The Kansas School Finance Wars

Transcription

1 BRANDMEYER CENTER FOR APPLIED ECONOMICS Supporting Regional Economic Development through Analysis and Education The Kansas School Finance Wars Technical Report November 2017 Arthur P. Hall, Ph.D. Executive Director Brandmeyer Center for Applied Economics University of Kansas School of Business

2 About the Brandmeyer Center for Applied Economics The KU School of Business established the Center for Applied Economics in February of 2004 renamed the Brandmeyer Center in 2016 to honor a generous gift presented to the School by Joe and Jeanne Brandmeyer. The mission of the Brandmeyer Center for Applied Economics is to help advance the economic development of the state and region by offering economic analysis and economic education relevant for policymakers, community leaders, and other interested citizens. The stakeholders in the Brandmeyer Center want to increase the amount of credible economic analysis available to decision makers in both the state and region. When policymakers, community leaders, and citizens discuss issues that may have an impact on the economic development potential of the state or region, they can benefit from a wide array of perspectives. The Brandmeyer Center focuses on the contributions that markets and economic institutions can make to economic development. Because credibility is, in part, a function of economic literacy, the Brandmeyer Center also promotes economics education. About the Author Arthur P. Hall is the founding Executive Director of the Brandmeyer Center for Applied Economics at the University of Kansas School of Business. Before joining the KU School of Business, Hall was Chief Economist in the Public Affairs group of Wichita, Kansas-based Koch Industries, Inc. In that capacity, he worked with business leaders to define how public policy initiatives would influence the structure of the markets in which the company participates. Koch sponsored Hall s directorship of Kansas Governor Sebelius Budget Efficiency Savings Teams from April 2003 until his departure from the firm in February Before joining Koch Industries in May 1997, Hall was Senior Economist at the Washington, D.C.-based Tax Foundation, where he produced quantitative and qualitative research pertaining to the economics of taxation and acted as an economic advisor to The National Commission on Economic Growth and Tax Reform. Before that, he worked as a financial economist at the U.S. General Accounting Office. Hall has taught university-level economics at both the undergraduate and MBA levels. He received his doctorate in economics from the University of Georgia and his bachelor of arts in economics from Emory University. The opinions expressed are those of the author; they should in no way be interpreted as the viewpoints of the University of Kansas (or any subunits thereof) or the Kansas Board of Regents.

3 TABLE OF CONTENTS The Kansas School Finance Wars Introduction and Overview 1 Defining the School Finance Wars 2 The Legal Issues of Equity and Adequacy 3 Trends in School-Related Spending 6 The Winds of War Begin to Blow in the 1990s 10 Governor Brownback Calls for a Timeout in the School Finance Wars 15 CLASS and the Courts 16 CLASS and the Political Process 18 Appendix: Key Dates and Events in the Political Economy of K-12 Public Finance 23

4 For years, we have faced repeated legal action against the state because no one knows what a suitable education actually means. I invite this Legislature to define suitability and end the confusion. This will provide us with a definition of what we need to undertake reform of our school finance formula and provide our school districts with stable, sustainable funding for the future. Let the Legislature resolve school finance not the courts, so we can send more money to the classroom, not the courtroom. Governor Sam Brownback, 2011 State of the State Address 1 Introduction and Overview 2 Kansas, like virtually every other state, has an education section in its constitution. Article 6 of the Kansas Constitution says, in relevant part: The legislature shall make suitable provision for finance of the educational interests of the state. 3 This language came from a 1966 constitutional amendment that sought to modernize the original education-related language ratified at statehood in Despite several school finance-related lawsuits since 1966, the Kansas Supreme Court never had the opportunity to adjudicate the fuzzy term suitable provision until the 1990s. That fact is key to understanding the fiscal history defined by what Governor Sam Brownback dubbed the school finance wars. 4 He used the term as a general way to describe the continual parade of lawsuits related to K-12 education funding. However, the term has several possible interpretations. It could mean the parade of lawsuits that have happened in (roughly) the postwar era (Governor Brownback s apparent meaning). It could mean the parade of lawsuits involving the Kansas Supreme Court, which began in It could also mean something much more specific especially from a fiscal policy perspective. This study gives analytical support to a particular definition of the school finance wars. It does this by discussing in a fiscal policy context how Kansas legislatures and courts have dealt with key legal ideas and issues associated with school finance. School finance-related litigation has taken place frequently through the history of Kansas. However, events leading up to and following the passage of the 1992 School District Finance and Quality Performance Act changed the historical relationship between the State Legislature and the courts in a way that led to this study s proposed definition of the school finance wars David Dorsey, a public school elementary teacher for 20 years and a Senior Education Fellow at the Kansas Policy Institute, provided substantial contributions to this report. He provided all of the source material for the discussions related to the legislative debates about the 2015 Classroom Learning Assuring Student Success (CLASS) Act and the 2017 Kansas School Equity and Enhancement Act

