School Finance
by Darrel Stufflebeam
October 23, 2009
School Funding and Finance
This document offers general information about how public schools are financed in Kansas.
Part One: State Financial Aid
State financial aid is the total amount of state funding a school district is entitled to. It includes the Base State Aid Per Pupil (BSAPP) and adjusted enrollment. The BSAPP is the dollar amount the school district receives from the state for each student. The state legislature sets the BSAPP, which the school district then receives for each full-time student.
Most students are simply counted as one full-time equivalent (FTE) student. Some students, however, are counted as less or more than one FTE. This is because some students are considered less expensive or more expensive to educate. Categories of students counted as more than one FTE are known as “weightings”.
The following are students that are counted as less or more than one FTE:
- Kindergarten: Kindergarten students are counted as .5 FTE because the state does not fund kindergarten as a full-time program. Kindergarten students receiving special education services, however, are counted as 1.0 FTE.
- Low Enrollment Weighting: Students in school districts with low enrollment are weighted more than 1.0 FTE because education in smaller school districts can cost more money per student. A sliding scale for determining the amount of weighting in low enrollment schools gives less additional weighting as a school district’s FTE approaches 1,637.
- High Enrollment Weighting: Students in school districts with high enrollment are also weighted more than one FTE because educating a student in large school districts can also cost more. Although high enrollment weighting is smaller than low enrollment weighting, the sliding scale for high enrollment weighting gives more weight to students attending a school district as FTE rises above 1,637.
- Transportation: Students that live more than 2.5 miles from their school must be transported (or reimbursed for transportation) by the school district and those students have an FTE higher than 1.0. Weighting for these students is determined by a formula that considers the previous year’s transportation costs and the number of students residing 2.5 miles or more from their school.
- Vocational Education: Vocational Education students are weighted higher than 1.0 because those programs, which have to be approved by the state, cost more than regular education programs.
- Bilingual Education: Bilingual education students are counted as an additional .395 of a student.
- At-Risk: At-risk students are determined by the number of students that qualify for free meals under the National School Lunch Program and are counted as an additional .278 of a student.
- New Facilities: Students that attend school in a new facility are counted as an additional .25 of a student. In order to be eligible for this weighting, a school district’s Local Option Budget must be at least 25% of its General Fund (see Part Two and Part Three).
- Ancillary Facilities: This weighting is only in allowed in areas that are rapidly growing and require additional funding for staffing and operations. This funding must be raised locally and is obtained by an appeal to the State Board of Tax Appeals.
- Declining Enrollment: This weighting is allowed for school districts experiencing an extraordinary decline in enrollment. This funding must be raised locally and is obtained by an appeal to the State Board of Tax Appeals.
- Special Education: The amount of special education state aid a school receives is determined by dividing last year’s special education and special education transportation costs by BSAPP. In order to allow school districts to be eligible for more Local Option Budget authority (see Part Three), this aid is deposited in a school district’s general fund and then transferred to the district’s special education fund.
- Cost of Living: This weighting is available to school districts with housing values at 125% or above of the state average. This weight allows those districts to receive an additional 5% of their general fund from a local tax levy.
Part Two: Local Effort
A school district’s “local effort” represents locally generated resources that are dedicated to helping finance the school district’s educational program. This amount of funding is subtracted from the “State Financial Aid”. Local effort resources include the following:
- Proceeds from the uniform school district property tax levy. All school districts levy 20 mills (2009) for state financial aid
- Mineral production tax receipts
- Industrial revenue bonds and port authority bonds in lieu of tax payments
- Federal impact aid for additional expenses related to nearby federal installations or programs
- Unexpected and unencumbered balances remaining in the general funds
- Unexpected and unencumbered balances remaining in the “program weighted” funds
The sum of the school district’s local effort is subtracted from their total state financial aid in order to determine the amount of state funding a school district is entitled to. This is the amount of state aid that goes into a school district’s General Fund. If the sum of a district’s local effort exceeds its total state financial aid then the district receives no general state aid and the excess amount is remitted to the state general fund to be used for other school districts.
