Mid-Week update

I'm sure by know you've heard Betsy DeVos was approved by the US Senate with the tie breaking vote cast by the Vice President. We appreciate everyone's efforts, and I want to encourage you to continue to keep an eye on the Department of Education. Our friends in Washington believe a plan has already been constructed and changes could be recommended soon.   

Funding Formulas 
Back at the state level there are three separate school funding formulas in the  House K-12 Education Budget Committee. Representative Scott Schwab introduced HB2242 - Enacting the classroom-based funding act early in the session, and his bill was discussed on Tuesday.  HB2270 was introduced by Representative Rooker, and this formula contains many of the components USA-Kansas felt would be necessary for a school funding formuala moving forward.  The Highland-Abrams plan which we talked about last year is also still on the table.

Possible Budget Cuts
The Senate Ways and Means committee recommended a 5 percent school aid cut as a starting point. School districts would lose 5 percent of general state aid in this year's block grants under a bill advanced Tuesday by the Committee. 

As amended by the committee, SB 27 would cut school district aid by $127.9 million. The bill would also create a new $15 million fund to replace the extraordinary needs fund, and could help districts that do not have enough money in cash reserves to absorb the 5 percent reduction. 

The amended budget plan reduces higher education by 3 percent, or $22.9 million, and other state agencies by zero to 2.5 percent, reducing state spending by about $3 million. 

In addition, the bill would reduce KPERS payments this year by $90 million, but require repayment over the next 10 years.

Several committee members stressed this was a preliminary "starting point," and the level of cuts and borrowing were likely to be adjusted. Republicans Carolyn McGinn, Rick Billinger, Larry Alley, Ed Berger, Jim Denning, John Doll, Dan Goddard, Dan Kerschen, and John Skubal supported the bill. Democrats Tom Hawk, Anthony Hensley, and Laura Kelly, as well as Republican Vicky Schmidt voted against the bill.  

Some legislators appear to believe that school districts can absorb cuts in the current year by using cash reserves. Reports from the Legislative Research Department suggested that most districts have more cash in contingency reserves and other "flexible" funds than the proposed level of reductions. 

A spreadsheet on the impact of a 5 percent cut can be found here. The reduction does not apply to cost-of-living, declining enrollment, ancillary weighting or KPERS contributions. General state aid does not include special education aid, local option budget aid, capital outlay aid or bond and interest aid. 

We do not believe it is time to storm the Capitol, but it is important you have a conversation with your Senator (find your Senator’s contact information here) about what cuts might happen in your district if state cuts become a reality. Be prepared to explain to your Senator what block grants have already done to salaries, class sizes, and programs. Talk about the morale of your staff, and explain your reserve account and the plans for those funds. You need to be prepared to tell YOUR story. 

Two tax increase measures on Tuesday were forwarded to the full Senate for consideration. 
Senate Bill 147 would increase state income tax rates and repeal the so-called LLC loophole. As amended, the measure would raise approximately $288 million the first year and $372 million the year after that. 
Senate Bill 97 is a bill that deals with vehicle cash rebates but was drastically amended to set a flat income tax rate of 3.9 percent while lowering the state sales tax on food to 5.5 percent. It would also eliminate the tax exemption for certain business owners on pass-through income and it would allow a deduction for medical expenses. Preliminary estimates indicate the income tax changes would raise approximately $270 million per year, but the medical deduction and reduction in food sales tax could reduce net revenue to about $200 million per year. 

The bill would also provide an automatic reduction in the state food sales tax in future years when state tax growth exceeds 1 percent. Current law contains a similar provision that automatically cuts income tax rates if state revenue exceeds certain targets. 

Senate Assessment and Taxation Committee Chair Caryn Tyson, R-Parker, described SB 147 as the Senate leadership plan and SB 97 as an option. Consideration of the measures by the full Senate could occur this week.


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