State aid for school district bond projects: how it works, why it matters

State aid for school district bond projects: how it works, why it matters

Most people
are aware that the state of Kansas provides help for some school districts to
pay for construction bonds to build, remodel and equip schools and other
district facilities. But they may not know the details of how the program
works, or why it is important. Decades
ago, before the state began assuming a larger role in school funding, schools
were mostly funded through local property taxes. There are great differences among
districts in the amount of taxable local wealth (called assessed valuation),
especially when considering differences in the number of students each district
enrolls and educates.

 Assessed
valuation per pupil ranges from just over $1,000 in Ft. Leavenworth, a military
installation with almost no taxable property, to over $500,000 in Burlington,
home of the state’s only nuclear power plant. Even after throwing out those
extremes, valuation per pupil ranges from about $25,000 to over $375,000.

This means
lower wealth districts would require much higher property taxes to raise the
same amount as wealthier districts. For example, according to the Kansas State
Department of Education, the average school district bond payment last year was
$1,202 per pupil. This is an average: many districts have no debt and no
payments; others are higher.

 Again,
excluding extremes, a district with $25,000 in assessed valuation per pupil
(AVPP) would have to levy over 46 mills to raise $1,202 per pupil, compared to
just over 3 mills for a district with $350,000 AVPP. The statewide average
would be about 16 mills. Beginning in 1993, even before the Kansas Supreme
Court ruled such differences would create unconstitutional inequities for
students, the Kansas Legislature created a program to help lower-wealth
districts pay for school construction bonds.

 The
original formula was amended by the Legislature in 2015. Under the new formula,
the LOWEST district in assessed valuation per pupil would receive 75 percent
state aid, meaning the state would pay for 75 percent of the annual bond
payment. The “aid ratio” drops by one percent for every $1,000 in
increase in AVPP.

The next
lowest AVPP district for last year, 2017-18, was $25,800. The difference
between $25,800 and the lowest AVPP of $1,000 is approximately $25,000.
Subtracting 25 percent (1 percent for each $1,000) from 75 percent, means the
second lowest current district is eligible for about 50 percent state aid.

Without state aid, a district with AVPP of $25,000 would
need to levy about 47 mills to raise the state average per pupil annual bond
payment of $1,202. With 50 percent state, the required mill levy drops to about
23 mills.

The aid
percentage continue to drop until AVPP reaches about $76,000. In other words, the
rate drops from 75 percent at $1,000 per pupil to zero at $76,000 per pupil. There
are about 140 districts below $76,000 in AVPP, out of 286, which means that
approximately half of districts receive NO state aid, and half receive aid
between 50 percent and zero. There are only about 20 districts below $40,000
AVPP, which means most districts that get state aid receive less than 35
percent.

It is
important to remember that while lower wealth districts receive an increasing
percentage of aid, it does not mean their taxpayers pay less in taxes. In fact,
even with state aid, these districts still require a higher mill levy than
wealthier districts.

The chart
below shows the approximate mill levy required to raise the average bond and
interest payment of $1,202 per pupil without any state aid (blue bars), and the
levy required with the current state aid formula (orange bars). No aid is paid
for districts over about $76,000 per pupil and as AVPP continues to rise, the
mill levy continues to decrease.

As the table shows, this program is far from “fully
equalized.” Wealthier districts can still raise more revenue per mill, or equal
revenue at a lower tax rate; and the poorest districts still must pay more than
to raise the same amount. However, it does allow those lower wealth per pupil
districts to pay for school construction with tax rates closer to the state
average.

Information about specific districts can be accessed through
the Kansas State Department’s Data Central portal, here. You can
select reports on assessed valuation, bonded indebtedness and bond proceeds.