A maxim mentioned by conservatives when school finance rears its head is that school districts are sitting on large sums of money that go unspent.
The most recent statement to that effect came from David Dorsey, senior school policy fellow with the Kansas Policy Institute.
He wrote: “… school districts in Kansas have quietly amassed cash reserves of $853 million, an 82 percent increase from a decade earlier!”
Dorsey’s statement is absolutely true, but there is more to the story.
Craig Neuenswander, former USD 257 superintendent and now school finance director for the Kansas Department of Education, pointed out some federal and capital funds have restrictions that limit expenditures, including they cannot be spent in the classroom.
— The balance in the supplemental general fund cannot be spent because districts have a budget limitation. The balance is used to lower property taxes in the next budget year — cash carryover frequently found in local budgets. This fund, also known as the local option budget, is determined by a percentage of the general fund, and funded in part by local property taxes. The levy this year is 17.333 mills in USD 257. The LOB is about 30 percent of the general fund: $3.15 million compared to $10.25 million.
— Food service balance may be used only for breakfast and lunch expenses, and what is budgeted appears as a balance until it is spent, a year-long process. USD 257’s food service expenditures are predicted at $990,671 this year.
— Some districts have a self-insured health plan, which means contributions are held in reserve and accumulated.
— Gifts and grants may be spent only for the purposes specified by the donor of those funds. In the current budget, USD 257 has $134,205.
— The Activities Fund, largely student money, is a part of the budget, but available only for student activities. When students raise money — at car washes, bake sales or similar ventures — for the prom or special trips, those proceeds go the Activities Fund.
— USD 257 also has $142,867 set aside in its budget for bond and interest payments, part of which is reflected in reserve until payments are due.
Neuenswander also noted that Dorsey was correct in that balances such as the contingency reserve have increased.
Reserves are kept for many reasons, such as accumulation for textbook and technology purchases, “but in part it is due to human nature,” Neuenswander said. Some districts also bank money when major repairs or remodeling are anticipated.
During the recession, schools districts had to deal with several funding cuts within one year and since have had annual reductions in state aid, because of the 2012-13 income tax cuts that failed to spur the economy as Gov. Sam Brownback and his supporters promised.
Resulting pessimism led districts to be more cautious than usual. “When this is the case, you try to increase your reserves, not spend them,” Neuenswander said. Consequently, fear may be a primary reason for the increase in cash balances.
KANSAS school districts hit a fiscal wall this year and last when block grant funding replaced the 20-plus-year-old formula that determined state aid by enrollment and factors that took into consideration economic conditions within each district.
Block grant funding did provide more money to districts — after a fashion. The funding included money for the state retirement fund — KPERS — and made special education aid a part of the base funding. Money in neither of those have anything to do with traditional classrooms.
KPERS ($870,619 in this 257 budget) immediately turns around and returns to the state while special education funds — $2.8 million this year — flows to that segment of education, in USD 257’s case the ANW Cooperative.
Changes are coming.
Supreme Court justices recently ruled — in what should be considered a landmark decision and one that drove another stake in the ill-advised income tax cuts — block grant funding is unconstitutional in the Kansas document’s requirement all children should receive an adequate and equitable education.
The second order of the justices was that Kansas was not meeting its financial obligations to schools. The Legislature was given until June 30 to construct a new school aid formula and adequately fund it. They did not put a dollar figure on funding. Estimates have ranged from $300 million to $800 million.
Meanwhile, as has been reported ad infinitum, funding must be found to balance this year’s state budget, with a current deficit of $281 million, and then fill a $1.1 billion shortfall for fiscal years 2018 and 2019 budgets.
— Bob Johnson