5 Defining the School Finance Wars University of Kansas law professor Richard E. Levy colorfully described Montoy v. State as the Gunfight at the K-12 Corral. 5 That gunfight started the wars and the Kansas Supreme Court fired the first shot on January 3, 2005, when it mandated that the Kansas Legislature appropriate a specified dollar sum to augment already-appropriated funding for K-12 education. 6 Stated specifically, the wars concern the level and growth trajectory of K-12 education spending. Does suitable provision mean the levels and trajectory defined by the first few years following the Montoy mandate or does it mean the levels and trajectory defined by the decades preceding the Montoy mandate? Only two Supreme Court cases address this question: Montoy v. State ( ) and Gannon v. State (2010-present). If a school finance war means a legal case that addresses this fiscal question, then the term school finance wars means Montoy, Gannon, and any similar cases that follow Gannon. The long-run trend of per-pupil K-12 education spending illustrated in Chart 1 offers empirical support for this interpretation of the school finance wars. Important details and explanations follow, but the key takeaway from Chart 1 concerns the remarkably sta- Chart 1: Inflation-Adjusted Kansas K-12 Education Spending per Pupil, Sources: Kansas Department of Education; U.S. Census Bureau, Census of Governments: Finance Survey of School System Finances, various years; National Center for Education Statistics; Statistical Abstract of the United States, various years. Note: As a visual aid, the overlaid lines represent color-coded trend lines for and Richard E. Levy, Gunfight at the K-12 Corral: Legislative vs. Judicial Power in Kansas School Finance Litigation, University of Kansas Law Review, Vol. 54 (2006). 6 Montoy v. State (Montoy III), No. 91,915 (Supreme Court of Kansas, January 3, 2005). Specifically, no later than July 1, 2005, for the school year, the legislature shall implement a minimum increase of $285 million above the funding level for the school year,... 2

6 ble growth path of spending per pupil until the Montoy mandate. The mandate looks like an exogenous shock to a relatively stable fiscal system that subsequently struggled through a process of mean reversion a reversion process punctuated by a significant economic recession and bold fiscal policy changes. Chart 1 illustrates the inflation-adjusted growth in per-student K-12 education spending over many decades and across three major legislative reform efforts. The immediate post-montoy spending levels represent the historically unusual levels of per-student spending, the true break from a trend that began undergoing mean-reversion after the budgetary impact of the 2008 recession (which Kansas did not experience until 2009). As a visual aid to compare the Montoy mandate with longer historical trends, Chart 1 illustrates two different trend lines, one for the 1973 Act and one for the 1992 Act. The 1973 Act established a trajectory of per-pupil spending that almost perfectly predicted actual spending in 2014 and The 1992 Act (pre-montoy) established a trajectory that closely approximated per-pupil spending in 2010 and To appreciate the definition of the school finance wars suggested here requires an appreciation of two general themes in the historical record. The first theme relates to the pre-montoy working relationship between the Legislature and the courts. The Legislature typically responded in good faith when the courts discovered constitutional infirmities with the school finance formula operating at the time, and the courts typically accepted the Legislature s response. The second theme relates to the process of political economy that generated the relatively stable growth trends in per-pupil spending shown on Chart 1. To a remarkable degree, the growth in Kansas personal income has predicted the spending levels on K-12 education. The Kansas Supreme Court s entry into the school finance litigation in the 1990s began to disrupt these long-running, but informal, political agreements. A 1994 Supreme Court case known as U.S.D. 229 v. State maintained the agreement, but planted the intellectual seeds that grew into Montoy. The Montoy mandate started the wars. The Kansas Supreme Court has used the Gannon case to refine its judicial interpretations of the education article in the Kansas Constitution (Article 6). The Montoy decision focused on monetary inputs because the issue of cost dominated the evidence produced by the trial court. The Court has used Gannon to emphasize that the constitutional term suitable must focus on both financial inputs and student outcomes. That said, however, in the most recent oral arguments associated with the Gannon case (which took place on July 18, 2017), the Montoy mandate continued to play a role in the deliberations. In response to previous Gannon decisions (as detailed below), the 2017 Legislature appropriated an additional $293 million for K-12 education. During the July 2017 oral arguments, Supreme Court Justice Dan Biles asked the attorneys for the State: How do we justify giving less money [in inflation-adjusted terms] than we did in [2009]? 7 The different judicial and legislative answers to that question define the intellectual contours of the school finance wars. The Legal Issues of Equity and Adequacy Chart 1 identifies three different school finance laws (or funding formulas, as amended). The Legislature enacted each of these laws, at least in part, as a response to some type of school finance-related legal challenge. Once enacted, each of the different laws faced its own legal challenges on constitutional grounds. In the parlance of school finance litigation, two key terms delineate the primary elements of school-finance related law: equity and adequacy. Equity relates to the relative equality of the distribution of funding across the education system (usually on a per-student basis). Adequacy relates to the overall funding of the education system (usually on a per-student basis). Equity and adequacy often become legal- 7 Danedri Herbert, Supreme Court Appears Skeptical of School Funding Formula, The Sentinel, July 19, The Kansas Supreme Court hosts a video archive of oral arguments on its website, 3

