THE PHILLIPS FILES: School Finance Changes

It was a pleasure to attend this year’s Boys & Girls Club Youth of the Year Dinner. I had the opportunity to introduce Mesiah Allen, currently a freshman at MHS where he plays tennis and soccer. Originally from Georgia, Mesiah has been involved with BGC for 2 years and intends to attend MATC to study animation and videography for a career in television and film.

Congratulations as well to Kansas Regenerative Medicine Center on their KS Small Business Development Center’s Emerging Business award!

What a beautiful day for a parade! We enjoyed this year’s St. Patrick’s Day Parade with the Phillips for Kansas team.

• Please join me Saturday, March 28 at 7:30 am for the Manhattan Chamber’s Eggs & Issues at the Sunset Zoo. 

In the News (AND On the Floor)

As you have seen all over the news and social media, a bill to restructure school finance (block grant bill) in Kansas was introduced last week. Hearings were heard this week and the House Appropriations Committee amended the contents into a previously-approved Senate bill, renaming the bill as House Substitute for Senate Bill 7. With this procedure, it does not need to go back to the Senate for full consideration, the Senate can merely “Concur” on the House’s changes. With a concur, the bill would go immediately to the governor’s desk for his signature. The bill flew out of committee, was debated by the full House on Thursday, and passed the House Friday morning on a 64-57 vote I voted NO. In short, a new finance formula to fund education for 460,000 Kansas students should not be introduced and signed into law in a matter of days.

• Specifically, the bill would mean an immediate nearly $600,000 cut from Manhattan/Ogden schools. I had a few good conversations with Superintendent Bob Shannon this week and heard from many parents and teachers asking for a NO vote.
• The Kansas Department of Education performed a financial analysis for each school district statewide. Interestingly, the analysis shows that poorer, low property valuation districts will bear most of the burden under the new proposal, while high property valuation districts mostly will be held harmless. 

Most would agree the school finance formula needs to be changed to reflect the changing needs of Kansas students. So I ask, why not continue to fund schools under the current formula and take a reasonable amount of time to develop a transparent and inclusive process to identify a new and equitable funding formula?  The short answer is the current state revenue picture is just too volatile, and in order to create certainty for the next two-year budget cycle, the state has in effect implemented a freeze on public school funding.  The net result means no more fiscal surprises to the state.

Current education dollars are assigned to and spent by districts according to an intricate formula accounting for the various needs of students or demographic and economic conditions of a community or school district.

The new block grant formula aims to breakdown what proponents are calling the “silos” in funding to eliminate restrictions and provide more flexibility for school administrators and financial officers. Regardless of how legislators choose to define a district budget (“rigid silo-driven budget” versus a “flexible purpose-driven budget”, the bottom-line for school boards and superintendents is how best to educate our youth with the dollars in the budget.

Do you remember when the Affordable Care Act (Obamacare) passed, and many said they needed to vote for it in order to see what was in it? We heard the same rhetoric this week and I wasn’t prepared to “wait and see” when students and teachers are at stake. I agree the formula needs to be changed, but a 25-year formula deserves more than 7 days deliberation. When more than HALF the state budget is K-12 education, we owe it to the taxpayers to perform due diligence on every bill.

• Wichita Eagle editorial
• Manhattan Mercury article
  

Next Steps

At this point, the bill is awaiting Senate consideration, which is likely to happen Monday. However, the Shawnee District Court announced it could block the bill from becoming law. This court is home to the 3-judge panel tasked by the Kansas Supreme Court to assess adequacy of education in Kansas, and which said in December the state is indeed underfunding education to unconstitutional levels. In the December opinion, the court warned against shenanigans and clearly saw through this effort to override its authority by changing the rules mid-game.

The rhetoric is flying and talking points distributed, but I am more comfortable with my vote than ever. At the very least, this will hopefully slow down the process and encourage the Senate to hold real hearings and provide full consideration.

• Lawrence Journal-World article
• Court Order

Committee Work:  Next week’s calendar: The hearing schedule starts on Page 16.

Taxation

We hosted a Kansas Department of Revenue briefing by Richard Carlson. Rich is the previous Chairman of the House Tax Committee, who is now employed by KDOR, so he has a unique perspective on tax legislation. 

HB 2361 and HB 2263 would allow Bourbon and Douglas Counties to hold elections to establish a 1% and ½% sales tax (respectively) for building county jails. It also creates a sales tax exemption for Concern, Inc., a Mound City food pantry. The legislature hasn’t been keen on new tax exemptions, so I expect that to be amended out of the bill.

HB 2367 and HB 2298 would, respectively, include Miami County as a Rural Opportunity Zone (ROZ) and remove the sunset for ROZ program. This program has been successful, but I want to see more detail and data on exactly how many new residents have been attracted, to which counties, and how much the program has cost in both education reimbursement and income tax exemptions for those new residents.

To date a wide range of tax bills have been filed in both the House and Senate, many of the bills are being held until the month of May before serious consideration is given to raising taxes. Now that passage of the block grant school formula looks certain, a fixed public education budget number can be plugged into the 2016-17 budget.  Remember, K-12 funding is half of the state budget, so the block grant bill is a huge step in finalizing the budget.

Over the next several weeks, work to cut the state budget will continue. But at some point, the willingness of legislators to cut will hit a wall. We are looking at a nearly $600 million funding gap (we just added $300 million with passage of the block grant formula, so the deficit is up to $900 million). I personally do not see the House finding anywhere near $900 million worth of budget cuts. So we are going to have to raise taxes.

Last week we heard about HB 2392, which addresses what I consider a serious flaw in the tax cuts of 2012.  The bill would remove the tax exemption for “rent and royalties” pass-through income. The bill is anticipated to bring in $65 million per year. An example to illustrate how this works is five investors create an LLC, and purchase a building. Rent off the building is the source income for the investors. Under our current tax structure, the earned rent is tax-free. No jobs created, just a tax break for the investors. 

Children & Seniors

We held briefings by the Kansas Department on Aging and Disabilities (KDADS) and the Department for Children and Families (DCF). 

Energy & Environment

HB 2373 is a creative new way to debate the Renewable Portfolio Standards (RPS) which caused such a ruckus last year. Rather than repeal the standards, this bill simply sunsets the requirement for renewable energy generation on January 1, 2016. This bill will most certainly get out of committee but is likely to face the same struggles seen on the House floor with last year’s maneuvers to kill the RPS.

Please do not hesitate to reply with questions or comments. It is an honor to serve you in Topeka. 

Sincerely,

Tom Phillips
State Representative, District 67
Kansas House of Representatives