As the legislative session moves toward the final stretch I wanted to take a moment to share with you some thoughts about the budgetary challenges currently facing our state. I have had the privilege of receiving a great deal of constituent input over the past several months and while those communications include much nuance, the three most prevalent messages I hear are: 1) Please do not raise taxes, but instead spend more efficiently; 2) Please do not decrease state funding for schools; 3) Please do not decrease state funding for the elderly and disabled. In understanding the challenges associated with balancing these concerns it is helpful to take a step back and consider the overall fiscal picture in Kansas. For those who are interested I encourage you to take a moment to view an attached power point presentation prepared by Rep. Kasha Kelley (R- ArkCity) that provides a helpful overview of the Kansas Budget.

The upshot of this information is that from FY 2005 to FY 2008 Kansas State General Fund (SGF) spending increased from $4,690.1 billion to $6,101.8 billion. This massive expansion in the size of Kansas government, coupled with the economic downturn in 2009 have combined to create our current fiscal difficulties. To put those numbers in perspective, total approved expenditures for FY 2010 currently stand at $5,450.1 billion, while revenue projections are $5,393.5 billion and falling. Indeed, state revenues in February were $71 million below estimates just for that single month. The key to the February shortfall was significantly lower individual income tax receipts than had been projected. That fact speaks volumes regarding the continued economic challenges facing Kansans.

Another way to understand our current economic reality is to look at the overall jobs picture in Kansas. According to the Bureau of Labor Statistics from December 2007 to December 2009 the private sector in Kansas lost 57,900 jobs while state, local and federal government in Kansas added 3,200 jobs. These statistics speak for themselves.

For FY 2010 the breakdown of state spending is as follows: Education $3.6 billion (66%); Human Services $1.2 billion (22%); Public Safety $368 million (7%); General Government $230 million (4%); Ag & Natural Resources $27 million (1%); Transportation $9 million (less than 1%). With respect to education spending another way to look at it is that 52¢ of every SGF dollar goes to K-12 education and 14¢ to higher education. As noted recently in the Kansas Business Journal (Click here for direct link), K-12 funding in Kansas is significantly more reliant upon state dollars than is the case in most other states. Currently 56.8% of Kansas K-12 spending is state financed with locals contributing 35.8%. Nationally the average is 46.6% state and 44.4% local.

This allocation of resources has significant consequences with respect to the ability of Kansas to fund other priorities like services for the elderly and disabled. This fact was recognized in February 2010 by Moody’s Investors Service when they downgraded Kansas’ bond rating on $1.5 billion of the state’s current debt. While a number of factors went into the Moody’s rating the report stated as follows: “Education funding increase legislation was enacted in connection with the state’s Montoy v. State school equity case. The funding legislation, which increased state school aid by about $1 billion during the fiscal 2006 through 2009 period in response to an order from the state’s Supreme Court, left Kansas little budgetary flexibility.” Again, this lack of budget flexibility impacts not only the interest rate Kansas will pay on its bonded indebtedness, but the funds available for all other programs. (As a brief aside it is interesting to note that from 2000 to 2010 our state bonded debt has increased from $1,427,911,190 to $3,843,142,000).

With all of this in mind we are now faced with a tough question; where do we go from here? While this question is far from simple I would suggest the basic answer can be clearly deduced from the available facts. Our current state school finance funding formula is broken and any plan that seeks to help our schools by simply putting more money into the existing formula is bad public policy, especially for Johnson County schools, where in rough terms we pay 30% of the state taxes, educate 20% of the state’s kids and receive in return 10% of state K-12 dollars.

Understanding the real legislative debate on K-12 education spending for the coming fiscal year requires giving consideration to a few basic facts. No legislator who I am aware of is proposing spending less state dollars on K-12 education than we will spend in the 2009 -2010 school year. Rather, the debate is focused on how to deal with the fact that Kansas will have approximately $173 million less in available federal dollars to spend on K-12 education during the next school year.

