Tuesday, October 13, 2015

Block Grants Are a Bad Recipe (Part 2)

By Duane Goossen

Kansas school districts face a multi-year decline in classroom funding while statewide enrollment grows, and while costs for supplies, utilities, student transportation, and salaries rise.

An important accounting of this trend can be found in the table “Major Categories of State Aid for K-12 Education in Kansas” in the FY 2016 Comparison Report (page 60). The table contains the governor’s numbers, reported by his Kansas Division of the Budget. The budget office uses FY 2011 as the comparison point to the current fiscal year, but if the FY 2016 numbers were compared to FY 2009, the trend would actually be even starker.

The chart below, reprinted from the previous blog post on this topic, summarizes the numbers from the Comparison Report table.

Taking a deeper look at the Comparison Report table numbers, three items are important to note:
  • The switch to block grant funding serves to hide the trend.  In the Comparison Report table’s FY 2011 column, it’s easy to see the numbers separated out for General State Aid (classroom dollars) and for special purposes such as Retirement System Payments (KPERS), Local Option Budget Aid, etc., but in the FY 2016 column most of those categories are mushed together under the block grant.  However, an earlier table on page 59 shows how to unpack the block grant numbers to gain a clear comparison between the years.
  • Statewide mill levy money is included in the comparison.  For many years, Kansas has had a 20-mill statewide levy for schools.  The property tax proceeds from that levy used to go directly to school districts, but in FY 2015 the state began routing the money through the state treasury and counting it as state aid.  The block grant incorporates that statewide mill levy money.  For the purpose of comparing FY 2011 to FY 2016 the table correctly includes that property tax funding in both years, even though it did not pass through the state treasury in FY 2011.
  • Federal recovery act (ARRA) dollars are appropriately counted as “state aid” in FY 2011.  In FY 2010 and FY 2011 all states received federal ARRA funding to support Medicaid and Education as part of the federal government’s attempt to help states through the Great Recession.  Kansas lawmakers chose to use the federal education dollars as a substitute for state general fund dollars, knowing that the federal money was only available for two years.  To school districts it was all “state aid,” whether the source was ARRA funds or the general fund, just as the Comparison Report table appropriately shows. School districts expected that lawmakers would shift the source of school finance funding back to the SGF when the state no longer had access to ARRA funds. 
School districts also garner funding through local property tax levies for local option budgets, and bond issues. While the Comparison Report table does not show those sources, it does show the portion of school finance for which state lawmakers are responsible.

School block grants are a direct result of the state’s financial crisis. With revenue dropping as a consequence of unaffordable tax cuts, the switch to block grants provided a way to shut off increases for schools. Yes, as the chart shows, the amount for KPERS, capital improvement aid (buildings), capital outlay aid, and local option budget aid (mostly property tax relief) has grown. But the remaining state aid — the money that is used for classrooms — has declined.

If Kansas lawmakers want more money to go to classrooms, they should put more money there. The current block grant setup does not accomplish that.

— This entry was originally posted on the Kansas Center for Economic Growth website.

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