KEPC WEEKLY UPDATE: Education, recission, block grant, LOB, ag property tax, labor stats

In this issue …

  • Governor cuts education
  • Rescission bill passes
  • Block grant bill introduced, but not available
  • Hearing held on LOB bill
  • Agricultural property taxes examined
  • Labor stats still not good


Governor cuts education

Just as the Kansas Senate was preparing to debate the rescission bill Thursday to bring Kansas to a balanced budget, Governor Sam Brownback announced more of his own cuts.

This time, they included K-12 and higher education.

The new round of cuts on top of the previous reductions were needed when new numbers from legislative staff indicated the state would still be about $800,000 in the hole for the current fiscal year.  That’s with transfers/cuts already included the rescission bill.

The cuts announced Thursday by the Governor go into effect March 7.  Regents universities will see a 2 percent cut and K-12 education is reduced 1.5 percent.  That saves the state $44.5 million.

School districts were scrambling Thursday afternoon to understand what the cuts mean to them.

We have the numbers.

Here’s a listing of the impact on each school district in Kansas from the Kansas State Department of Education web site. Click on the link to “Effects on General Fund Budgets of Governor’s Allotment (SF15-050) – Computer Printout.”

You can read the official notification and news release from the Governor here.

Here’s more breakdown on the cuts:

  • K-12 Education – $28.3 million
  • Kansas Board of Regents – $4.5 million
  • University of Kansas – $2.7 million
  • Kansas State University – $2.1 million
  • Wichita State University – $1.48 million
  • Kansas State University ESARP (Extension and Research) – $949 thousand
  • Pittsburg State University – $709 thousand
  • Fort Hays State University – $679 thousand
  • Emporia State University – $632 thousand
  • KSU Veterinary Medical Center – $292 thousand

What’s significant about Thursday’s announcement is that the Governor has tried to avoid direct cuts to education as much as possible in the past.

In his budget and his allotments, he tried to steer clear of direct cuts to education, preferring to discuss school funding formulas and other methods of saving money that impact education.


Rescission bill passes

Meanwhile, the first major legislation of 2015 has passed the House and Senate and is on the way to Governor Brownback for his signature.  It’s Senate Bill 4, the rescission bill that does most of the work to cut spending and keep the state’s checking account in the black.

The bill transfers/cuts $253 million dollars out of the current Fiscal Year 2015 budget.

The biggest hit goes to KDOT’s state highway fund, which gets tapped for over $158 million.

Other changes in the bill:

  • $55 million – transferred from the Medical Programs Fee Fund of KDHE
  • $14.5 million additional transfer from the KPERS Key Fund (tobacco settlement money)
  • $5,219,827 – transferred from two vehicle funds at the Revenue Department
  • $7.1 million – saved from a reduced transfer to the Job Creation Program Fund of the Impact program
  • $4,200,000 – transferred from the Department of Aging (includes $1.2 million from the Problem Gambling and Addictions Grant Fund)
  • $3 million – transferred from the KDHE Underground Storage Tank Redevelopment Fund
  • $3 million – transferred from the Workers Compensation 2nd Injury Fund
  • $1,400,000 – transferred from the Department of Wildlife, Parks and Tourism (road and bridge funds)
  • $1,123,083 – transferred from the Economic Development Initiatives Fund
  • $1,000,000 – transferred from the Medicaid Fraud Prosecution Revolving Fund in the Attorney General’s budget
  • $500,000 – transferred from the Children’s Initiatives Fund

Because the state is in danger of not being able to pay its bills in mid-February without the legislation, the bill did not move through the standard committee process in the Senate.

Instead, the Senate simply accepted the work of the House in order to get it to the Governor quickly.  The Senate vote was 24 to 13.  It had passed the House Wednesday, 88-34.


Block grant bill introduced, but not available

The Governor’s long-awaited “block grant” bill, which would suspend the current school finance formula and replace it with an interim system of direct grants to school districts, has been introduced.  However, it is not available in written form, either paper or electronically.

It will probably not be available until sometime next week.


Hearing held on LOB bill

The controversial Senate Bill 71, which cuts K-12 budgets an estimated $39.1 million by changing the Local Option Budget authority, was heard this week in the Senate Ways and Means Committee.

No final action was taken, although it had been scheduled.

It’s unclear if the bill will be voted out of the committee.

Current law provides state aid to school district with a Local Option Budget according to a formula based on the assessed valuation per pupil.The bill changes that formula so that many districts do not receive as much state aid for their LOB.

The least wealthy districts in terms of assessed valuation per pupil would receive the biggest cuts.


Agricultural property taxes examined

The Senate Ways and Means Committee reviewed use value appraisal of farmland this week in what appears to be a move toward finding more money for K-12 education by increasing property taxes on agriculture.

Legislation was introduced last year, but came late in the session and did not advance.

Zoe Gehr of the Revenue Department’s Property Valuation Division gave senators the overview.

Agricultural land use valuation was passed in 1985 at a time of great turbulence for Kansas farmers.  It was enacted to insulate agricultural land from market influences outside the control of farmers.  For example, land on the outskirts of an urban area had higher valuations and higher taxes because it had development potential.  Many farmers in such situations could not afford to continue farming.

The new and complicated system allowed an eight year average to determine the valuation assigned to the property.  That helped reduce volatility.  The valuation is also based on the quality of the land, since that significantly influenced its economic value.

Senator Jeff Melcher (R-Leawood) has been questioning the system because the effective property tax rate on ag land is much lower than regular commercial property.

Gehr explained it is a use value calculation designed to protect farmers from volatility, not fair market value.  Melcher stated the law was written to create a falsely low valuation to protect agriculture from having to pay the fair value that every other citizen would have to pay.

Gehr said without the insulation of use value appraisal of farmland, land that abuts or is surrounded by commercial and residential development would likely be driven out of production.  Gehr also told the lawmakers that many states copy Kansas or parts of the Kansas formula.


Labor stats still not good

The latest labor statistics show Kansas still behind in employment growth.  Here are the non-farm employment growth figures for 2014:

  • 2.6% job growth – Colorado
  • 2.2% job growth – Oklahoma
  • 1.6% job growth – Missouri
  • 0.9 % job growth –Kansas
  • 0.8% job growth – Nebraska