7 ly intertwined ideas, but should remain analytically distinct. A famous California case known as Serrano v. Priest (1971) helped initiate equity-related school finance litigation across the states. 8 The California Supreme Court ruled that the California system of school finance violated the equal protection clause of the Fourteenth Amendment to the U.S. Constitution (and the similar clause in the California Constitution), because it depended significantly on property taxation, and the widely disparate distribution of property wealth meant that this funding scheme invidiously discriminates against the poor because it makes the quality of the child s education a function of the wealth of his parents and neighbors. Lawmakers in Kansas dealt with the issue of uneven property wealth long before the Serrano decision. The property tax has always played a prominent role in the financing of public education in Kansas and property tax-related equity issues remain as relevant in current times as they did in the state s early history. 9 Chart 2 illustrates the fundamental fiscal issue, using current county-by-county (taxable) property wealth in Kansas. As part of its school funding equalization procedures, the state government of Kansas levies a 20 mill (2.0 percent) property tax. Chart 2 shows how much that levy raised on a per-student basis in Using county-based estimates makes the outcome more familiar to people who understand Kansas geography, but the same general pattern would hold Chart 2: Per-Student Property Tax Yield by Kansas County in 2016: 20-Mill State School Levy Sources: Kansas League of Municipalities, Kansas Tax Rate and Fiscal Data Book, 2017; authors calculations. 8 For an application of Serrano v. Priest to Kansas, see Philip Ridenour and Patricia Ridenour, Serrano v. Priest: Wealth and Kansas School Finance, University of Kansas Law Review, Vol. 20 (1972), pp See p. 213 for the quotation. 9 In addition to the prominent school finance Supreme Court cases of Montoy and Gannon, see Petrella v. Brownback. 4

8 for a chart using Kansas school districts. The disparity among different geographic areas captures the core issue. However, for those who understand population distribution in Kansas, Chart 2 illustrates a deeper issue, one that makes the equity issue much more complicated. Consider these facts related to three Kansas counties: Coffey County has by far the highest property tax collections per student, because it has a relatively small student population and it hosts the Wolf Creek nuclear power plant, a major payer of property taxes. Coffey County has three school districts that enroll, respectively, about 850, 425, and 200 students. Each district has a geographic size about midway between the size of the Meade County districts and the Sedgwick County districts. One district has about 50 percent of its students on free or reduced-price lunch (a proxy sometimes used to measure the number of at-risk students); the other two districts have about 40 percent. Related to Chart 2, total property tax collections in Coffey County summed to $10.0 million. Meade County has the third highest property tax collections per student. However, Meade County is a rural county in southwest Kansas. It hosts two school districts, one with about 400 students and the other with about 150 students. Each district covers a large rural geography. About 50 percent of the students in each district qualify for free or reduced-price lunch. Related to Chart 2, total property tax collections in Meade County summed to $2.0 million. Sedgwick County, home to the City of Wichita, collects about 70 percent less in property taxes per student compared to Meade County. However, Sedgwick County hosts 10 school districts. The largest district enrolls more than 50,000 students; the smallest enrolls about 800. Most of the districts enroll between 2,000 and 7,000 students. All of the districts cover a much smaller geography than the two Meade County districts. About 75 percent of the students enrolled in the Wichita school district, the largest one, qualify for free or reduced-price lunch. However, almost all of the other districts have a lower fraction of their students on free or reduced-price lunch than the two Meade County districts. Related to Chart 2, total property tax collections in Sedgwick County summed to $90.6 million. The legal issue of educational equity asks the question: do each of the students in these school districts have reasonably equal access to substantially similar educational opportunity through similar tax effort? The substance of that question reaches far beyond tax dollars per student. It raises a host of efficiency-oriented operational questions technocratic and pedagogic questions that may never have precise answers. The idea of equity, at least in the constitutional context of Kansas, essentially presupposes the idea of adequacy. As discussed in more detail below, the Kansas courts, at least from a layperson s perspective, have come to define the constitutional term suitable as synonymous with the legal term adequate. Accordingly, it becomes difficult to adjudicate issues of equity if the courts do not first have a firm understanding of adequacy. The challenge for school finance, as the school finance wars make clear, is that the idea of adequacy involves hard-tomeasure outcomes. The first Kansas Supreme Court case to adjudicate the idea of adequacy (suitability) approvingly quoted the district court s thoughts on the issue: The standard most comparable to the Kansas constitutional requirement of suitable funding is a requirement of adequacy found in several state constitutions. In common terms, suitable means fitting, proper, appropriate, or satisfactory. Webster s New Collegiate Dictionary (1977). Suitability does not mandate excellence or high quality. In fact, suitability does not imply any objective, quantifiable education standard against which schools can be measured by a court. Rather, value judgments must be made regardless of whether the constitutional mandate requires that education be suitable, sufficient, appropriate, or adequate. 5

