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Summary of HB 2741

KASB-April 1, 2016

Part 1 - Creates a new school finance law called the School District Finance and Student Success Act, to take effect July 1, 2017 upon expiration of the two-year block grant law.

Sec.1 - Citation (title) of act.

Sec. 2 - Purpose.

States the purpose is to provide financing of “instruction” (not “education”) to be reasonably calculated to meet the Rose standards. “Instruction" means those school district functions that directly impact the provision of education services. The term "instruction" does not include the following school district functions: Central office administration; capital improvement construction, reconstruction or remodeling; facility maintenance and repair; food service procurement and preparation; or the provision of extracurricular activities, as defined in section 19.

(Note: this definition of “instruction” does not match the federal definition of instruction used by the school district accounting handbook, or elsewhere in state law which equate instruction with “spending in the classroom.” The “accounting” definition of instruction only includes the activities dealing directly with the interaction between teachers and students - but DOES include extracurricular and co-curricular activities.)

 

Sec. 3 - Definitions - significant features include:

Sect. 4 - Determination of General State Aid:

Beginning 2017-18, each district receives general state aid as follows: Enrollment aid (Sec. 5), plus transportation aid (Sec. 6), plus low income aid (Sec. 7), plus bilingual aid (Sec. 8), plus KPERS obligation, plus amount determined in Sec. 9, if any (hold harmless aid); subject to reduction in Sec. 38 (private education accounts).

(Note: the bill does not change the current system of special education funding.)

Sec. 5 - Enrollment Aid is:

Less than 400 students

$8,490 per student

400 to 999

$7,269

1,000 to 1,999

$6,137

2,000 or more

$5,763

(Note: there does not appear to be “linear transition” as under the previous low enrollment weighting. This likely means if a district’s enrollment changes to one student above or below the enrollment threshold, there is a significant change in enrollment funding, rather than a gradual change.)

According to the bill, these amounts are based on components of “typical” district in which 70 percent of students who are not low income have met achievement levels 2, 3 or 4 for college and career readiness on state assessments for 2014-15.

The components based on 2014-15 expenditures are:

Beginning 2018-19, each amount shall be increased annually by Consumer Price Index - Midwest Region.

Previous law: Base budget per pupil $3,852, adjusted by weightings

HB 2741

Previous law (2014-15)

Estimated enrollment aid: $2.83 billion

Unweighted base aid: $1.75 billion

Unrestricted weightings: $301.7 million

Local Option Budget: $1.06 billion

Total: $3.11 billion

Sec. 6 - Transportation Aid

Transportation aid is based on the formula used in the previous school finance law, but adjusted as recommended by Legislative Post Audit for what LPA believes is an error in calculating the amount, which reduces funding.

HB 2741

Previous law (2014-15)

Estimated transportation aid: $86.6 million

Transportation weighting: $101.8 million

Sec. 7 - Low Income State Aid

Based on poverty rate of individuals 5-17 in district in immediate prior year published by U.S. Census Bureau, multiplied by enrollment of district, multiplied by $3,099. The previous law used the percent of students eligible for free meals. (Note: there is no inflation adjustment for this feature.)

HB 2741

Previous law (2014-15)

Estimated low income state aid: $337.2 million

At-Risk weighting: $343.3 million

High At-Risk Weighting: $52.0 million
Total: $395.3 million

Sec. 8 - Bilingual State Aid.

The number of students enrolled in a district receiving bilingual services, multiplied by $425. (Note: the previous law used the number of contact hours of bilingual instruction taught by certified bilingual teachers. There is also no inflation adjustment for this feature.)

