Questions and answers about proposed fix for Kansas school finances

If you’re trying to follow along at home, the Kansas school finance tumult is no doubt alarming and confusing.

That’s to be expected when a court decision mentions the potential shutdown of public schools over a matter that involves a complex education funding formula.

Kansas lawmakers in March approved a plan meant to satisfy an ominous school finance ruling by the state Supreme Court.

The bill is on the desk of Gov. Sam Brownback, who has until Friday to act. If he signs it or allows it to become law without his signature, the Supreme Court then would decide whether the plan complies with its decision.

Here are answers to some key questions.

Q. Was the Kansas Supreme Court serious that the state’s public schools might not open for the 2016-2017 school year?

A. The court ruled in February that unless the Legislature approved a plan by June 30 that fairly distributed funds among school districts, there would be no constitutionally valid school finance system for the fiscal year that begins July 1.

“Without a constitutionally equitable school finance system, the schools in Kansas will be unable to operate beyond June 30,” the ruling stated.

“Accordingly, the Legislature’s chosen path during the 2016 session will ultimately determine whether Kansas students will be treated fairly and the schoolhouse doors will be open to them in August for the beginning of the 2016-2017 school year.”

So, yes, the court’s language is clear.

What was the context of the court’s ruling?

Led by Republican Gov. Brownback, the GOP-dominated Legislature in 2015 repealed a per-pupil school financing plan begun in 1992 and replaced it with the block grant system for two years, time for lawmakers to devise a new school finance plan. The block grants essentially froze funding.

Four school districts — Kansas City, Kan., Wichita, Hutchinson and Dodge City — challenged the 2015 legislation as part of a lawsuit called Gannon v. Kansas. The Supreme Court said in its February ruling that the Legislature’s action last year did not comply with constitutional requirements for school funding.

How exactly?

The Gannon case has two parts, “equity” and “adequacy.” To comply with the equity requirement, the state must distribute state aid in a way that doesn’t create unreasonable funding differences between wealthier and poorer school districts.

The court said the Legislature’s school spending decisions in 2015 violated the equity requirement. The legislation shorted poorer districts, widening the funding gap between poor and wealthy districts, the court said.

An equalization plan was needed to smooth out the differences, the court said, and must produce “reasonably equal access to substantially similar educational opportunity through similar tax effort.”

The state high court is expected to review “adequacy” after the “equity” issue is resolved. The adequacy requirement focuses on whether the state is allocating enough funds to provide public school students a constitutionally adequate education.

What’s an acceptable equalization formula?

In its ruling, the court said one option for the Legislature would be to revive the equalization process used in the former per-pupil financing system.

Prior to the block grant legislation, the state used one equalization formula for aid to districts’ “capital outlay” budgets, primarily for buildings and equipment, and a different formula for aid to their “local option” budgets, mainly for operations.

Both equalization formulas were based on districts’ assessed property valuation per pupil, or the assessed valuation of the district divided by the number of pupils.

The state ranked districts from poorest to wealthiest. For capital outlay, the state set a certain amount of aid for the district at the halfway point or median, gradually decreasing aid for districts above that point and gradually increasing aid for districts below it. Some districts receive no capital outlay aid.

For local option budget assistance, the wealthiest districts, a little less than the top one-fifth, received no aid. The rest received aid on another type of sliding scale. The capital outlay formula was less generous than the local option one.

In the bill approved March 24 by the Legislature, only one formula — the less generous one for capital outlay — is used to calculate aid for both capital outlay and local option.

So how does the Legislature’s plan work?

The less generous formula reduces local option budget aid for most districts, a reduction overall of about $83 million. While capital outlay aid increases about $23 million overall, the net effect is to free up about $60 million.

Under the plan, that money is then distributed back to the districts to ensure that none loses funding next school year.

That’s the bill’s hold-harmless provision. Including it in the plan helped win the support of many Johnson County lawmakers. In previous proposals, the Blue Valley, Olathe and Shawnee Mission districts collectively would have lost millions in state aid.

The bill gives the Kansas state Board of Education control of a $15 million fund to respond to districts’ emergency needs and to other equity issues that arise.

The plan is for the 2016-2017 school year only.

Why do some say the plan will pass court muster?

Proponents said the plan is a valid remedy because it uses an equalization formula in the old per-pupil funding system, although not in the same way.

And the hold-harmless provision satisfies political and practical demands that school districts aren’t hit with a sudden cut in funding next school year, they said.

The Shawnee Mission district, for example, would lose an estimated $3 million in local option budget aid but would receive that same amount through the hold-harmless provision.

None of the state’s 286 districts would see a loss of funds, and 23 districts would receive an increase in state aid. Backers said an analysis by the state’s legislative research staff shows that the plan reduces the funding gap between the poorest and wealthiest districts.

Rep. Ron Ryckman Jr., an Olathe Republican, and Sen. Ty Masterson, an Andover Republican, chairmen of the Legislature’s budget committees, said they were keeping careful record for the court of the plan’s approval, including the use of transcriptionists at meetings. The court suggested in its ruling that the Legislature “show its work.”

Why do others say it won’t satisfy the court?

Opponents argued that switching equalization formulas won’t pass the court’s equity test.

The capital outlay equalization formula was not approved by the court for local option budget aid, they said. And reducing local option budget aid was done for budget reasons, not for educational reasons, they said.

The hold harmless provision is likely to create new disparities between wealthier and poorer districts, opponents said.

The hold harmless money is distributed to districts to replace the loss of local option budget aid, but it goes into districts’ general fund budgets. That means local school boards also could increase their mill levy to raise that same amount.

Doing so is easier for wealthier districts, they said. And if all districts with such authority chose to raise their mill levies, property taxes statewide would go up $83 million.

The bill keeps school funding approximately at current levels, but properly funding equalization under the old per-pupil formula would require increased spending of about $38 million, they said.

What if the high court rejects the Legislature’s fix?

Lawmakers said that such a possibility was the reason for approving the plan March 24 before leaving on a monthlong break. That provides time for the court to review and, they hope, respond by early May.

If the court gives a thumbs up, schools can open next school year and the Legislature can get to work on an overall school finance plan.

If the court rejects the remedy, there would be time for the Legislature to review the court’s decision and approve a new fix before July.

Has the state faced a school shutdown before?

In 2005, the state was within three days of a public school shutdown. When the Legislature failed to satisfy a school funding order, the court that summer threatened to freeze the state’s education budget. Legislation approved in a special session averted the shutdown.

A proposal for a new school finance formula was in the news this week. How does that relate to this discussion?

The legislation approved by lawmakers March 24 is a response to the February Supreme Court ruling, which ordered the state to fix the “equity” problem in the current financing system.

The one-year remedy would run through June 30, 2017. That’s when the current system, the block grants put in place in 2015 for two years, will expire.

The state needs a replacement financing formula to take effect July 1, 2017. House Bill 2741, filed just before lawmakers left for their spring recess, contains a proposed new formula. Legislators will decide how and when to proceed on the proposal when they return later this month.

Answers composed with the help of Kansas deputy education commissioner Dale Dennis, Mark Tallman with the Kansas Association of School Boards and others.

This story was originally published April 4, 2016 at 11:13 AM with the headline "Questions and answers about proposed fix for Kansas school finances."