One alternative would be to replace those federal education dollars with new state K-12 spending within the existing school finance formula. This, plus a further increase in base state aid is essentially the Governor’s plan. Given the discussion above I think it is clear that this approach would perpetuate a flawed school finance formula and make it virtually impossible to properly fund other priorities, while at the same time necessitating a huge increase in the tax burden on Kansas families and businesses. A second alternative would be to simply not replace the reduced federal education dollars. This option, coming all at once, would be very difficult for our schools to absorb. This is especially true for Johnson County schools, which under the current formula are able to spend less per pupil than the state average. A third approach, and I think the better one, would respect fiscal reality by holding state K-12 spending level next year, while at the same time providing more flexibility and funding options to local school districts. To do this we must fundamentally reform the way in which schools are funded in Kansas.

Absent such fundamental reform simply putting more money into the existing formula will only increase the long term strain on Johnson County Schools. While there is no doubt that K-12 funding has dramatically increased over the past 5 years (for example from FY 2005 to FY 2010 funding for the Olathe School district increased 18.1% on a per pupil basis), these increases have not proven to be sustainable (for example the Olathe School district experienced a 3.3% decrease in per pupil funding from FY 2009 to FY 2010). Reforming the school finance formula by putting our money where our mouth is on the issue of local control is the most responsible way out of our current dilemma.

Of course talking about support for K-12 education and reform of the school finance formula is one thing; actually standing up and proposing real reform is another. On March 16th the Kansas House had an opportunity to debate any and every tax policy proposal that any member cared to suggest. Remarkably, Democrats and others who have spoken up most loudly for state wide tax increases failed to support or even offer a single proposal when the opportunity to do so was provided on the House floor. To advocate for one thing in public forums and then to do the very opposite in reality is, at the very least, a disservice to responsible political discourse in Kansas.

That having been said I am proud to be able to say that during our recent tax debate I was the ONLY member of the Kansas House to offer a concrete proposal to increase local control and flexibility relative to K-12 funding. My proposal which received 49 of the needed 63 votes, would have allowed local voters, on a county by county basis to approve up to .25% in additional sales tax authority to fund local schools. Johnson County had just such a tax in place from 2003 through 2008 when the County Commission, with voter approval, elected to shift this revenue to public safety funding. If passed by the legislature and approved by local voters my plan would have made available approximately $31 million dollars a year for Johnson County Schools.

Other proposals to allow more local flexibility and control will be forthcoming as we work to establish a method of school finance that is affordable, stable and fair. In evaluating these proposals I pledge the following: 1) I will not support a bandage approach that increases taxes on Kansans to prop up a failing and unfair school finance formula; 2) I will support, and have proposed, real reform efforts that give local schools, and local voters, better options to fund local schools at the local level; 3) I will not support state tax increases that harm Kansas families and businesses and delay economic recovery.

As a postscript it may be helpful to some to see a basic overview of our current school finance formula. The description immediately below is a slightly modified and updated version of an overview provided by the Kansas Legislative Post Audit Division a few years ago.

The School District Finance and Quality Performance Act provides the formula for computing State aid for the almost 300 unified school districts in Kansas. For the 2009-10 school year, Kansas school districts received just over $5.5 billion in revenues from all sources, or approximately $12,225 per FTE student. The process for determining the amount of General State Aid each school district will receive from the State is complex, but generally can be described as follows:

• First, the Legislature determines a baseline cost called Base State Aid Per Pupil (BSAPP). For the 2009-10 school year, BSAPP is $4,012.
• Second, what’s often referred to as a foundation-level of funding is determined by multiplying the BSAPP times each district’s “adjusted” enrollment. (Full-time-equivalent (FTE) enrollments in the district are adjusted to recognize and help fund the additional costs districts incur for such things as low enrollment levels and special needs students…) In Kansas, this foundation-level of funding is called State Financial Aid.
• Third, the State’s share of this foundation-level of funding is calculated by subtracting what’s called the “local effort” from the amount computed above. Local effort is the sum of locally generated resources, such as proceeds from the mandatory statewide 20-mill property tax, unexpended and unencumbered balances remaining in a district’s General Fund, certain federal funds, and other miscellaneous local revenues that are available to help finance the district’s educational activities. In Kansas, the State’s share of this foundation-level of funding is called General State Aid.