9 Because these concepts are amorphous, courts have molded tests by which to assess the level of funding. 10 The equity issue played a more prominent role in the Kansas school finance litigation of the more distant past. The adequacy issue has played a more prominent role in the Kansas litigation of the more recent past. Related to the three different school finance laws labeled on Chart 1, three important legal cases known, respectively, as Caldwell, Knowles, and Mock connect the 1965 Act, the 1973 Act, and the 1992 Act. Professor Richard E. Levy provided an insightful summary of these three cases: Several points are worth noting in relation to Caldwell, Knowles, and Mock. First, although none of these cases resulted in a definitive interpretation of article 6 of the Kansas Constitution by the Kansas Supreme Court, the trial courts in all three cases interpreted the relevant constitutional provisions to impose significant constitutional duties on the Legislature in relation to school finance. Second, in all three cases, the Legislature responded to the trial court rulings by amending the school finance laws, rather than seeking a definitive ruling by the Kansas Supreme Court. Conversely, the lower courts accepted this legislative response as a good-faith effort to solve constitutional problems. The cases thus represent an ongoing dialogue between the courts and the Legislature in which the Legislature accepted the guidance of the courts regarding its duty to provide suitable finance for education and worked to fulfill it. Third, the cases also reflect inherent difficulties in making suitable provisions to finance the educational interests of the state, which involve complex budgeting considerations, specialized judgments concerning educational policy, and hard choices about competing demands on limited state resources. Although new legislation was initially upheld in Caldwell, it was invalidated in Knowles, and the legislation upheld in Knowles was invalidated in Mock. Fourth, the evolution of the cases is consistent with the larger national pattern of school finance litigation. In Caldwell, a 1972 decision, the trial court relied exclusively on equal protection [an issue of equity]. In 1975, the Knowles trial court found the law unconstitutional because it provided unequal benefits to some districts, imposed an unequal burden on taxpayers, and funded poorer districts at a level that was insufficient to enable the plaintiffs to provide a fundamental education for the students..., on a rationally equal basis with students of other school districts. This language focuses on equity but also contains hints of an adequacy theory. By the early 1990s, the district court in Mock expressly concluded that article 6 imposed a minimum requirement of adequacy, citing the Kentucky Supreme Court s decision in Rose v. Council for Better Education as an example. 11 Trends in School-Related Spending Professor Levy s legal insights pair well with another interesting insight about Kansas education finance discovered or, at least, popularized by Mark Tallman. Mr. Tallman has been a fixture in the Kansas school finance debates throughout the modern history that began with the 1992 School District Finance and Quality Performance Act. For his Master s thesis, he wrote a comprehensive political history of the 1992 Act. From his post as the Associate Executive Director for Advocacy at the Kansas Association of School Boards, Mr. Tallman frequently writes reports that compare how school funding relates to aggregate personal income growth in Kansas. As an example, 10 U.S.D. 229 v. State of Kansas, No. 70,931, 98 (Supreme Court of Kansas, December 2, 1994). Later in the passage, the district court uses the Rose case adjudicated by the Kentucky Supreme Court. That case produced a set of standards (the Rose standards) that the Kansas Supreme Court adopted in its 2014 Gannon v. State decision. 11 Levy, Gunfight at the K-12 Corral, pp Emphasis added. Citations omitted. 6

10 two weeks before the 2014 Kansas Gubernatorial election, he wrote the following passage in his Tallman Education Report: 12 Educational funding continues to be a major theme in this fall s election campaigns. It is worth noting how school funding has historically been affected by economic trends and tax policy choices. Over the past 25 years, the Legislature has generally allowed state aid for K-12 education to grow at the same rate as the Kansas economy, even if it required tax increases. Following the Great Recession, however, Governor Brownback and the Legislative majority passed significant income tax cuts with the goal of boosting the state economy. Although total state school aid has increased, the income tax cuts have also lowered state education funding relative to Kansans personal income. Like any effective advocate, Mr. Tallman identified a usefully-simple metric to bring attention to his cause of advocating for higher K-12 education funding. It turns out that the level of Kansas personal income, as measured by the U.S. Bureau of Economic Analysis, has offered an extremely good prediction tool for the level of total (and per-student) Kansas K-12 funding; this has been true for the 59 years from 1957 through 2016, not just the post-1992 era, as highlighted by Mr. Tallman. Not surprisingly, however, the level of Kansas personal income and total K-12 funding do not move in perfect lock-step. In many years, the growth of total K-12 funding grows faster than the growth of personal income, and in many years it grows slower. Mr. Tallman supplied no compelling support for the last sentence in his passage, the statement related to tax reductions. There is no way to know how the Legislature would have decided to allocate budgetary funds if the income tax reductions, effective as of January 1, 2013, had not taken place. The Legislature always tries to balance competing priorities. The history of education finance in Kansas represents a menagerie of political trade-offs between taxation and funding. 13 The level and composition of taxation has been a central feature in every major school-finance-reform debate. Mr. Tallman s Master s thesis documents the rich details of the debates and trade-offs that occurred in the context of the 1992 reform, which happened to result in an increase of state-level taxes, but not without a substantial amount of political negotiation. 14 Governor Brownback explicitly spoke to this point in his 2013 State of the State Address when he said: 15 In the democratic system of checks and balances crafted by our Founding Fathers, the power to authorize spending public money was given exclusively to you, the Legislative branch. This is a core principle. The power of the purse is the primary power of the Legislature, not the Executive or the Judiciary. For the last two years you, the Legislature, have proven that you can increase state support for education while pursuing pro-growth economic policy. Balancing a wide range of public priorities is one of the strengths of our representative system. And so I ask you to make it clear in law that defining what is suitable provision for public 12 Mark Tallman, Tax Choices Shape Education Funding, Tallman Education Report, October 15, A more recent example with all of the same themes is New Revenue Estimates Part 3: Declining Investment in School Funding, November 22, This political balancing act has always taken place, especially in economically challenging times. History offers two good examples to help show that no golden era of education finance has existed. Because of the panic of 1873 and the 1874 grasshopper infestation, historian Charles Wright tells us that: All financial support of public schools by the state of Kansas was substantially lost for 60 years from 1879 to 1937, when the sales tax was enacted and part of the return was used for the schools. In 1931, the Legislature and Governor Harry Woodring passed and submitted to a vote of the people a Tax Limitation Amendment to the Constitution, which would have capped the school-related property tax rates used by local governments. See Charles O. Wright, 100 Years in Kansas Education, Vol. 1 (Topeka: The Kansas State teachers Association, 1963), p. 66 & 128. Emphasis in original. 14 Mark Tallman, The 1992 Kansas School Finance Act: A Political and Legislative History, M.P.A. Wichita State University,