School districts can use General Fund money for any expense other than capital improvements (see Part Four) and can transfer unencumbered balances to other funds.
Part Three: Local Option Budget
The Local Option Budget (LOB) is additional school funding that a school district can raise through a local property tax. These funds make up a school district’s Supplemental General Fund. School districts are allowed to tax property in an amount up to 30% of their General Fund (31% if approved by a majority vote of the public). If a school district’s LOB percentage is higher than the state average then the LOB authority is subject to a protest petition and vote by the public. In 2009, the state LOB average percentage (of the General Fund) was 28% and USD 323’s LOB percentage was 15.11%.
Since school district property wealth varies widely, the state “equalizes” LOB funding by paying a percentage of each “mill” levied. Simply put, the less property wealth a school district has the more equalization funding it receives from the state.
A mill is one dollar of tax for every thousand dollars of
assessed property value. To determine the assessed property
value one would take the appraised value of the property and
multiply it by 11.5% for residential property or 25% for
commercial/industrial property. For
example:
A house with an appraised value of 100,000 would have an assessed
value of $11,500 ($100,000 x 11.5%).
Using “Assessed Valuation Per Pupil” (AVPP) as a measurement of a school district’s property wealth, the state uses a sliding scale of equalization aid for districts falling below the 81st percentile of AVPP among all school districts. Somewhat different formulas are used to equalize Capital Outlay and Bond and Interest (see Part Four). In 2009, the LOB equalization rate for USD 323 was 54%. In other words, for every one dollar of LOB tax raised by our school district in 2009, the state paid 54 cents of it.
Supplemental General Funds can be used for anything other than capital improvements and must be spent (and cannot be transferred to other funds) by the end of the fiscal year.
Part Four: Capital Outlay and Bonds
The state allows school districts to levy a property tax of up to eight mills for capital improvement expenses. These expenses include facilities, equipment, and vehicles. Like the LOB, the state equalizes capital outlay levies by paying a portion of it although, in 2009, the state eliminated this equalization. USD 323 does not levy a separate tax for its Capital Outlay fund.
School districts can also levy a separate tax to fund bonds and interest for the purpose of making larger capital improvements (i.e. building or renovating schools). Such bond issues must be approved by a majority vote of the public.
Part Five: Contingency Reserve and Other Funds
The state allows school districts to retain a Contingency Reserve fund equal to 6% of its General Fund. That maximum allowable amount was raised to 10% in 2009 but will revert back to 6% in 2112. Contingency Reserve money can be used for any expense except to make bond and interest payments.
Other funds within a school district’s budget usually include Driver’s Education, At-risk, Food Service, Summer School, Parent Education, Professional Development, and Textbooks.
Detailed copies of our past budgets can be found on the school district’s website (www.rockcreekschools.org) under “District Information”.
Part Six: General Information
It would obviously be easier to have all school district revenues and expenditures use one fund. The various laws and rules regarding school district finance have created a complex system that is difficult for a lot of people to understand. Below are some other important bits of information for people to bear in mind.
1. The Kansas State Constitution requires the state legislature to “suitably” fund K-12 public education. This is the only constitutionally required expense. In 2005, the Kansas Supreme Court ruled that the state legislature was not adequately funding schools and, as a result, the legislature promised additional funding. Since then, however, the economic downturn has resulted in severe funding cuts for public schools—to pre-2005 levels.
2. Since there are specific rules regarding what types of expenses can be paid for from the various funds, it’s not uncommon for school districts to have millions of dollars in Capital Outlay and little excess funds for operating expenses. This is why school districts occasionally make capital improvements (renovate buildings, athletic facilities, etc…) but, at the same time, must cut back on their budget. This is particularly true when a school district’s LOB is at the state maximum.
3. A school district that has a high property value (AVPP) can raise more revenue with fewer mills. Although their state equalization funding will be less, they can often establish a large Capital Outlay balance. Since there is a limit to LOB authority, however, operating revenue cannot be increased to the same degree.
4. Approximately 85% of a school district’s budget goes to salaries, wages, and benefits for employees.
