KASB estimates show Governor Kelly’s K-12 funding plan would bring school budgets close to inflation-adjusted 2009 levels

KASB estimates show Governor Kelly’s K-12 funding plan would bring school budgets close to inflation-adjusted 2009 levels

Governor Laura Kelly’s proposed budget for K-12 education is designed to settle the Gannon school finance lawsuit by restoring school district general fund budgets to constitutionally-approved levels in 2009, adjusted for inflation. It appears the Governor’s proposal would allow total general operating budgets, including local option budgets, to be close to that level in 2023, depending on actual inflation rates. Anything short of that amount would leave districts farther below the mark.

Last session, the Legislature passed a five-year (2019 to 2023) plan designed to restore base or foundational funding to the approved base state aid amount in 2009, under the system previously found to be constitutional, when adjusted for inflation from 2009 to 2017. The Kansas Supreme Court approved that method but said if the Legislature phased in the amount, it must also account for inflation during the phase-in period through 2023.

The Kansas State Board of Education has recommended a proposal to add approximately $360 million in additional base aid spread over four years (2020 to 2023) to meet that requirement. The Governor’s budget essentially adopts that recommendation, which means base aid would be about $90 million higher than levels already approved each year.

To analyze  what this means for school funding, KASB began with the K-12 Education Funding Proposal on page 8 of the Budget Director’s presentation. This provides a five-year plan for state foundation aid, special education state aid, and supplemental general (Local Option Budget) state aid. KASB then estimated total LOB funding by increasing the legal maximum LOB for 2019 by the percent of increase in state aid over each of the next five years.

The total of these three components (state foundation aid, special education aid and estimated LOB funding (both state LOB and local property tax) was then compared to the total of school district general fund budgets and special education aid plus LOB used from 2002 to 2018, as shown in the following chart.

Important note: this is an estimate of total school budgets, including the entire local option budget, not just state aid, which is all that is shows on the Governor’s budget documents.

The chart shows essentially flat funding from 2002 to 2004, an increase of nearly $1 billion from 2005 to 2009 following the Legislative response to the Montoy lawsuit, reduced funding following the budget crisis of the Great Recession, essentially flat funding during after the Kansas income tax cuts and block grant system that froze funding in 2016 and 2017, increased funding as the Legislature responds to the Gannon decision, and additional increases under the Governor’s plan.

However, the picture is different when adjusted for inflation, using the 2018 consumer price index.

In inflation-adjusted dollars, total general fund, special education state aid and local option budget funding had fallen from $4.81 billion in 2009 to $4.24 billion in 2017, a drop of $600 million. (Due to budget cuts, actual 2009 funding was lower than the amount of agreed to by the Legislature and Supreme Court to resolve the Montoy case.) In fact, the 2017 inflation-adjusted total is about the same as 2006 funding. That was before the Legislature began adding funding based a Legislative Post Audit cost study to determine funding necessary to reach state outcomes, a level that was supposed to reached in 2009.

Note that even with the Governor’s budget proposal, based on the State Board’s plan to reach constitutional funding, total funding is not expected to quite reach 2009 levels when adjusted for inflation. The major reason is the State Board’s plan is based on an average inflation rate of 1.44 percent, the average from 2009 to 2017. However, the actual CPI in 2018 was 2.3 percent; the official state Consensus Revenue Estimate is 2.2 percent annually for 2019 through 2021; and KASB used 2.0 percent to estimate the change in 2022 and 2023.

If the actual inflation rate is lower, the value of the Governor’s recommendation in future years will be greater; if inflation is higher than estimated, the value will be less.

Final points: these are total amounts, not per pupil amounts. Since 2009, statewide headcount enrollment has increased by nearly 19,000 students (4.0 percent). Students eligible for free meals, who are much more likely to have additional learning challenges requiring more resources, increased by over 30,000. Special education students, who require special services, increased by over 10,000.