11 funding of education is a job for the people s elected representatives and no one else. Chart 3a: Relative Growth Trends for Kansas Personal Income and K-12 Education Spending (2016$), The tight link between the growth of Kansas personal income and Kansas K-12 education spending offers a useful framework for thinking about the school finance wars. This framework captures a key element of Professor Levy s legal analysis the decades-long ongoing dialogue between the courts and the Legislature in which the Legislature accepted the guidance of the courts regarding its duty to provide suitable finance for education and worked to fulfill it. Chart 3b: Total K-12 Education Spending as a Share of Kansas Personal Income, Nothing inherent in the nature of economics or public finance makes the growth of personal income the correct guideline for the growth of total public K-12 funding, but, in Kansas, with some qualifications, the growth of personal income has tended to (informally) guide politically acceptable education-spending outcomes for at least a half-century. To repeat, however, the most noteworthy disruption to this general trend resulted from the 2005 Montoy mandate issued by the Kansas Supreme Court. Chart 3a and Chart 3b help put the personal-income-and-education-spending story into historical perspective. Chart 3a shows the inflation-adjusted relative growth trends in Kansas for personal income, total K-12 education spending, education spending per pupil, and the ratio of total education spending to personal income. Chart 3b provides the empirical details associated with the ratio of total K-12 education spending to Kansas personal income. Sources: Kansas Department of Education; U.S. Census Bureau, Census of Governments: Finance Survey of School System Finances, various years; National Center for Education Statistics; Statistical Abstract of the United States, various years; U.S. Bureau of Economic Analysis. With reference to Chart 3a, note the following: 8

12 Over the entire sample period, the simple statistical correlation coefficient between personal income growth and (1) total K-12 spending growth and (2) per-pupil spending growth equals 0.99, where a coefficient of 1.0 means perfect co-movement. During smaller time segments, the co-movement is less exact, but still strong. As a rule of thumb, the growth of Kansas personal income has offered a solid prediction tool for the growth in K-12 education spending. The strong co-movement between personal income and education spending helps explain why the ratio of K-12 spending to personal income is such a flat line (with Chart 3b showing that it has fluctuated in a relatively narrow band over a 59-year time period). Despite the strong co-movement from year to year, K-12 education spending has compounded at a higher annual growth rate than personal income. If 1973 to 2008 (the year before the onset of economic recession) are chosen as the endpoints, inflation-adjusted personal income grew by 150 percent, while total K-12 spending and per-pupil spending grew by 200 percent and 236 percent, respectively. A continuation of these disparate growth rates may have been theoretically possible, but perhaps they were not politically possible especially in the context of the severe economic recession and the escalating financial demands of other state government priorities (Medicaid being a prime example). Chart 3a makes clear the acceleration in total K-12 education spending that resulted from the Supreme Court s Montoy mandate. From 1992 to 2005, inflation-adjusted total spending grew at an average annual rate of 3.0 percent. From 2005 to 2009, inflation-adjusted total spending grew at a 5.1 percent average annual rate. The accelerated growth rate of total spending and the sudden decline in personal income in 2009 drove the ratio of K-12 spending to personal income to its highest level since The decline in spending followed the decline in personal income. These declines came during the Sebelius-Parkinson era. (As an aside, mathematically the decline in the ratio of K-12 education spending to personal income almost exactly equals the rise in the ratio of the state government s Medicaid spending as a share of personal income. There is no way to know for sure how the Legislature balances the state government s competing policy priorities, but this example helps illustrate relevant budgetary facts of the balancing act.) Chart 3b indicates that the post-2009 decline in the ratio of K-12 education spending to personal income looks like a process of reversion to the mean after a historically exceptional deviation from the mean. It is difficult to document the degree to which this mean reversion relates in some political way to the school finance wars. It may simply represent the normal political process of budgeting during challenging economic times. Regardless of cause, with a hat tip to Mr. Tallman, Chart 3a shows that the compounded growth rates of Kansas personal income and per-pupil spending have converged they represent almost the same dot on the chart. True, K-12 education spending relative to personal income in the Brownback era dropped below the long-run average of 4.5 percent, but the levels have historical precedence. Plus, as explained below, Governor Brownback initiated legislation that stabilized K-12 education funding for two years via a block grant program in order to give the Legislature time to write a new, superior school finance formula. Kansas personal income grew during that time, thereby reducing the ratio of education spending to personal income. Chart 4 adds perspective to Chart 3a. It shows the spending numbers that Kansas lawmakers saw. Without inflation adjustment and presented as dollars instead of rates of annual change anchored to 1957, the decline in K-12 spending from 2009 to 2011 appears much less pronounced. Most of the change in state aid and local revenue from 2014 to 2015 resulted from a change in accounting procedure, not a change in K-12 education spending policy See the commentary associated with Chart 5. For the law, see: Section 7 of House Substitute for Senate Bill 245 (2014 Legislature) and K.S.A Supp