HB 2741

Previous law (2014-15)

Estimated Bilingual State Aid: $20.8 million

Bilingual Weighting: $40.5 million

Sec. 9 - “Hold Harmless” Aid - For school years 2017-18 and 2018-19:

  1. For each district, determine total state aid received in 2014-15, less federal funds received from state solely as pass through.
  2. Add proceeds of any tax levied by district in 2014-15 other than bond and interest.
  3. Deduct any state aid received in current year (excluding federal aid received under this section).
  4. Deduct from (1+2) savings directly attributable to state health insurance plan as certified by budget director (see sections 27-32).
  5. Deduct from (1+2) savings attributable to efficiencies in food service and extracurricular activities as certified by budget director (see sections 19 and 20 - district may not spend general state aid on food service or extracurricular activities.)
  6. Deduct from (1+2) one-third of cash balance reconciliation amount.

Essentially, if state aid under the new system is less than what a district received in 2014-15 (adjusted to health insurance savings, food service and extracurricular programs, and “excessive” cash balances), the district receives additional aid to make up the difference. (This provision is in effect for the first two years only.)

The “cash balance reconciliation amount” is the amount of cash on hand July 1, 2014, in all funds except bond and interest, capital outlay, gifts and grants and any federal funds, in excess of 15 percent of expenditures in functions 1000, 2100, 2200, 2300, 2400, 2500, 2600, 2700, 2900, 3100 or 3300. (Basically, the A&M state efficiency study recommendation but spread over three years rather than five.)

Reduction from 2014-15

$372.6 million

Estimated H.H.Reductions:

Food Service:

$27.6 million

Activities:

$64.3 million

Health Insurance:

$80.0 million

Cash Balances:

$60.0 million        (Three years only)

Total

$231,745,454

Hold Harmless Aid (Two Years Only):

$257,391,213

Note: Statewide estimates only; may vary significantly by individual districts.

                                        

Sec. 10-13

Maintains School District Finance Fund, state collection of statewide mill levy; dates of distribution of state aid; repayment of excess state aid; adoption of district budgets by August 25.

Sec. 14, 46 - Success grants.

Sec. 14 - Beginning in 2018-19, the State Board shall disburse grants to districts based on student success indicators. No amount of funding provided.

The State Board is to use the following factors to measure student success:

  1. Number of students graduating in immediately preceding school year divided by number in ninth grade cohort.
  2. Number of students receiving nationally recognized certificate in preceding school year divided by number of students who graduated in second preceding school year.
  3. Number of students that graduated in second preceding school year who enrolled in third consecutive semester of postsecondary institution divided by number of students graduated in second preceding year, and
  4. Number of students graduating in second preceding school year and required to take remedial courses after graduation divided by number of students graduated in second preceding year.

The amount a school district receives must be proportional to the district’s success as compared to all other school districts. The higher the success factor score, the more grant money the district will receive.

Success grants shall be disbursed to employees in the following classifications equally on a per employee basis: Principal; assistant principal; vocational education teacher; pre-kindergarten teacher; kindergarten teacher; reading teacher; other teacher; library specialist; school counselor; and school psychologist.

Sec. 15 - Statewide mill levy.

Districts are required to levy a 35 mill property tax, compared to the current 20 mill tax rate.

Sec. 16 - Local property tax.

Districts may levy a property tax for up to five years, with no limit, but subject to public vote. The purpose of the proceeds must be specified, but may not be used for instruction unless the course of study is offered to every other district in the state electronically. No state equalization aid provided.

Sec. 17-18 - Continues school district budget funds currently authorized, and allows transfers among funds as the same basis as the current block grant law.

Sections 19, 69, 74 - Extracurricular Activities

Sec. 19 - Prohibits spending general state aid for extracurricular activities.

No district may spend general state aid for extracurricular activities or related to such activities, but may use revenues raised under Sec. 16 or other local revenues (i.e. gate receipts, fees.) “Extracurricular activities” means those activities provided or supported by a school district, but which are not required by or a substantial part of any curriculum of such school district. “Co-curricular activities” means those activities provided or supported by a school district that are not extracurricular activities.

Sec. 20 - Prohibit spending general state aid for food service.

No district may spend general state aid for food service or related activities, but may use revenues raised under Sec. 16.

