DALLAS – Kansas lawmakers must fix the state's public school funding formula by June 30 or face closure of the schools, the state Supreme Court ruled Thursday.
The latest ruling on the school funding formula could add $100 million to a budget that is already $200 million short of balance, officials said. Lawmakers in Topeka are considering one plan to balance the budget for the fiscal year beginning July 1.
While deploring the ruling as "judicial activism," Republican Gov. Sam Brownback issued a statement promising to "review this decision closely and work with the Legislature to ensure the continued success of our great Kansas schools."
Cuts to state income tax rates at Brownback's urging have led to revenue shortfalls over the past three years, forcing lawmakers to pass sales tax and cigarette tax increases while also sharply reducing spending.
On Thursday, Feb. 11, the Kansas Senate Ways and Means Committee approved a bill that would eliminate a projected deficit of nearly $200 million in the $16.1 billion budget for the next fiscal year.
The committee's 9-2 vote sends the bill to the full Senate for a debate.
The bill includes many of Republican Gov. Sam Brownback's proposals to help close the budget gap. Republican lawmakers on the committee also found an additional $32 million in savings in a program that provides death and disability benefits to the families of state workers.
In 2015 legislators trimmed school funding by about $54 million. The reductions were combined with similar changes for the next two fiscal years.
The $54 million came from allocations for school districts with weaker local tax resources. Some legislators claimed the $54 million adjustment wasn't a cut because the money had not yet been allocated.
Plaintiffs lawyers in the Gannon v. State case rejected that version of events.
In its ruling Thursday, the state Supreme Court declared that the legislation "widened the gap between districts receiving aid and those without a need for it."
Attorneys for the plaintiffs said they will seek clarification from the court on whether Kansas owes money to schools for fiscal year 2015 and the current fiscal year 2016.
If so, that would come to more than $100 million.
The attorneys' data from the Kansas State Department of Education indicates a fix could cost $73 million for 2016 and the same amount for 2017.
Standard & Poor's downgraded Kansas' general obligation bond rating to AA from AA-plus Aug. 6, 2014 and retained a negative outlook.
Moody's Investors Service has a stable outlook on its Aa2 GO rating for Kansas. But Moody's analysts issue a comment piece in January saying the lower court's ruling on the school finance lawsuit was a negative credit factor.
Before sending the case back to the lower courts for clarification, the Supreme Court last year suggested the state spend at least $548 million more a year, or almost 9% of its $6.3 billion fiscal 2015 budget.
"The ruling is credit negative for the state and the added funding would be a particular challenge on top of the state's projected fiscal 2015 budget shortfall of $279 million and loss of revenue from income tax cuts," Moody's noted.
Kansas' judiciary has ruled several times in recent years that state education funding is inadequate. In March 2013, the Kansas Supreme Court agreed, in part, with the lower court's finding that school funding laws failed to provide "equitable" education to certain poorer districts in fiscal years 2010, 2011 and 2012.
The ruling also rejected the state legislature's claim that school funding cuts were necessary due to the state's large tax cuts. After that ruling, lawmakers restored $129 million per year in funding to poor districts.
In its previous ruling, the state Supreme Court noted that funding adequacy is not just a matter of amount, but the ability of a district to achieve certain levels of competency. With that guidance, the Supreme Court returned the case to the lower court to revisit its recommendation of additional spending.
The lower court panel again ruled that school funding was inadequate and suggested that the funding would be constitutional if base state aid per pupil was approximately $4,654 to $4,980 per student. The state's current base aid to schools is $3,852 per student, down from a peak of $4,433 in 2008.
Nine other states currently face similar lawsuits, Moody's noted.