How school funding changes compare to inflation, enrollment and educational attainment

How school funding changes compare to inflation, enrollment and educational attainment

Each year at this time the Kansas State Department of Education releases updated budget information for school districts. That often produces questions and comments from school leaders, legislators and other organizations. People are interested in how much funding has changed, especially after increased state funding over the past two years. Unfortunately, some of that information can be quite confusing without a fuller context.

Here is a closer look and explanation of some key points. School leaders may want to use this information to explain school funding trends statewide, and for their districts. Here are the highlights:

  • Schooling funding is complicated, and any single report or annual change often doesn’t show the whole picture.
  • Looking at total expenditures along doesn’t show the impact of inflation. School funding was far below inflation since 2009 and still hasn’t caught up after the past two years.
  • Inflation-adjusted expenditures must also account for enrollment and students with additional needs, which have also been increasing. Per pupil funding is still lower than the mid-2000’s when adjusted for inflation.
  • Long-term school funding – going back several decades or more – has risen more than inflation. So has educational attainment.

Details:

School funding is complicated, and any single report or annual change often doesn’t show the whole picture.

Let’s start with total expenditures, which are reported annually by KSDE for the entire state and by individual districts, which can be found at this link. The statewide total report looks like this:

This chart shows total expenditures statewide rising from about $5.6 billion in 2009-10 to $6.7 billion last year. That seems like a substantial increase – but it doesn’t take into account the impact of inflation, higher enrollment, and more students with special needs. It also doesn’t reflect change in the type of funding districts receive and how those funds can be used. We’ll look at those in more detail.

But first, the chart shows total expenditures increased $219 million from 2017-18 to 2018-19, or about 2.3 percent. That was the second year of increased state funding under the Gannon school finance case. The first year was 2017-18, when funding increased over $400 million.

For 2019, the Legislature increased base state aid per pupil, including weighting factors, by $90 million, special education aid by $43 million, and bond and interest and capital outlay aid by $15 million. Note, however, that this report shows STATE aid increased just $68.6 million (from $4.33 to $4.39 billion). That’s because the Legislature reduced school contributions to the Kansas Public Employees Retirement System by $115 million as a one-time savings. KPERS funding will increase $258 million in the current year (2019-20), so the 2019 state aid amount is accurate but somewhat misleading.

This report also shows federal aid increased $46 million – the largest increase in a decade. However, most of that increase – $34.5 million – was in one district (Geary County USD 475) for a new high school to serve students of military families and will not be on-going.

The final revenue source, local, increased $103 million. This is mainly due to higher revenues from local capital outlay levies, higher bond payments and reducing cash balances in operating funds, which is also “one time” money.

The point is, year-to-year changes do not tell the whole story. However, it’s clear total K-12 funding in Kansas is has been consistently rising over the past decade. Why, then, did school districts impose “budget cuts” and the Kansas Supreme Court find funding was unconstitutional?

Looking at total expenditures alone doesn’t show the impact of inflation. School funding was far below inflation since 2009 and still hasn’t caught up after the last two years.

Most people understand that the value of a dollar today is not the same as a dollar years ago, because of inflation. KASB prepared the following chart to show both actual dollars spent each year since 1990, and the value of those dollars adjusted for the inflation by the consumer price index for each year. (Since 2019 is not over, we use the 2918 CPI and adjusted 2019 spending for estimated inflation this year.)

The top solid and dashed lines show total expenditures – the same information reported above but back to 1990 – both in actual dollars and adjusted for inflation. The bottom solid and dashed lines show the total of school districts general funds, local options budgets and special education state aid, actual and adjusted. This data is from the final legal maximum budget reports posted by KSDE, found here since 2006. KASB has data back to 1990.

Although total expenditures of $6.71 billion for school year 2018-19 is the highest ever, when adjusted for inflation to the 2018 consumer price index (assuming a 1.9 percent inflation rate for all of calendar year 2019), total adjusted expenditures for 2019 ($6.59  billion) will be lower than 2009 adjusted ($6.63 billion.

