Kansas Speaker: Schools don’t spend all they have

Based on choices that many school districts have made in response to legislation giving them flexibility to spend fund balances, Speaker of the Kansas House of Representatives Mike O’Neal questions whether a school funding crisis actually exists.

O’Neal, a Republican from Hutchinson, addressed members and guests of the Wichita Pachyderm Club at its regular Friday luncheon meeting. He started his talk by giving a quick history of recent Kansas school finances, especially litigation.

In 2005 there was the Montoy II ruling, which resulted in a special session of the legislature in response to a ruling of the Kansas Supreme Court. O’Neal described this as “nearly a constitutional meltdown,” because the was not a party to the lawsuit, but the Court ordered the Legislature to appropriate a specific amount of money to schools, or schools would close. O’Neal said this was an unconstitutional usurpation of the separation of powers.

Nonetheless, the Legislature did respond to the Court’s order and agreed to spend as directed.

O’Neal cited two provisions in the Kansas Constitution that relate to spending and education. One, Article 2, Section 24, states: “No money shall be drawn from the treasury except in pursuance of a specific appropriation made by law.” The other is Article 6, Section 6(b), which reads: “The legislature shall make suitable provision for finance of the educational interests of the state.”

Before Montoy II, this had been interpreted to require an appropriate and equitable mechanism for distributing available funds be in place. But after Montoy II, the Court interpreted this clause to apply to adequacy, that is, the Court can determine whether enough money is being spent on education.

O’Neal said there are now two pending amendments to the Kansas Constitution. One would make it clear that the Supreme Court can’t order an appropriation, and the other is a clarification to the “suitable provision” clause. “It’s trying to keep courts out of the business of education and school finance funding, and putting it in the hands of those who are elected and closest to the people,” O’Neal told the audience.

After this review of school finance litigation, O’Neal switched to the topic of whether schools are underfunded, as is the claim of the education community.

The claims of the school spending lobby are that the cuts are “devastating,” O’Neal said. But the facts, he said, do not support this contention. Since 2005 schools have enjoyed “a pretty healthy increase in funding.” The cuts that we hear about, he said, are not cuts in the sense that most people would use. Instead, there have been reductions in the amount of annual increases that have been experienced.

O’Neal said that during the last legislative session he spent a great deal of time investigating the status of school funding. He also said he tried to give schools authority to utilize funds in a way that would help address any funding crisis. He was aided by the Kansas Commissioner of Education, and also the Assistant Commissioner.

O’Neal said there are about 28 separate funds related to school funding. The Legislature created many of these in an effort to track how appropriated funds are being spent. One — the contingency reserve fund — is generally thought of as the primary reserve fund for schools.

At the end of 2011, the balance in all funds was $1.7 billion, O’Neal said, emphasizing the “b” in “billion.” He said this is a substantial increase over the prior year. Some of these funds are encumbered or spoken for, he said. In an effort to be fair, an analysis removed items like bond and interest and KPERS obligations. Taking away everything that could be argued as encumbered, O’Neal said there was still $640 million.

These balances are not distributed evenly across school districts, he added.

Referring to the 2005 Montoy decision, O’Neal said that the Court said the school finance formula distributed funds equitably, but there was not enough money in the pot. Noting the irony, he said “I would respectfully suggest today, based upon our analysis, that the Court not only got it wrong, but it was completely opposite. Why do we have a situation where some school districts have zero, with very conservative administration and management, and we have other schools districts that are sitting on tons of reserves.”

Using the Wichita school district as an example, he said the unencumbered balances are $39 million.

O’Neal asked the Kansas Department of Education this question: “Is this money that should be available to schools, and should they be utilizing that to educate Johnny and Susie?”

The answer he received was yes: There are funds, other than the contingency reserve fund, that have balances that ought to be available.

O’Neal said the analysis didn’t consider fund balances only at a particular point in time, but looked at the trend in balances over a period of five years. These balances, he said, are increasing over time, and at a “pretty hefty rate.”

The balances in some funds — he mentioned special education and at-risk — are growing rapidly. This, he said, is an indication that schools can’t spend all the money the state has sent. “But, it’s a devastating situation nevertheless, according to the education community.”

In response to recent cuts in Kansas base state aid per pupil funding, O’Neal said in 2011 the Legislature passed a bill giving school districts authority to spend up to $154 million to back-fill losses in base state aid. KNEA — the teachers union — and the Kansas Association of School Boards approved the bill.

But O’Neal said he was terribly disappointed in the result. Only 77 school districts (Kansas has nearly 300 districts) elected to spend any of the fund balances. The total amount involved was $23.4 million, which O’Neal said was 15 percent of the total authority granted by the Legislature, and a much smaller fraction of the total unencumbered fund balances.

Based on this, O’Neal questioned whether school funding is really inadequate. He said that schools could use these fund balances to compensate for cuts in base state aid, and could avoid laying off teachers. But many districts chose not to spend fund balances.

Regarding the ending balances in the Kansas general fund, O’Neal said there will be calls to spend more on education. “My question becomes: If you’re not spending the money you have already, why do you want the state to spend down its reserves, and send you more money that’s likely only to end up increasing some of your ending balances.”


2 thoughts on “Kansas Speaker: Schools don’t spend all they have”

  1. This is characteristic of government budgeted expenditures. Balances existing at fiscal year end are sequestered out of site. As an NIH grant applicant with primary clinical responsibilities at Stanford University Medical School I was assured by NIH Director that he always had over $30million assigned off budget for recall for ‘worthy’ projects.

  2. It was sad that Speaker O’Neal’s recent comments at the Pachyderm Club did not receive any Wichita media news coverage. At least I did not see any broadcast or print coverage.

    School districts should not be building surpluses while the private sector is hurting so badly. When you go into almost every small town in KS you will usually see that the newest and nicest buildings in town are the schools. In addition, the newest and nicest cars in this town are usually parked outside those school buildings. Kansans pay a lot for their government school structure and the education that their children are receiving according to the NAEP is quite disappointing. I’m glad that KS Policy Institute is providing information to legislators on this issue.

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