13 Chart 4: Kansas K-12 Funding by Level of Government, Select Years constitutional provisions. From a public education finance perspective, the items listed below paraphrase the essential points of law developed by Judge Bullock: 17 Sources: Kansas Department of Education The Winds of War Begin to Blow in the 1990s The modern history of education finance in Kansas began with the 1992 School District Finance and Quality Performance Act. Like previous school funding legislation, the 1992 Act arose as a response to litigation, a case known as Mock v. State. More than ever before, however, the judge in the Mock case, Terry L. Bullock, encouraged lawmakers to create a comprehensive response to the core legal issues of equity and adequacy. Mock would effectively begin the deliberate quest to define a judiciable interpretation of the suitable provision clause in the Constitution. The school finance wars, as defined herein, became a by-product of this quest. To encourage a constructive solution to the eclectic array of cases challenging the constitutionality of the 1973 School District Equalization Act cases consolidated as Mock Judge Bullock elected to identify and decide the essential questions of law in advance of trial. He did this because: No controlling authority exists in Kansas interpreting the meaning of these The State Legislature (not local units of government) has a constitutional duty to each child to provide him or her with the same educational opportunity, which could readily imply different expenditure amounts per child, depending on circumstances. However, any unequal or disproportionate distribution of financial resources alone gives rise to a duty on the part of the legislature, if challenged, to articulate a rational educational explanation for the differential. The State Legislature s constitutional duty will inevitably require some level of resource redistribution among local school districts. In addition to equality of educational opportunity, there is another constitutional requirement and that relates to the duty of the Legislature to furnish enough total dollars so that the educational opportunities afforded every child are also suitable. In other words, should total legislative funding fall to a level which the Court, in enforcing the Constitution, finds to be inadequate for a suitable (or basic as some state s decisions prefer) or minimally adequate education, a violation of the suitable provision would occur. 18 Judge Bullock identified the Kentucky Supreme Court case of Rose v. Council for a Better Education (1989) as defining the elements of a minimally adequate education. The Kansas Supreme Court subsequently (in Gannon v. State) adopted the Rose standards, as further explained below. 17 Mock v. State of Kansas, No. 91-CV-1009 (Shawnee County District Court, October 14, 1991). 18 Mock v. State at 63,64. 10

14 Chart 5: Share of Kansas K-12 Funding by Level of Government, Select Years Sources: Kansas Department of Education; U.S. Census Bureau, Census of Governments: Finance Survey of School System Finances, various years. Judge Bullock s court invited the plaintiffs in Mock and Kansas lawmakers to consider a legislative solution to the constitutional challenges, using his points of law as guidelines. All agreed. The result the 1992 Act resolved the Mock litigation and once again reinforced the historical pattern of the Legislature reacting to the guidance of the courts in matters related to the constitutionality of education finance. The 1992 Act also solidified a long-evolving trend of having the state government provide an ever-increasing share of K-12 education funding. Some would argue that the state government s share has been even larger than the roughly 55-to-60 percent indicated by Chart 5, because the 1992 Act established a statewide uniform property tax rate for the purpose of education finance; however, historically, the money generated by this dedicated levy had been recorded as funding local-level rather than state-level education spending. That long-running procedure changed in 2015; state lawmakers insisted that the state government receive appropriate credit for the state-government resources dedicated to K-12 education. 19 Implementation of the 1992 Act did nothing to end the school-finance lawsuits. Several parties immediately went to court to challenge the constitutionality of the 1992 Act. The Kansas Supreme Court consolidated these cases into U.S.D 229 v. State, the first school finance case to appear before the Court after the suitable provision language became part of the Kansas Constitution in Given the newness of the 1992 Act, and the Court s perception of the earnest effort put forth by the Legislature to address the issues of equity and adequacy, the Court concluded that the 1992 Act was constitutionally permissible legislation. However, as part of its decision, the Supreme Court favorably quoted the district court on language that would become a memorable phrase in the school finance wars: the issue of suitability is not stagnant; past history teaches that this issue must be closely monitored. This phrase formed the foundation for the next wave of school finance litigation Montoy v. State to advance to the Supreme Court. A district court used the arguments and conclusions in the Supreme Court s U.S.D. 229 decision to summarily dispose of the Montoy suit (filed in 1999) that challenged the constitutionality of the 1992 Act. However, the Supreme Court disagreed with that decision, saying that the suitability analysis required by U.S.D. 229 is more rigorous than presumed by the district court. Using the suitability is not stagnant argument, the Supreme Court reasoned that this case [Montoy] is sufficiently removed in time from our decision in U.S.D. 229 so as to preclude summary application of U.S.D. 229 to dispose of the plaintiffs claims. 20 Consequently, the Supreme Court remanded the case back to the district court for further fact-finding. 19 For the law, see: Section 7 of House Substitute for Senate Bill 245 (2014 Legislature) and K.S.A Supp Montoy v. State of Kansas, No. 88,440, 16,17 (Supreme Court of Kansas, January 24, 2003). 11