Sec. 21 - Accreditation System

No district shall be accredited unless the district can demonstrate it is meeting the Rose standards. Reinstates system used in block grant law and previous law, referring to Rose capacities as state education goals, requiring state standards and assessments, site councils.

(Note: by directing that schools must be meeting the Rose standards to be accredited, if a school is accreditation it is evidence that its funding is constitutionally suitable. This section raises issues of the State Board of Education’s constitutional powers regarding school accreditation.)

Sec. 22 - Rules and regulation authority to State Board.

Sec. 23 - Sections 1-23 are not severable.

Part 2 - Capital outlay and capital improvement (bond and interest) state aid

Sec. 24 - Capital Outlay State Aid Fund.

Equalization for district capital outlay levies of up to eight mills is based on cube root of assessed valuation per pupil, multiplied by mean federal adjusted gross income for preceding tax year, multiplied by average appraised value of single family homes in districts to the determine the equalization base for each district. (Currently equalization is based on assessed valuation per pupil only.)

Values are rounded to nearest $1,000 and ranked high to low. Aid is based on 25 percent at the median equalization base, increasing or decreasing by 1 percent for each $1,000 up or down. (This is the same equalization formula for capital outlay in the bill passed to respond to the Kansas Supreme Court equity order, except that bill uses AVPP only.)

Sec. 25 - Capital Improvement Aid.

Beginning July 1, 2016, the Joint Committee on State Building Construction is to review those projects for which a school district is requesting capital improvement state aid to help finance the project.

The committee shall consider the use of each facility and authorize (1) up to 100 percent of the state aid amount as the percentage of utilization for direct instruction for any school building that is a classroom attendance center; (2) up to 50 percent as the percentage of utilization for direct instruction for any building that is used for student transportation services, or for any portion of a building that is not a classroom, but is used on a daily basis by students for classes and extracurricular activities, including, but not limited to, auditoriums and gymnasiums; and (3) no percentage of utilization for direct instruction for any athletic facility or for any school administration and support building.

(Note: this differs from legislation recently approved by Senate and the House Education Committees, currently in conference committee, which sets a state cap on bond and interest expenditures rather than limiting state aid by usage and has priorities for aid set by the State Board.)

Sec. 26 - Study of state bonding programs for capital outlay and improvements.

Creates joint committee on school district capital outlay and improvements, appointed by legislative leaders to:

  1. Review and make recommendations on proposals to implement a state revolving loan fund as a source of financing for school district capital improvement projects, which would utilize the bonding authority of the Kansas development finance authority;
  2. Review and make recommendations on proposals to implement a master lease program as a source of financing for school district capital outlay acquisitions, which would utilize the bonding authority of the Kansas development finance authority; and
  3. Submit a report on or before January 15, 2017, to the Governor and the Legislature on the special joint committee's findings, conclusions and recommendations. The committee then expires.

Sec. 66 - Bidding for construction projects

No expenditure for construction, reconstruction or remodeling of a facility for which bonds have been issued by the school district to finance such expenditure shall be made unless such school district has received at least three sealed proposals. (Note: this section could override authority for school districts to use construction management at risk.)

Sec. 83 - State aid formula for capital improvement aid.

The equalization formula used the block grant law is continued (using a lower equalization formula than the capital outlay plan just approved by the Legislature).

Part 3 - School District Health Insurance Program

Sec. 27-32

Directs that the state employees health care commission shall develop and provide for the implementation and administration of a unified school district employee health care benefits program.

Beginning Jan. 1 2018, no school district shall offer or enter into any contract for the provision of any health plan in lieu of a high-deductible health plan and health savings account under the unified school district employee health care benefits program.

A school district may offer or enter into a contract for the provision of supplemental health coverage in addition to a plan offered under the unified school district employee health care benefits program.

An employee shall be eligible to elect such supplemental health coverage only if the employee also elects a high deductible health plan and health savings account under the unified school district employee health care benefits program.

