Kansas school funding formula is badly broken

By Dave Trabert, Kansas Policy Institute.

Data from the Kansas State Department of Education (KSDE) shows school districts’ unencumbered operating carryover cash reserves (excluding capital, debt and federal funds) as of July 1, 2011 were at a record-high $868.3 million. All last year districts said funding shortfalls were prompting them to cut teachers and programs. Meanwhile, most districts didn’t spend all of their state and local tax aid and increased their operating carryover cash reserves by $85.7 million.

This isn’t a one-time phenomenon; 2011 was the sixth consecutive year (since the courts said schools were under-funded) that some state and local tax aid was used to increase operating carryover cash reserves. Total operating carryover increased by $410.1 million since 2005.

If the school funding formula is consistently providing more money than necessary to operate schools, we should put the money where it’s really needed or give it back to taxpayers. That may be a controversial statement, but we can’t let controversy get in the way of providing kids with a quality education and a fiscally stable state after they graduate.

A large portion of the buildup in carryover cash is in funds set aside for special education, academically at-risk, and bilingual students. The balances in these funds alone have grown by $164.5 million; their total is $314.4 million. This is money specifically allocated by the funding formula for those purposes; the fact that this much apparently wasn’t needed is a clear indication that the formula is badly broken.

Kansas Policy Institute has been researching this issue since 2009. At first, some districts said the money wasn’t there; others said it existed at one point but had been spent. Still others said the cash existed but couldn’t be spent.

There is a legitimate issue of needing some degree of carryover to manage cash flow, especially since the state has been late sending money to districts over the last two years. But even that reason has an element of ‘the dog ate my homework’ for many districts.

Data collected from KSDE shows that districts’ operating carryover ratio last year (beginning carryover cash divided by operating costs) ranged from 1 percent (USD 312 Haven) to 64 percent (USD 502 Lewis), with the median at 16 percent. If Haven and dozens of other districts consistently manage cash flow with less than 10 percent carryover cash ratio, those with ratios of 20 percent or greater could do so with much smaller carryover balances.

Fortunately, the Kansas Legislature recognized the absurdity of having carryover cash pile up and gave schools full authority to transfer carryover balances from previously-restricted funds to offset up to $156 million in Base State Aid reductions over the last two years. (Another quirk of the formula caused base state aid to decline even though total state aid increased.) KSDE reports that only a small portion has been put to use so far.

The school funding formula should be based on what it costs to achieve required outcomes and also have districts operating and organized in a cost-effective manner.

Believe it or not, that wasn’t the basis of the last school lawsuit.

How’s that for a broken system?


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