Tuesday, June 06, 2006

 

Shrinking Enrollments Challenge SMSD

The Shawnee Mission School District (SMSD) faces a two-fold financial challenge: declining enrollments and a politically distorted, state administered financing formula. This paper will examine the implications of this challenge for the financial condition and the policies of the Shawnee Mission School District

On May 9, 2006, the Kansas Legislature passed a school finance bill which will present a significant challenge to the SMSD. The bill passed in the house on a 66-54 vote[1], with all 22 Johnson County legislators opposed. All the Johnson County senators also voted "Nay" when the upper chamber passed the bill.

Kansas School Finance Basics

Kansas primary and secondary education is funded through the state. The state sets an amount of money paid to each district for each full time student or equivalent (FTE) enrolled on September 20 of the previous school year. The school's FTE is adjusted by a complex formula which takes into account ten factors impacting costs. The distribution of funds was held by the state Supreme Court to violate the state constitution, which requires the provision of an adequate education.

The state funds basically come from a 20 mill levy on property[2].

Added to the money provided by the state are funds generated under a "Local Option Budget" (LOB). The LOB is capped by the state legislature, at 27% for fiscal year 2006 (FY06). The cap is based on general fund budget provided by BSAPP. For example, in Shawnee Mission, the FY06 general fund budget was $147 million; 27% was $39.8 million. Thus the FY06 LOB authority was capped at $39.8 million. The bill passed a few days ago increases the cap to 30% in FY07 and 31% in FY08.

Under current rules, the state compensates districts with low assessed property valuations who adopt LOBs. Supplemental general state aid ensures no district LOB will be based on less than 81% of the statewide average assessed valuation per pupil. Thus, no district's LOB can rise more than 19% above any other district in the state.[3] If the cap were removed, increases in LOBs by wealthier districts would doubtless put even more pressure on the state school finance budget because of the equalization provision.

The district also receives a small amount of money from a ΒΌ cent sales tax in that applies to Johnson County. The "economic development" tax passed in 2002, with money divided among the school districts, county and cities. The cities receive 36% of the revenue generated; a portion of the county's 64% share is given to the school districts in the form of grants. SMSD received $5.3 million from this source in 2004.[4]

Effect on Shawnee Mission School Finances

The bill provides for a $236.00 increase in the "Base State Aid Per Pupil" (BSAPP) for 2006-2007 (FY07) for the district under the formula over the previous year (FY06). The BSARPP is set at $4,316, an increase of $59 over FY06. Adjustments to the FTE for FY06 meant the district's operating revenue was $5,293.44 per student. Thus, the adjusted BSARPP income will be $5,529.43 in FY07, an increase of 4.3%, if enrollment remained stable at 27,874.9.

In fact, enrollment in the district has declined significantly over the last few years, and is projected to decline in the future. District superintendent Marjorie Kaplan said that the increase, coupled with local option funds, would amount to $14.7 million for the district with last September's enrollment. However, with the projected decline in enrollment, the increase is much more likely to be about $1 million less.[5]

Falling Enrollment

The district has had to cope with falling enrollment almost since its very inception. A peak of 45,702 students attended in 1970. In 1974, the district operated 51 elementary schools, 10 junior high schools and 5 high schools. SMSD closed 19 schools over the last 35 years[6]. In recent times, headcount for FY05 was 28,522; for FY00, it was 31,238[7].

Even though headcounts continue to decline along with operating funds based on BSAPP, fixed costs move in the opposite direction. For the Kansas City area as a whole, the Consumer Price Index increased by 4.4% in 2005.[8]

The loss of enrollment, spread as it is over dozens of facilities, does not admit of easy solutions. With student teacher ratios of 15:1, a loss of about 450 students should mean 30 fewer teachers would be needed across the district. This would translate to less than one teacher per school. In practice, the difficulties of eliminating a single instructor position in a particular school can lead to unacceptable results.

If a hypothetical school had three fourth grade classes of 15 students each, and attempted to reduce to two positions, the likely result would be two classes of about 22 students each.

This difficulty can be over overcome by pursuing a strategy of building new schools and consolidating older, smaller facilities. Since the successful bond election of 2004, the district has pursued exactly that strategy[9].

Likely Court Challenge

As noted above, the Johnson county delegation unanimously opposed the bill funding schools for the next three years. The Kansas Supreme Court determined the prior school finance plan violated the state constitution in two ways; first, it failed to provide for an adequate education; second, "... the ways in which vastly differing amounts of resources are distributed across Kansas school districts are "politically distorted" and "not cost-based.""[10] One representative said, "... Johnson County has 18 percent of the state's students and will contribute 30 percent of the tax revenue to pay for the $466 million plan. The county's schools will receive only about 8 percent of the $194 million first-year state aid total."[11]

The state Supreme Court, in a supplemental opinion to its ruling on Montoy v. State of Kansas, ordered the legislature to conduct a study of the cost of providing an adequate education to the primary and secondary students in the state.[12] The resulting study shows substantially more money than the legislature appropriated would be required to fully fund an adequate education in Kansas.[13]

In view of the remaining political distortion and the inadequacy of the amounts provided, additional court action, possibly the appointment of a special master, appears likely.

Chief Recommendations

Continue to build new schools and consolidate old facilities. The district's policy in this regard represents sound planning in the face of declining enrollments.

Prepare updated briefs to file with the state supreme court. According to a private e-mail from Mr. Tim Rooney, the district's finance director, SMSD filed a "Friend of the Court" brief in the Montoy case. Since future court action is at least possible, and is actually probable, SMSD should be ready to make sure the court is fully apprised of the district's views.