(Note: this is based on recommendation of the Alvarez and Marsal efficiency study. A&M estimated current district health care expenditures of $300 to $350 million. Saving $80 million would require reducing expenditures by approximately 25 percent. Assuming approximately half of 80,000 school district employees receive health insurance through the district, this would require shifting about $2,000 per year to each covered employee.)

Sec. 58 - Professional Negotiations Act

Amends state law so matters relating to health care benefits in Sec. 27 are not negotiable.

Part 4 - Creates the Kansas Education Freedom Act, beginning July 1, 2017

Sec. 33, 34 - Citation; Definitions.

Sec. 35, 36 - Allows creation of education freedom accounts for students whose parent satisfies the requirements of the act, under administration of the State Treasurer. Parents must agree the student shall receive instruction in state-required subjects and not be enrolled full-time in a public school.

Sec. 37 - A student’s account shall receive an aggregate annual amount equal to 70 percent of the general state aid of such student’s resident school district as determined under the finance law, excluding any amounts certified by the board of trustees of the Kansas public employees retirement system for the participating employer's obligation of such school district to the system for the immediately preceding school year divided by the enrollment of such school district for the immediately preceding school year. If the student enrolls in public school on a part-time basis, the amount shall be prorated. (Up to 2 percent deducted for administrative expenses.)

Sec. 38 - Each student with an account shall be counted in the enrollment of the resident public school district, and the amount equal to 70 percent of general state aid shall be deducted for each participating student. (Note: it appears this means the districts retains the other 30 percent, which is not addressed by the bill.)

Sec. 39, 40 - Moneys in each account shall be accessed only by parents and may only be spent on specific educational costs; provides for random audits of accounts.

Sec. 41 - A participating educational provider must be: (A) An accredited nonpublic school; (B) a program of distance education not operated by a public school or the department of education; (C) a tutor or tutoring facility accredited by a state, regional or national accrediting organization; or (D) a non-accredited private school registered with the State Board pursuant to K.S.A. 72-53,101; and must provide instruction in at least those subjects required by state law; provides for audits and revocation of approval.

Sec. 42 - The state treasurer shall conduct an annual survey of parents to include, but not be limited to:

  1. The number of years the student has been a participant in the program;
  2. The relative satisfaction of the parent with the program; and
  3. Any opinions regarding any topics, items or other issues the treasurer determines may aid in the evaluation of the program or increase effectiveness of the program.

(Note: there are no requirements for academic testing or other assessment or accountability measures for students.)

Sec. 43 - Rules and regulation authority of State Treasurer.

Sec. 44 - Nothing in this act shall be deemed to limit the independence or autonomy of a participating entity or to make the actions of a participating entity the actions of the state government.

Part 5 - USD Efficiency Incentive Program

Sec. 45 - Creates USD efficiency incentive program.

Any employee of a school district may submit a plan for the efficient operation of school districts which will result in cost savings. More than one employee may be identified as a submitter on any plan. Such plan shall be submitted in such manner and form as prescribed by the State Board, and investigated by the State Board.

Each January the State Board is to submit a report describing each plan, the potential cost savings, and any legislation that may be necessary for implementation

Upon certification of savings by adopting such a plan, 10 percent of savings are awarded to the employee or employees.

Part 6 - School Finance Litigation

Sec. 51 - Amends K.S.A. 60-2102 to strike the right to directly appeal a decision in a school finance lawsuit to the Kansas Supreme Court. Under this amendment an appeal from a trial court decision would first have to be made to the Kansas Court of Appeals. This section is effective on July 1, 2016.

Sec. 59 - Prohibit any general state aid moneys from being used by a school district to fund a lawsuit challenging the constitutionality of any law concerning school finance. This section is effective on July 1, 2017. (It was would this would require these funds to be raised by the local levy levy authorized in Sec. 16.)

Sec. 60 - Provides for selection of a three-judge panel for school finance trials by lottery, rather than appointment. The first judge selected via lottery is to be designated as the presiding judge over the panel. This section is effective on July 1, 2016.

