KPI criticized for stance on unspent balances

The Kansas Policy Institute (with which I am affiliated) has certainly gotten some press with its work on unspent balances that school districts have. Sometimes it’s good, but sometimes it’s not.

Pat Maloney, a member of the Kansas House from Kingman, recently criticized KPI in an op-ed published by the Kiowa County Signal. The headline is “Maloney accuses KPI of misleading public on education.”

I’ll say first-up that the headline should say “Maloney accuses KPI of misleading public on school funding.”

Why? Education sometimes occurs in schools, and sometimes it doesn’t. We need to remember that distinction, lest our view of education get frozen in time.

But to the substance of the criticism, Maloney says, in part:

When you hear a story about education funding in Kansas, ask yourself, “Would schools really lay off teachers and cancel important programs if they had millions of extra dollars to spend?” The answer is no. These funds belong to our students of public education, and should not be taken by the state for other purposes.

Maybe I’m misunderstanding what the representative is saying, but I’m confident that KPI’s president, Dave Trabert, is NOT saying that the Legislature take unspent account balances that schools have on their books and use the money to, say, pay for the state’s Medicaid program. He is staying, instead, that perhaps schools can spend down some of their reserves, so we can avoid tax increases, spending cuts, or both.

Certainly it is prudent, as Maloney says, for schools to maintain reserves, as a cash-flow management tool. But it’s also prudent to ask how much of a reserve is enough, and, when leaders determine the reserves are more than sufficient, start spending them.

For the record, here’s a press release that KPI released on April 30. I’ll emphasize some of the key text:

Analysis of K-12 spending projections for FY 2010 shows that total spending is up about $320 million over last year, with about $220 million of the increase in current operating costs and the rest is in Capital and Debt Service.  174 districts are predicting higher operating expenditures this year; 77 districts have reductions of less than 5% and 42 districts have reductions greater than 5%.

Total revenue is $5.616 billion or just $50 million less than last year.  Districts spent down their unencumbered carryover reserves by $370 million to offset the revenue decline and fund the $320 million spending increase.

Taxpayers will naturally wonder how spending could be higher after all the budget cuts.  Kansas Policy Institute’s review of district budgets found that schools planned to spend $612 million more this year ($297 million in operating costs and $315 million in Capital and Debt Service).  They therefore ‘cut’ $77 million from their operating budgets and $215 million from their capital and debt service budgets…but still spent more than last year.

Kansas Legislative Research Division collected school spending and ending fund balance projections from each school district earlier this month.  Dale Dennis and Sara Barnes at KSDE confirmed that the way KPI calculated spending and reconciled the increase against declining fund balances and the revenue change is accurate.

The statewide summary and individual district files can be found on the KLRD web site.  A summary analysis of district spending and ending balances and analysis of spending by district is available in the Data Warehouse on Kansas Policy Institute web site.

Districts’ proven ability and willingness to use their carryover funds is good news for taxpayers and teachers.  As things stand today in the state budget debate, it appears the worst that might occur is that schools have to offset half of their decline in federal stimulus dollars, as the House budget proposes to replace $85 million.  Districts say they will still have $515 million of carryover money remaining in funds that can either be spent down as they did this year or transferred with legislative authority, giving them the ability to offset their ARRA loss and without making cuts.

The House Education Committee agreed that schools should be able to spend more from their unencumbered funds.

The Wichita Eagle, meanwhile, said in an editorial that school districts aren’t pleased at Trabert’s suggestions. It repeats the argument that districts need reserves, suggesting that Trabert is unaware of that fact. That is certainly not true; the claim is not that reserves are unnecessary, only that they are more generous than is prudent given the budget situation.

The Eagle also quotes some unhappy district officials (“”It is difficult to hear that,” said one, “a lie,” said another). It also quotes Dale Dennis:

Trabert and Kansas Policy Institute also keep citing Kansas Deputy Education Commissioner Dale Dennis, who said that districts could use some fund balance money. What they don’t mention is that Dennis thinks doing so without a way to replace that money would be a terrible idea.

“They only tell half the story,” Dennis complained about KPI.

Finally, the Eagle firmly establishes itself in the camp of district officials:

It doesn’t matter what superintendents say or how often they explain the facts, Evans said; the groups keep repeating the same misleading claims.

Which is frustrating, to say the least.

In an op-ed, also published by the Eagle, Trabert responded:

A recent Wichita Eagle editorial said school superintendents are frustrated by what they say are misleading claims about school spending and the availability of large fund balances.  The Eagle editorial board believes their frustrations are justified, but again, they are only getting one side of the story.

It is indeed frustrating to have school districts and their lobbyists claim for over a year that their fund balances can’t or shouldn’t be used, only to learn that most districts now admit they are using some of that money to pay for a spending increase this year.  Districts started the year with about $700 million in funds that could be used and they now report those balances are being spent down by $191 million. They used that money to increase their current operating costs this year.  Districts said they were being forced to dramatically reduce spending, but they just reported that total spending will increase $262.8 million this year, with $163.4 million of the increase in current operating costs. 174 districts statewide now admit they will spend more on operating costs this year, including 6 districts in Sedgwick County and 4 districts in Butler County.

It’s true that they used some of their reserves to pay bills when the state chose to pay them late.  We encouraged legislators to force the state to pay schools on time and now there’s new legislation being considered to require prompt payment.  It’s also true that those reserve balances represent aid received in prior years that wasn’t spent.  This year and next seem like good times to use the money as originally intended.

Districts have claimed aid per-pupil is severely reduced but now admit that KPI ads are correct; total aid per pupil is only 3% less than last year and 26% higher than five years ago.

The editorial also said I “…suggested schools may be making certain budget cuts deliberately to anger parents.”  That’s another of those frustrating distortions.  I said districts were encouraged in public meetings by members of the 2010 Commission and the State Board of Education to make ‘high profile’ changes that would anger parents and generate support for tax increases.  We did not say any districts took that advice, but noted that they certainly had options to avoid classroom cuts, such as using their carryover reserves to offset their expected 3% decline in per-pupil aid or reducing non-instructional operating costs, which jumped 25% in the preceding four years.

Kansas Policy Institute is simply refuting claims made by districts and their lobbyists, and they may be frustrated at having to explain the rest of the story that we discovered.  Our research and studies published by Legislative Post Audit show schools can meet state requirements and operate much more efficiently – that should be seen as good news.  Instead, taxpayers have been fed a steady stream of misleading claims to justify an unnecessary tax increase that will put thousands more Kansans out of work.

Now that is frustrating.

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