Continue to lobby for local control of locally generated funds. Almost half the levy of 42 mills in the district, 20 mills, goes to the state and the district has no control over these funds. In addition, the Local Option Budget (LOB) remains capped.

The use of local sales tax revenue for schools will likely be challenged in the future in the legislature. The district should continue to lobby for integrity of local sales tax.[14]

Additional Recommendations

Increase the visibility of the Shawnee Mission Educational Foundation as a public/private partnership. The foundation gives grants to individual teachers and schools for educational projects and equipment. The foundation is funded by private donations. Increased visibility and the promotion of a public/private partnership could result in additional money for the schools.

Market the school system so as to slow the decline in enrollment. There are an estimated 4,852 students enrolled in private elementary and secondary schools in Johnson County.[15] A study could be done to explore ways to bring some of those children back into the school system. Emphasizing the excellence of the product, the diversity and advanced nature of the districts programs, and the numbers who go on to graduate from college would very likely result in some home schooled or privately schooled students returning to the system. The matter should at least be studied for feasibility.

Study the effect of tuition assistance grants to boost enrollment from out-of-district. Such grants could be funded through the SMEF or other sources. A grant which resulted in cost sharing might bring students in for specific programs, such as the outstanding foreign language or culinary arts programs offered at South High School.

Conclusion

Existing policies to lobby Topeka and to present the district's views to the state Supreme Court are prudently being followed. The effort to increase local control over school budgets cannot worsen the district's situation even if the results have had limited success so far.

Intense opposition can be expected because the equalization requirements will force the state to ante up more money as LOBs increase. The legislature has proven that any form of tax increase is anathema; they have also directly challenged the court to make the tough decisions for them. However, the court has a reputation for being unpredictable.

Existing strategy of building new facilities and consolidating older schools is financially prudent and needs no modification, only careful monitoring. The long term effects of recent increases in gasoline prices, which appear to be permanent, remain to be seen. The higher transportation cost for private individuals may slow urban sprawl, increase density and thus affect enrollments in presently unforeseen ways.

Creative strategies to slow the decline in enrollments should be explored, such as marketing the schools. The district, like any successful enterprise, serves a specific customer base. The cost-effectiveness of various ideas to retain or even expand the customer base should be on the table.

A Personal Note

As a parent and taxpayer, my exploration of the district's finances leaves me with mixed feelings. I see the district as well run, with reasonable and prudent strategies in place to cope with the financial challenges of the present and foreseeable future. I feel angry at the legislature for shirking its responsibilities and failing the state's children. I remain hopeful the Supreme Court will remedy the situation, and that the children will get what they need.

[1] Kansas City Star, May 10, 2006. http://www.kansascity.com/mld/kansascity/14541804.htm

[2] Blue Valley School District "Understanding School Finance" Current Kansas School Finance Formula Glossary of Key Terms http://www.bluevalleyk12.org/SupportServices/downloads/
understandingschoolfinance.pdf

[3] Ibid.
[4] JoCoGov "Cover Stories" March, 2004: http://www.jocogov.org/coverStories/mar04.htm
[5] Kansas City Star, May 11, 2006. http://www.kansascity.com/mld/kansascity/
living/education/14549368.htm

[6] Inside Shawnee Mission Schools, spring 2005, vol. 13, issue 2. After Unification, Enrollment Still Counts, http://www.smsd.org/parents/
Documents/Inside/Spring2005.pdf

[7] Statistics from the Kansas State Board of Education: http://www.ksde.org/leaf/reports_and_publications/
enrollment_headcount/enrollment.htm

[8] KC Chamber of Commerce http://www.kcchamber.com/Resource/Index.asp?IdS=03320A-3679390&x=021%7C010&Id=392
[9] Comprehensive Annual Financial Report, 2005, p. ii. http://www.smsd.org/custom/
budgetfinance/CAFR/FY05CAFR.pdf

[10] Baker, Bruce D., Kansas Policy Review, vol. 27, no 2. December, 2005.
http://www.ku.edu/pri/publicat/
kpr/kprV27N2/kprV27N2A3.shtml

[11] Rep Pat Colloton, quoted in the Kansas City Star, May 10, 2006. http://www.kansascity.com/mld/kansascity/14541804.htm
[12] Monty v. State of Kansas, http://www.kscourts.org/kscases/
supct/2005/20050603/92032.htm

[13] "Cost Study Analysis Elementary and Secondary Education in Kansas: Estimating the Cost of K-12 Education Using Two Approaches Executive Study" January 2006, p.5. http://skyways.lib.ks.us/ksleg/KLRD/Publications/
Education_Cost_Study/Cost_Study_Summary.pdf

[14] Shawnee Mission School District Legislative Platform 2005: http://www.smsd.org/parents/Documents/LegPlatform05.pdf
[15] Private School Review: http://www.privateschoolreview.com/county_middle_schools/
stateid/KS/county/20091

Comments:
Mike, I do not agree with you on your conclusions since I do not believe the Kansas Supreme Court had jurisdiction on this matter. I do not believe the Kansas State Constitution allows the state court system to have jurisdiction.
 
This is not difficult.

SM East has 400 more students than SM South. If you want to even that out, pull 200 from East, and put them at South.

How? Audit the kids and pull those who don't live within the East boundaries, and are actually using addresses of friends, relatives, apartments, and PO Boxes to register for schools.

I can name ten students right now. Easy. I bet there's 300.
 
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