Part 7 - Conforming amendments; ending sections and effective date

Sec. 47-50; 52-57; 61-65; 67-68; 70-73; 75-82; and 84-91 - Provides conforming amendments to various statutes outside the area of school finance that are needed if the act becomes law on July 1, 2017.

Sec. 92-93 - Repealers of existing law, which would be replaced by the amended laws contained in the bill.

Sec. 94 - Provides that the bill is effective upon publication in the statute book.

Data

Student FTEs

Category

FTE

9/20/14 FTE (excl 4yrAR & Virt)

452,822

323.5 2/20/15 FTE (excl 4yrAR & Virt)

625

4yrAR FTE (9/20 & 2/20)

3,530

9/20/14 FTE Virtual

6,289

FTE 9/20 & 2/20 (incl 4yrAR/Virt)

463,266

FTE Special Ed IDEA

27,061

Free Meal Headcount

193,253

Total FTE (excl 4yr AR and incl Virt)

459,736

State Fund Totals

Category

State Totals

Per Pupil

State Totals

Per Pupil

Without At-Risk

With At-Risk

1000 Instruction

$1,637,884,830

$3,563

$2,055,874,479

$4,472

2100 Student Support

$137,078,955

$298

$147,336,619

$320

2200 Staff Support

$144,580,038

$314

$147,537,247

$321

General Admin

$101,364,844

$220

$101,364,844

$220

School Admin

$256,339,452

$558

$260,457,765

$567

Central Svcs

$108,900,621

$237

$109,324,926

$238

2300-2400-2500 Administration

$466,604,917

$1,015

$471,147,535

$1,025

2600 Opns Maint

$430,615,403

$937

$431,303,291

$938

2601 Opns Maint (Trans)

$3,199,268

$7

$3,199,268

$7

2600 (incl 2601) Opns Maint

$433,550,042

$943

$434,502,559

$945

Transportation

$132,926,247

$289

$132,926,247

$289

Total $/FTE

$2,952,424,592

$6,422

$3,256,310,088

$7,083

Groupings

FTE Enrolled excluding 4YR

At-Risk Range

FTE Enrolled excluding 4YR

At-Risk Total

Avg. Math ELA @ Grade Level

# of Districts

Low Income

Not Low Income

67.8 to 399.5

26,821.40

72.63

83.30

108

401.2 to 984.3

63,233.50

73.97

84.27

99

1006.5 to 1931

54,293.50

72.62

85.36

37

2101.5 to 46298.4

316,867.70

70.43

83.68

42

State

461,216.10

72.77

83.96

286

Instruction

FTE Enrolled excluding 4YR

At-Risk

Instruction $ Per-Pupil

Instruction $ Total

Adequate Per-Pupil

Adequate Total $

$ Variance to 2015 Actual

67.8 to 399.5

$5,253

$140,905,591

$5,251

$140,839,171

-$66,420

401.2 to 984.3

$4,348

$274,950,814

$4,350

$275,065,725

$114,911

1006.5 to 1931

$3,690

$200,318,508

$3,690

$200,343,015

$24,507

2101.5 to 46298.4

$3,239

$1,022,196,001

$3,351

$1,047,922,709

$34,299,848

State

$3,562

$1,638,370,914

$3,608

$1,664,170,620

$34,372,846

Student Support

FTE Enrolled excluding 4YR

At-Risk

Student Support $$ Per-Pupil

Student Support $$ Total

Adequate Per-Pupil

Adequate Total $

$ Variance

to 2015 Actual

67.8 to 399.5

$223

$5,974,535

$221

$5,927,529

-$47,006

401.2 to 984.3

$266

$16,845,713

$266

$16,820,111

-$25,602

1006.5 to 1931

$245

$13,376,665

$246

$13,356,201

-$20,464

2101.5 to 46298.4

$318

$100,882,042

$320

$101,397,664

$515,622

State

$297

$137,078,955

