TOPEKA — New lawmakers are taking a skeptical look at a proposed delay of a state aid payment to Kansas schools — an annual practice for more than a decade — arguing it squeezes districts.
For years, Kansas has delayed the final aid payment of the fiscal year to school districts in June. The practice allows the state to count the amount of the payment toward the following fiscal year — a way of helping to balance the books on the year that is ending.
The Senate Ways and Means Committee heard legislation Wednesday to balance the current-year budget. The state faces a budget shortfall of more than $270 million, and the bill already has passed the House.
The legislation, House Bill 2052, would add $75 million to the amount of aid withheld from school districts in the final days of June and instead paid in July. In some previous years, the withheld aid has totaled approximately $200 million.
Committee members, especially new senators, peppered a legislative researcher with questions about the aid delay. Sen. John Skubal, a first-term Republican from Overland Park, said he would like the budget bill to not include the delay. He didn’t go as far as to say he would offer an amendment to strip out the provision when the committee works the bill Monday.
The aid delay can place financial pressure on some districts, Skubal argued. Districts without adequate reserves are especially burdened, he said.
“The problem is the school districts are on a cash basis, so they can’t write checks if they don’t have any money, and that’s concerning to me with payroll, with people that do work for them,” Skubal said. “And, of course, they can’t enter into contracts without money in the bank. So the delay of this money, even though it’s for a short period of time, will stress some districts.”
Districts have grown to expect the annual aid delay. Mark Tallman, a lobbyist with the Kansas Association of School Boards, said the delay underscores the need for school districts to have cash reserves.
Sen. Ed Berger, a first-term Republican from Hutchinson, echoed that sentiment. He said it is unrealistic to eliminate the delay this year, but said it demonstrates why districts need reserves.
The size of district cash reserves are a perennial topic at the Statehouse. In 2016, an efficiency study of state government commissioned by the Legislature recommended a maximum cap on reserves of 15 percent of operating expenses.
“Districts have come to manage it, but it’s really just another way school district balances have sort of helped the state out. Rather than being a negative thing, (cash reserves have) helped the state manage its own cash flow,” Tallman said.
Sen. Laura Kelly, a Topeka Democrat and ranking minority member on the committee, said she hopes the Legislature eventually can pass a tax package into law that will allow the state to stop “using accounting tricks” to balance the budget.
As lawmakers assemble a tax package, the amount it generates should be robust enough to allow accounting maneuvers — such as the aid delay — to stop, she argued.
But Kelly acknowledged it might not be possible to end the practice immediately.
“I think we’re going to have to play games to get through 2018 because no matter what we do with our tax package, it isn’t going to fully impact the bottom line until ’19,” Kelly said.
The Legislature last month passed a tax package that would have generated approximately $590 million next year by raising personal income tax rates, reinstating a third tax bracket and eliminating an exemption for pass-through business income. Brownback vetoed the measure, and an effort to override the veto failed in the Senate.
Lawmakers also must balance the current-year budget shortfall. House Bill 2052, known as a rescission bill, in addition to the $75 million school aid delay, would freeze state contributions to KPERS, the state pension system, at 2016 levels. That year, Kansas made only three of four quarterly payments. The freeze is expected to save nearly $86 million.
The bill also eliminates the planned repayment of the delayed 2016 quarterly payment — a savings of approximately $115 million.
The bill also would require 10 percent of the state ending fund balance to go into a budget stabilization fund. And 50 percent of the ending balance would go toward KPERS.
How much the state ultimately will have for an ending balance is unknown. The rescission bill assumes an ending balance of approximately $100 million.
The bill attempts to solve a shortfall of nearly $349 million. Monthly revenue collections have been better than expected recently, reducing the shortfall to only about $270 million.