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From big Olathe to tiny Ness City, Kansas schools struggle with new block grant funding

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Three-hundred Kansas miles separate Olathe’s suburban public schools from Ness City’s outpost in the heart of economically smitten oil country.

Both of these seemingly mismatched school districts are reaching out their hands for a share of the “extraordinary needs fund” lawmakers set up to relieve stress on districts particularly aggrieved by the block grant system now funding Kansas schools.

The hard times show just how alike all school systems have become in an increasingly global and digital world.

“There’s not a lot of difference between Olathe and Ness City anymore,” said Ness City Superintendent Derek Reinhardt. “Education is changing, and we’ve got to change with it — with the workforce these kids are going to enter into.”

There lies the tension between backers of Gov. Sam Brownback’s 2012 income tax cuts for the as-yet-unmet promise of attracting new revenue and those who think public schools will suffer for it.

The amount of state education funding per pupil is as high as it has ever been, even with the state’s revenue shortfall in 2015, Brownback says.

“They have more money than last year and more flexibility,” he told The Star on Friday.

But by shelving Kansas’ school funding formula and replacing it with block grants that freeze state aid levels for the next two years, lawmakers are actually throwing schools behind, said Mark Tallman, associate executive director for advocacy at the Kansas Association of School Boards.

This state is not keeping up with inflation, he said, and even if it did that much, it wouldn’t be enough.

“Not only do costs go up, but we also add to what we expect education to do,” Tallman said. “We want reduced class sizes, full-day kindergarten instead of half-day, and new programs.”

Communities want their schools competing in digital technology, advanced professional studies, and college and career prep while serving growing numbers of English language learners, poor and transient students and special education students, he said.

That goes for the 28,800 students in Olathe and the 300 in Ness City.

But Olathe, because its enrollment is growing over the next two years, and Ness City, because of dramatic losses in the value of the oil-dependent properties in its district, stand with several dozen districts that will miss the compensatory increases in state aid that would have been provided by the shelved funding formula.

Dale Dennis, Kansas’ deputy commissioner of education, met with districts all last week in Topeka, helping review their work as they approach an August deadline to set their budgets for the 2015-2016 school year.

For some, it’s been extra worrisome.

It’s true, Dennis said, that state funding levels under the block grants are “very similar” to state funding a year ago, even when separating out the state funds dedicated to the teachers’ retirement system.

But he expects there will be about a dozen districts like Olathe, mostly in the Kansas City and Wichita areas, that will see enrollment increases with no increase in state aid.

There may be close to two dozen districts like Ness City, mostly smaller districts in oil country, that will see painful drops in what they reap from local tax revenue without the usual state aid adjustment a year from now.

The Legislature appropriated $12.5 million for the extraordinary needs fund, which will be managed by the State Finance Council. It’s hard to know yet, Dennis said, how much need there will be and whether the fund can meet it.

Olathe on July 16 announced $2 million in cuts from its $250 million budget, with its chief financial officer, John Hutchison, saying that after years of keeping cuts away from the classroom, “the year finally came where we could not avoid that.”

The Kansas Policy Institute, a conservative think tank that has been supporting Kansas’ tax cuts, argues that school districts can become more efficient and that the revenue coming in should be enough for schools to thrive.

Institute president Dave Trabert, citing state data that show the Olathe district serves fewer students per administrator than neighboring Shawnee Mission, says Olathe did not need to cut classroom programming.

“They are choosing inefficiency,” Trabert said. “They are choosing cuts in the classroom.”

What Olathe is having to do, Hutchison said, is make “very difficult decisions” that are affecting employees “who have been part of the Olathe family for years and years.”

“We look at each program, and we determine what (personnel cuts) will have the least impact.”

The cuts include Spanish teachers in elementary schools, middle school library aides and some custodians, along with the elimination of some vacant positions. Individual schools’ discretionary budgets also are being reduced.

The district has been growing and is projecting to gain more than 700 additional students during the two years of block grant funding, Hutchison said.

The district has about $20 million in its operational budget reserve, but the board is hesitant to draw much from there not knowing what revenue or funding mechanism will be in place in 2017.

All of this is coming down as the district is planning to open a new high school in 2017.

“There are a lot of scenarios we have to be prepared for,” Hutchinson said.

Shawnee Mission Superintendent Jim Hinson told his board last week that he fears lagging state revenues may compel the district to turn to its reserves before the school year is out.

“We don’t want to be in the position in the middle of the year to be furloughing employees, canceling programs — we think we’re prepared so we don’t have to do those things,” he said. “But the likelihood of us eating into fund balances is very high.”

Districts throughout the area reported they are coping with rising transportation and health insurance costs.

“We’re seeing a 20 percent increase” in insurance costs, said Alvie Cater, spokesman for the De Soto School District, which cut its budget by $680,000 earlier this year.

Kansas City, Kan., announced layoffs earlier this year, saying it was necessary to manage rising costs and make promised increases in college and career prep programs.

Out in Ness City, Reinhardt is wrestling with a nearly 38 percent drop in property assessed valuation, from $61 million to $38 million.

That equates to a loss of about $260,000, or 10 percent of the district’s $2.5 million operating budget.

The district made some cuts and found some places to save costs, but still is drawing down about half of its $200,000 in contingency funds.

“We could raise the mill levy,” Reinhardt said, “but the economy here is dependent on oil and people are hurting. Raising their taxes would be a double-whammy.

“We’re living on bare bones. We’re trying to make it work. That’s what teachers do. But we’ve got to get to the point where we understand that if we want the economy to grow, kids have got to be successful. We’ve got to put money in schools to make that happen.”

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