New reports provide updated picture of school funding and state budget after Gannon increases

New reports provide updated picture of school funding and state budget after Gannon increases

New state and federal reports have allowed KASB to update long-term trends in Kansas school funding, including action by the 2019 Legislature to address the Gannon school finance lawsuit, which was accepted by the Kansas Supreme Court. Here are the key points.

  • Most of the increase in school funding approved in response to the Gannon lawsuit will only replace purchasing power lost to inflation since 2009.
  • Since 2009, Kansas K-12 funding per pupil has fallen behind the national average. Additional funding may help close that gap, but U.S. data lags several years behind.
  • After increased funding to address the Gannon case, spending on K-12 education will be a lower share of total personal income of Kansas than most of the past three decades.
  • K-12 support has only increased slightly as a share of the state general fund budget, and that increase is a result of making up for KPERS underfunding, not the school finance formula.

Details, updated with Kansas Legislative Research Department’s Fiscal Facts and the Governor’s Budget Comparison Report:

Most of the increase in school funding approved in response to the Gannon lawsuit will only replace purchasing power lost to inflation since 2009.

Total Kansas school district expenditures increased from $2.3 billion in 1992 to $6.49 billion in 2018. Based on the action of the 2019 Legislature to increase per pupil per pupil state and KASB estimates using projections for other aid program, KASB estimates that total funding will rise to $7.44 billion in 2021.

But when adjusted for inflation, total expenditures in 2018 are still lower than 2009 ($6.623 billion). Assuming an inflation rate of about 2.0 percent, total expenditures in 2021 will have an inflation-adjusted value of just over $7 billion, or an increase of six percent over 12 years. Much of that increase is due to higher funding for school building projects approved by local voters and increased state payments to the underfunded Kansas Public Employees Retirements.

Funding for general operating costs – school district general funds, special education state aid and local option budgets – has increased at a lower rate, from an inflation-adjusted $3.393 billion in 1992 to a high of $4.809 in 2009 and dropping to $4.345 in 2018. Because the Legislature already approved base state aid increases through 2023, KASB can estimate spending in these areas for two additional years.

Inflation-adjusted spending for the general fund, special education aid and local option budgets is projected to be $4.686 billion in 2023 – still below 2009, using the 2018 consumer price index.

These numbers are statewide totals only, and do not account for higher enrollment, more special needs students and additional requirements on schools and students.

Since 2009, Kansas K-12 funding per pupil has fallen behind the national average. Additional funding may help close that gap, but U.S. data lags several years behind.

The U.S. Census Bureau’s Public Education Finances report annually shows total spending per pupil in all states but lags two years behind so this year, 2019, the most recent data is for 2017.

Adjusted for inflation using the 2017 consumer price index, both Kansas and the national average per pupil dropped following the 2008-09 recession and the slow recovery. However, by 2016 the U.S. average had recovered to 2009 levels and increased further in 2017, while Kansas was still below 2009 funding and the gap was widening.

In 2009, Kansas total per pupil funding was $356 million below the U.S. average. In 2017, Kansas was over $1,500, or approximately $780 million, below the U.S. average. Although Kansas funding began increasing more than inflation in 2018 in response to the Gannon school finance lawsuit, other states will also be increasing funding, so although the gap may narrow, it is unlikely to completely close.

Even after increased funding, spending on K-12 education will be a lower share of total personal income of Kansas than most of the past three decades.

Comparing total school district funding in Kansas to total state personal income, which is the total annual income of all Kansas residents from all sources (salaries, investments, rents, governmental payments, etc.) shows how much of their total income Kansans spend on their public schools.

Based on the latest economic forecasts by Kansas revenue experts, total K-12 spending is expected to be slightly over 4.5 percent of total personal income in 2020 and 2021. Although an increase over recent years, this is still lower than most years since 1990. The average from 1990 to 2018 was 4.66 percent.

To put this in individual terms, Kansas per capita income (total personal income divided by total resident population) was $50,155 in 2018. (The consensus revenue estimates do not include per capita income, so a projection for future years is not available.) Total K-12 school spending was 4.45 percent of personal income in 2018, or $2,232 per person. If K-12 spending had been at the 1990 to 2018 average of 4.66 percent of personal income, per capita K-12 funding would have been $105 more ($2,337) and would have provided more than $300 million in additional school funding. Funding K-12 education at the previously high rate of 5 percent of personal income would be $2,508 per person and have provided an additional $800 million in 2018.

School district general fund, special education and local option budgets will be about 3.0 percent of personal income in 2020 and 2021, well below than any years from 1990 to 2010.

K-12 support has only increased slightly as a share of the state general fund budget, and that increase is a result of making up for KPERS underfunding, not the school finance formula.

In 2020, school district state aid is expected to be 51.6 percent of the state general fund. Since the state took over a larger share of school district funding in 1994, K-12 aid has consistently been around 50 percent of the State General Fund.

In the early 1990’s less than 40 percent of the state general fund budget was spent on K-12 state aid, and school districts relied much more heavily on local property taxes. In 1992, the Legislature approved a plan to raise state taxes and state aid to school districts in order to reduce property taxes in most districts. To this day, Kansas has both higher state aid for schools than most states, but also provides less local funding and had lower school property taxes than most states (and provides over $1,500 less per pupil from all sources).

State aid can be divided between general school finance aid programs like general state aid, Local Option Budget and special education state aid; and payments on behalf of school district employees to the Kansas Public Employees Retirement System. KPERS funding simply “flows through” school budgets on the way to the KPERS system, where it is invested for future retirement payments. Since the 1990’s, the Legislature consistently underfunded KPERS payments, resulting a growing unfunded liability in the retirement system.

As the Legislature has increased KPERS contributions in recent years to make up for previous shortfalls, the KPERS portion of K-12 aid has been increasing. The school finance formula portion without KPERS has actually been dropping as a percent of the state general fund.