State aid is life for local schools

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The big chore confronting the 2018 Kansas Legislature is
a long, grinding march into the matted jungle thicket of local
school finance. Its landscape is clotted with complex formulas
and pitted with unfamiliar jargon, impenetrable codes,
the quick-sands of property valuation and mill levies.

We elect legislators to understand and grapple with all
this. The footing for local school finance has four basic components:
A statewide uniform property tax for schools; local
spending limits; local wealth as a shared state resource; state
funding of local schools based on district enrollment.

Closer to home, we can see the issue more clearly, the
cross-currents of revenue and expense, the impact of state
“aid,” the importance of revenue sharing. A view to the local
budget presents a picture of the statewide formula that is life
for local schools.

Late last August, the Smoky Valley School District adopted
year. This budget is clear evidence that the state and federal
governments are crucial to the survival of local schools, and
in spite of Gov. Sam Brownback’s attempts to dismantle
them, our schools are in reasonably good shape.

The $9,647,000 operating budget is to pay the district’s
day-to-day expenses. They include, among other items,
salaries and supplies, utilities and insurance, transportation
(buses), building maintenance and equipment. The
operating budget is composed of two parts: a general fund,
$7,257,099, financed through state aid; and a “supplemental”
(or local) general fund, $2,390,547 financed with local
property taxes.

The lion’s share of $7,257,000 is allocated from a central
pool in Topeka, money collected through a uniform, 20-mill
($20 per $1,000 assessed valuation) property tax in each of
the state’s 286 school districts. The money is returned to
local schools based on the number of students to be educated,
plus other defined needs. The “supplemental” $2.39
million is financed with additional local taxes.

Put another way, 75 percent of the operating cost for
Smoky Valley schools comes from a shared state fund. This
is similar, in varying measures, for nearly every other district
in Kansas.

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Imagine the burden if communities were to pay it all. In
each school district, the tax base for the local share of school
finance is separated in two component parts – property
assessed to support the general fund, and property assessed
for all other funds. For the Smoky Valley, it’s $71,787,000
for property assessed for the general fund, and $77,740,000
for all other funds.

Without state aid, taxes on these valuations would almost
quadruple.

Here’s how: To finance the $7.2 million general fund, the
local tax would increase from the current statewide rate of
20 mills ($20 per $1,000 assessed valuation) to more than
101 mills. The $2.4 million “supplemental” general fund
(local option budget) levy would increase from 15.78 mills
($15.78 per $1,000 assessed valuation) to $30.75.
Total: $131.84 per $1,000 assessed valuation, compared
with the current $35.78.

Thirty years ago, legislators confronted soaring school
taxes. Federal tax reform and statewide property classification
and reappraisal combined to turn the state’s 1973 school
finance formula on its head. Across Kansas, property levies
threatened to increase from double to as much as ten times
established rates.

Repeated patchwork adjustments were not enough.
Citizens and the courts demanded lasting change. Historic,
bipartisan reforms in 1992 created the current uniform
state property tax, the central pool for revenue sharing,
and set basic, per-pupil aid for the state’s school districts.

The formula also outlined criteria for additional aid to poor
and sparsely populated regions. In effect, wealthier school
districts were to share tax revenues in districts with a diminished
ability to pay.

School finance is conceived as a statewide commitment,
with local funding through uniform state taxation, and based
chiefly on the number of students to be educated, not the
wealth of a district.

In recent years as Brownback and his legislative allies
cut state funding, local budgets suffered, or local taxes
increased, or both. In some regions, schools were closed. As
the state withdrew support, the wealth of each school district
courts have repeatedly declared unconstitutional.

We have turned away from that block-grant, take-it-orleave-
it funding scheme, a brief Brownback-era disaster that
ignored critical variances that bless or afflict communities,
such as local economies, enrollment flux, transportation
needs. At the same time state aid was repeatedly slashed,
throttling local schools.

We have returned to our more equitable finance formula,
but the damage has been done. The Kansas Supreme Court
has ordered legislators to refuel funding for local schools.

With adjustments here and there, the current system will
continue to invigorate local schools. It means a stronger
state through equity in aid to all school districts. Without it,
everything – as we have recently seen – begins to fail.

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DEPARTMENT OF HISTORY: The roots of reform

In late 1988, less than a month after his reelection to the
Kansas Senate, Dave Kerr began raising an alarm about
threats to the state’s formula for local school finance. “We’re
headed for a disaster,” he told a reporter.

At the time, Kerr, a Republican, represented Reno County
and Hutchinson, home to Dillon Companies, Inc. a multistate
corporation that owned hundreds of supermarkets,
pharmacies and convenience stores under local and regional
banners. Dillon Companies had agreed in 1983 to merge
with supermarket giant Kroger. As the merger was completed
with Dillon executives seizing corporate power, the
multi-billion dollar transaction would enrich many shareholders
almost overnight.

Kerr was alarmed that the sudden infusion of wealth
would put Reno County schools in financial peril, especially
the Hutchinson and Buhler districts. Here’s why:
Since 1973, the wealth of a school district (or lack of it)
had determined its allotment of state aid. At the time the
formula for wealth was composed of property values plus 24
percent of taxable income. Districts high in wealth per pupil
received less aid than poorer districts. On a state average,
then, property values comprised about 75 percent of district
wealth, and taxable income, 25 percent.

Federal tax reforms of 1986 would expose more Kansas
income to state taxation. And as statewide property classification
and reappraisal took hold, the traditional formula was
turned on its head. Statewide, taxable income was suddenly
an average 56 percent of school district wealth (not 25 percent)
and property values, 44 percent (not 75).

Kerr had seen the threat early on. Without revision, he
said, the finance formula would penalize scores of communities
placed, almost overnight, among the ranks of
high-income school districts; they faced dramatic losses in
state aid and soaring property tax bills. Almost overnight,
Hutchinson and Buhler would become no-aid districts; local
property taxes would soar.

Kerr’s warnings were at first met with a shrug. Few legislators
had paid much attention to school funding because the
old formula had worked well. But soon other districts faced
the dilemma that plagued Hutchinson. By late 1989, angry
protests against looming tax increases had swept across the
state.

Gov. Mike Hayden called a special session of the
Legislature to deal with the issue, but lawmakers could not
be expected, in two days in December, to rewrite a century
of state tax law. The special session adjourned in frustration.

In 1990 and 1991, the Legislature and Gov. Joan Finney
failed to agree on funding enough for reform of the education
finance formula. A directive from a Shawnee County
District judge invited the legislature and the governor, in late
1991, to begin the work that led to dramatic reform of state
school finance in 1992. It remains the foundation for current
law. In spite of recent attempts to disparage or dismantle that
formula, it remains an equitable and constitutional method
for funding local schools.

 

‒ JOHN MARSHALL

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