15 The district court returned with facts that would prove decisive in setting the stage for the school finance wars. Note that the Supreme Court s order remanding the Montoy case back to district court happened in 2003, but the plaintiffs in the Montoy case filed their case in That fact matters, because the Kansas Legislature in 2001 commissioned a study explicitly meant to determine the funding levels required for the Legislature to fulfill the state s obligation to provide a suitable education for Kansas children across the state s many differently-situated school districts. 21 The results of this study, conducted by the consulting firm of Augenblick and Meyers, became part of the trial record and substantial competent evidence in the Supreme Court s further review of the case. 22 The Court used this evidence to form two basic conclusions: the Legislature did, indeed, have its own definition of suitable and it had made no effort to fund it at the level deemed appropriate by the cost study it commissioned. Specifically, the district court found that the financing formula was not based upon actual costs to educate children but was instead based on former spending levels and political compromise. 23 In other words, the Court deemed the 1992 Act, as amended, unconstitutional. Consistent with past episodes of a court finding constitutional infirmities with the structure of school funding, the Supreme Court retained jurisdiction of the Montoy case to allow the Legislature time to remedy the infirmities. The Court made it clear that it wanted the Legislature to determine how it would accomplish its constitutional responsibility, but added: Its failure to act in the face of this opinion would require this court to direct action to be taken to carry out that responsibility. 24 The Legislature responded to the Court s deadline with HB 2247, which Governor Sebelius allowed to become law without her signature. On June 3, 2005, the Court announced that 2005 House Bill 2247 is not in compliance with the January 3, 2005 opinion of this court and fails to remedy the constitutional infirmities in the Kansas School District Finance and Quality Performance Act... identified in that opinion. 25 The Montoy decision involved issues of equity and adequacy, but the adequacy (suitability) issues matters most for understanding how the Court s Montoy decision initiated the school finance wars. Regarding suitability, HB 2247: Increased school year funding by $142 million, through a variety of funding formula-based factors; and Provided for Legislative Post Audit, a legislative research organization, to conduct a cost study to inform future legislative efforts. (The results of this study became important later in the school finance wars; in the courts view, it substantially confirmed the results of the Augenblick and Meyers results.) 26 To understand the logic of the Supreme Court s response to the HB 2247 legislative effort and, more importantly, to understand the intellectual contours shaping the school finance wars it makes sense to let the Court speak for itself. The following list provides excerpts of the relevant sections of the decision (citations omitted): In this [remedy] determination we will be guided, in large part, by the A&M [Augenblick and Meyers] study, despite the State s criticism of it and our knowledge that, at best, its conclusions are dated K.S.A (a) (repealed 2005). 22 Montoy v. State, No. 92,032 (Montoy II), 12 (Supreme Court of Kansas, January 3, 2005). The citation for the study, which was prepared for the Legislative Coordinating Council, is: Augenblick & Myers, Inc., Calculation of the Cost of a Suitable Education in Kansas in using Two Different Analytic Approaches, May Ibid Ibid., Montoy v. State, No. 92,032 (Montoy III), 1 (Supreme Court of Kansas, June 3, 2005). 26 See Gannon v. State, No. 133,267, 36, 56, 60, 75 (Supreme Court of Kansas, March 2, 2017). 12

