-adjusted 2009 levels, largely because the State Board used average inflation rate from 2010 to 2017 – 1.44 percent per year – when inflation is expected to be 2.0 percent or more from 2019 to 2023. Actual inflation could be higher or lower.
Another way to visualize the inflation adjustment proposed by the Governor is by comparing it to increased funding already approved. The following chart shows the increase in funding for school operating budgets over the next four years compared to the current year, 2019.
The yellow bar at the bottom shows the additional funding proposed by the Governor for higher base aid and LOB aid, rising from $97 million in 2020 to $108 million in 2023. Most of the increase after 2020 is to increase Local Option Budget state aid due to a higher base amount.
Special education state is already scheduled to increase $7.5 million each year, to an additional $30 million in 2023. Local Option Budget state aid is also expected to increase under current law, from $9 million next year to $36 million at the end of four years.
Finally, base aid increases approved last session to address the Gannon lawsuit will add $97 million next year, rising to $387 million in 2021.