Finally, School Finance

On Friday, lawmakers finally got a chance to start reviewing the education study they commissioned late last year. They were hoping the study would help them build and fund a constitutional K-12 school funding formula in response to the Kansas Supreme Court’s decision last year that the state’s funding of schools is neither adequate nor equitable.

The study provides a range of cost options depending on how ambitious the state chooses to be in generating improved student outcomes.  The low end of the scale would require the state to spend $451 million, or 10%, more each year.  On the other end, if the state wants to produce an even larger number of students who can perform basic math and reading skills and a 95% graduation rate over the next five years, the cost will be closer to $2 billion each year; that is a 44% percent increase.  This range might sound like a helpful suite of options, but it is actually a bit treacherous.  Any choice to fund schools at less than the highest level will presumably be portrayed by challengers in the November elections as the legislatures settling for suboptimal student outcomes.

Lawmakers were quick to point-out several shortcomings in the report. It contains erroneous statistics on some school districts’ student populations and it does not say how district-level cost information, even once it is corrected, should be converted into a new school finance formula. It also fails to detail whether federal funds are included in the cost calculations and what portion of the total costs are to be paid for using state, federal or local funds. Some legislators expressed frustration that the study does not appear to provide as much guidance as they had hoped on how much more of the state’s general fund needs to be applied to education to satisfy the Supreme Court.

At any rate, the report seems unequivocal in its conclusion that the legislature will need to find quite a bit more money somewhere in the budget to answer the Court’s challenge and prevent schools from closing in June.  Few legislators are eager to pay for schools with a tax increase, since they passed a large tax increase last year and many are up for reelection this year. Even so, funding the new school formula solely out of existing revenues will have unappealing political consequences as well. Funding the low end of $451 million per year is estimated to require spending cuts of at least 15% in every other state agency, agencies which deliver health care, social services, transportation, and higher education to Kansans. Paying $2 billion more a year would mean K-12 public schools consume 70% of the states’ budget.

The legislative pace should quicken now. Relevant committees in each chamber will work feverishly to develop a proposed school funding formula based on the new report. That is due by the end of April.  The rest of the state’s budget, as well as, other important issues like expanding Medicaid in the face of Governor Colyer’s intended veto, await resolution of the school finance issue. 


Tax Bills

Last week, the House Taxation Committee heard a number of bills introduced by the same Newton legislator which were forthrightly intended to lower sales tax on food to help the underprivileged and raise taxes on the wealthy. One of the bills would impose a 10% rate on an individual’s taxable income above $500,000 ($1 million for joint filers).  Income below those thresholds would remain at current rates.  A second bill would impose a 13% sales tax on purchases of cars costing more than $100,000; about 400 of those are sold each year in Kansas. Finally, the Newton representative sought to impose a 10% income tax on corporate profits above $1 million. The chair of the tax committee indicated he had no intention of doing anything further with these ideas. They warrant some attention, though, because these measures combined would raise an estimated $350 million for the state. As the impact of the K-12 school funding study comes to be better understood, even lawmakers opposed to raising taxes may find themselves reluctantly examining these kinds of ideas over the coming weeks.


Self-Serve Beer

The Senate bill to legalize self-service of beer is now expected to be taken up by the full Senate early this week. Its companion bill in the House will come before the House Federal and State Affairs committee on Wednesday where representatives of Top Tank winner, Brew Bank, Downtown Topeka, Inc. and the Topeka Chamber will again testify to the boost this modernization of Kansas’ liquor laws would give to efforts to attract and retain the mobile workforce of tomorrow.


Enterprise Zones

The House Appropriations Committee will be hearing a bill this week which reinstates the enterprise zone program in Kansas. The bill would provide tax credits and some sales tax exemptions to expanding businesses in designated nonmetropolitan counties. Lawmakers are similarly interested in expanding the Rural Opportunity Zone (ROZ) program to more areas of the state. The ROZ program hopes to attract new residents to rural areas by forgiving individual income taxes for five years and, in some cases, helping pay off up to $15,000 in educational loans. Nearly 500 new Kansas professionals took advantage of the program in 2016. Most of them were educators from Nebraska or Colorado.