16 We also reject the State s related argument that the doctrine of separation of powers limits our review to the issue of whether the legislature had the authority to pass such legislation. Any language in U.S.D. No. 229 v. State to this effect is inapplicable here because of this case s remedial posture. Even now, however, we do not quarrel with the legislature s authority. We simply recognize that the final decision as to the constitutionality of legislation rests exclusively with the courts. Although the balance of power may be delicate, ever since Marbury v. Madison it has been settled that the judiciary s sworn duty includes judicial review of legislation for constitutional infirmity. We are not at liberty to abdicate our own constitutional duty. We agree with the Board [Kansas Board of Education] that although H.B does provide a significant funding increase, it falls short of providing constitutionally adequate funding for public education. It is clear that the legislature did not consider what it costs to provide a constitutionally adequate education, nor the inequities created and worsened by H.B At oral arguments, counsel for the State could not identify any cost basis or study to support the amount of funding provided by H.B. 2247, its constellation of weightings and other provisions, or their relationships to one another. The legislature has known for some time that increased funding of the financing formula would be necessary. In July 2002, the Kansas Department of Education prepared a computation of the cost of implementing the recommendations in the A&M study. Calculated in 2001 dollars the total cost of the increase would have been $725,669,901 for each school year. Additionally, the Department adjusted that number because of changes in LOB [local option budget] funding and applied a 2 percent inflation factor for each of the school years of , , and The resulting number was an increase in costs of approximately $853 million. As noted, the A&M study was commissioned by the legislature, monitored by the legislature s committees, paid for by the legislature with tax dollars, and received by the legislature. Although the State claims it considered the A&M study, it in fact chose to impugn its design and ignore its recommendations. It can no longer do so. This case is extraordinary, but the imperative remains that we decide it on the record before us. The A&M study, and the testimony supporting it, appear in the record in this case. The State cites no cost study or evidence to rebut the A&M study, instead offering conclusory affidavits from legislative leaders. Thus the A&M study is the only analysis resembling a legitimate cost study before us. Accordingly, at this point in time, we accept it as a valid basis to determine the cost of a constitutionally adequate public education in kindergarten through the 12th grade. We conclude, however, that additional funding must be made available for the school year to assist in meeting the school districts immediate needs. We are mindful of the Board s argument that there are limits on the amount the system can absorb efficiently and effectively at this point in the budget process. We further conclude, after careful consideration, that at least one-third of the $853 million amount reported to the Board in July of 2002 (A&M study s cost adjusted for inflation) shall be funded for the school year. Specifically, no later than July 1, 2005, for the school year, the legislature shall implement a minimum increase of $285 million above the funding level for the school year, which includes the $142 million presently contemplated in H.B In deference to the cost study analysis mandated by the legislature in H.B. 2247, the implementation beyond the school year will be contingent upon the results of the study directed by H.B and this opinion. Further, if (1) the post audit study is not completed or timely submitted for the legislature to consider and act upon it during the 2006 session, 13

17 (2) the post audit study is judicially or legislatively determined not to be a valid cost study, or (3) legislation is not enacted which is based upon actual and necessary costs of providing a suitable system of finance and which equitably distributes the funding, we will consider, among other remedies, ordering that, at a minimum, the remaining two-thirds ($568 million) in increased funding based upon the A&M study be implemented for the school year. Clearly, the legislature s obligation will not end there; the costs of education continue to change and constant monitoring and funding adjustments are necessary. On July 28, 2006, the Kansas Supreme Court ended the Montoy litigation. At the start of the 2006 legislative session, Legislative Post Audit presented its cost study to the Legislature and the Legislature used it to develop SB 549, legislation that the Court recognized materially and fundamentally changed the way K-12 is funded in this state. 27 In brief, SB 549 developed a three-year funding plan that the Court felt addressed its former constitutional concerns and provided an estimated annual increased funding by the school year of $755.6 million over that provided in The Court concluded that the overall impact of the three-year funding plan would take time to manifest itself. 29 The Gannon v. State case followed Montoy. Consistent with the definition of the school finance wars defined herein, despite different fact patters, Gannon represented a continuation of the same constitutional issues adjudicated in Montoy. The plaintiffs filed their case in 2010 because the state government reduced school funding in response to the budget challenges that resulted from the national economic recession, as illustrated in Chart 3a and Chart 4. The importance of the Gannon case in the school finance wars matters less for its case-specific details and more for what it arguably accomplished. From the point of view of the Kansas Supreme Court, the definitions of equity and adequacy (suitability) have been resolved. Furthermore, as throughout Kansas history, the Legislature accepted in good faith the Court s definition of adequacy. The Supreme Court issued its first Gannon decision on March 7, Therein, following guidance offered by a 1989 decision of the Supreme Court of Kentucky, the Supreme Court of Kansas officially adopted the Rose standards as the definition of a suitable education. 30 The Kansas courts had foreshadowed this outcome since the 1991 Mock decision the decision that formed the intellectual foundation for the 1992 Act. On May 1, 2014, the Kansas Legislature via 2014 HB 2506 codified the Rose standards into statute. 31 From 2010 through 2017, the Gannon Court issued five opinions. From those decisions, the Court developed a body of law that will inform the school finance wars of the future. Barring an amendment to the current language in the education section of the Kansas Constitution (Article 6), the continual parade of school finance lawsuits will almost certainly continue. Taken from the text of the Gannon decisions, the following list highlights key points of law that will guide Kansas courts evaluation of the merits of future suits: 32 Equity: To determine compliance with the equity requirement in Article 6 of the Kansas Constitution, Kansas courts do not require ad- 27 Montoy v. State, No. 92,032 (Montoy IV), 19 (Supreme Court of Kansas, July 8, 2006). 28 Ibid., Ibid., Rose v. Council for Better Education, Inc., 790 S.W.2d 186 (Ky. 1989). For those that want to focus on the suitable provision phrase in the Kansas Constitution, note that the Kentucky Court came to the Rose standards by examining this language from the Kentucky Constitution (Section 183): General Assembly to provide for school system The General Assembly shall, by appropriate legislation, provide for an efficient system of common schools throughout the State. Quoted in Gannon I (No. 109,335), p See K.S.A Gannon v. State, Case No. 109,335, at pp. 2-4 (2014). 14