$298

$137,501,505

$422,550

Staff Support

FTE Enrolled excluding 4YR

At-Risk

Staff Support $$ Per-Student

Total $$ Staff Support

Adequate Staff Support Per-Pupil

Adequate Total $

$ Variance

to 2015 Actual

67.8 to 399.5

$200

$5,354,422

$200

$5,364,280

$9,858

401.2 to 984.3

$301

$19,017,030

$301

$19,033,284

$16,253

1006.5 to 1931

$272

$14,776,869

$272

$14,767,832

-$9,037

2101.5 to 46298.4

$338

$105,431,717

$338

$83,794,763

-$1,945,873

State

$317

$144,580,038

$317

$144,711,878

$131,840

Administration

FTE Enrolled excluding 4YR

At-Risk

Total Admin FTE

Total $$ Admin

Actual Admin $$ Per-Pupil

Adequate Admin $$$ Per-Pupil

Adequate Total $$

$ Variance to 2015 Actual

67.8 to 399.5

$255

$43,681,405

$1,629

$1,618

$43,397,025

-$284,380

401.2 to 984.3

$479

$76,697,461

$1,213

$1,210

$76,512,535

-$184,926

1006.5 to 1931

$345

$51,282,251

$945

$945

$51,307,358

$25,107

2101.5 to 46298.4

$1,718

$292,100,038

$937

$906

$224,609,631

-$67,490,407

State

$2,796

$463,761,155

$1,006

$858

$395,826,549

-$67,934,606

Operations and Maintenance

FTE Enrolled excluding 4YR At-Risk

Total $$ Opns & Maint

Opns & Maint $$ Per-Student

Adequate Opns & Maint Per-Pupil

Adequate Total $$

$ Variance to 2015 Actual

67.8 to 399.5

$32,927,655

$1,228

$1,200

$32,185,680

-$741,975

401.2 to 984.3

$71,892,672

$1,137

$1,142

$72,212,657

$319,985

1006.5 to 1931

$53,016,871

$976

$984

$53,424,804

$407,933

2101.5 to 46298.4

$273,019,806

$876

$855

$266,493,411

-$6,526,395

State

$430,857,004

$934

$920

$424,316,552

-$6,540,452

Calculated Per Pupil $

State Fund Totals

Fund

Amount

FTE

Enrollment

$2,832,242,836

459,736.40

Poverty

$337,206,521

Bilingual

$20,757,425

48,841.00

Transportation

$86,561,447

KPERS

$302,784,067

Special Ed

$420,476,221

Extra Special Ed

-$6,884,640

Bond and Interest

$145,009,015

Capital Outlay

$35,777,069

Total

$4,173,929,962

Total minus Special Ed and Bond and Interest

$3,615,329,366

Block Grant Total

$3,468,119,831

Gain/Loss

$147,209,535

Totals and Variance

Proposed State Formula Total

$4,173,929,962

Proposed Use of Carryover Cash

-$59,874,504

Net Proposed State Aid

$4,114,055,458

Proposed Existing Local Aid

$1,038,613,808

Proposed Use of Carryover Cash

$59,874,535

Total Proposed Local Aid

$1,098,488,343

Proposed Federal Aid (No Change from 2014-15)

$510,199,401

Total Aid Excluding Hold Harmless

$5,722,743,202

Partial Hold Harmless Aid (State Aid)

$257,391,213

Proposed Total

$5,980,134,415

2014-15 State Aid

$3,968,905,979

2014-15 Local Aid

$1,607,033,684

2014-15 Federal Aid

$510,199,401

2014-15 Total

$6,086,139,064

Proposed Food Service Savings or fee

$27,554,673

Proposed Change to SEHP (per A&M)

$80,029,690

Proposed Extra Activity Revenue

$64,286,556

Adjusted 2014-15 Actual Spending

$5,914,268,145

Proposed Total Aid minus 2014-15 Total Spending

-$106,004,649

Property Tax Change

-$161,952,519