Likewise, the combined district general fund, special education and local option budgets totaled $4.49 billion in 2019 is the highest ever in adjusted dollars. But when adjusted for inflation, general fund, LOB and special education in 2019 were still over $460 million below 2009.  In fact, these funds in 2018 were lower than the 2007 level. The Legislature acknowledged this gap in its response to the Kansas Supreme Court in the Gannon school finance case. The court ultimately accepted a plan to restore funding to 2009 level, adjusted for inflation, over a six-year period beginning in 2018. The Legislature has approved base state aid increased through 2023 calculated to reach that goal.

What is the difference between the general fund, special education state aid and local option budgets, and total expenditures? The first are basically district general operating funds for educational programs. The Legislature determines general fund levels and special education through base aid, weighting factors and appropriations. The state also caps the amount of local option budgets.

Total expenditures add bond and interest payments approved by local voters and capital outlay funds raised by local mill levies (plus state aid for both programs). It also includes KPERS retirement contributions which were underfunded in previous decades and now are increasing more rapidly as the Legislature tries to catch up. Finally, it includes all federal funds; most food service costs; and other any local revenues like student fees for meals, books, materials, activities and transportation. Most of these funds cannot be use for regular operating costs like teacher salaries.

Inflation-adjusted expenditures must also account for enrollment and students with additional needs, which have been increasing. Per pupil funding is still lower than the mid-2000’s when adjusted for inflation.

Total expenditures, even adjusted for inflation, also do not tell the whole story. Student enrollment has also increased. Headcount enrollment has also increased by 29,000 students from 2009 to 2019, or six percent. As a result, per pupil funding well even farther behind inflation.

Because student enrollment has also increased in recent years, per pupil funding is farther behind inflation than overall spending. On a headcount basis (counting each enrolled student as one student), 2019 total expenditures per pupil was $13,197 (in inflation-adjusted 2018 dollars). That is $900 below the high mark in 2009. In fact, it is $200 lower than 2007, when funding was still considered constitutionally inadequate.

General fund, local option budget and special education aid per headcount student was $8,828 in 2019 (in 2018 dollars) That is more than $1,400 below the 2009 high mark of $10,240 (inflation adjusted), and in fact is lower than the 2006 level of $9,011.

In other words, even after substantial increases in funding over the past two years, per pupil purchasing power is still less than it was 12 to 13 years ago. Based on 2019 enrollment, total expenditures were $450 million less than in 2009 and general fund, special education aid and LOB funding $700 million less than in 2009, when adjusted for inflation.

In addition, the number of students with greater learning challenges due to poverty and disability has grown faster than the regular enrollment, and educational expectations on schools has also increased. The number of students on free and reduced-price meals has increased nearly 20,000 since 2009 and the number of special education students has increased by over 10,000.

Note: KASB uses “headcount” enrollment to calculate a per pupil amount because until 2018, the full-time equivalent number reported by KSDE counted all kindergarten students as half-time students, even if they were attending full-time. The FTE number continues to count only preschool students funded by the state, not those funded by local districts. Because of the growth in such students, KASB believes the headcount number provides a more consistent comparison over the years and a more accurate count of the number of students the district is educating. Federal reports also use headcount.

Long-term, school funding – going back several decades – has risen more than inflation. So has educational attainment.

Although per pupil education funding has begun to recover from falling behind inflation from 2009 to 2017, it will be noted this funding is still higher than it was in 1990, 2000 or 2005. Because one of the key issues is education funding is whether higher funding leads to higher results, it is important to note that long-term Kansas education levels are also higher than they were in each of those years.

Since 1990, the percent of Kansans 25 and old who have completed high school have increased from 81 percent to 91 percent; completion of any postsecondary education from 48 percent to 66 percent; and four years of college or more 21 percent to 34 percent.