Kansas Legislative Research Department November 11, 2015

MINUTES

2015 SPECIAL COMMITTEE ON K-12 STUDENT SUCCESS

October 23, 2015 Room 112-N— S tate house

Members Present Representative , Chairperson Senator Steve Abrams, Vice-chairperson Senator Tom Arpke Senator Molly Baumgardner Senator Jim Denning Senator Anthony Hensley Senator Ty Masterson Representative Representative Sue Boldra Representative Larry Campbell Representative Jerry Lunn Representative Ron Ryckman Representative (substitution for Representative ) Representative Representative Valdenia Winn

Member Absent Representative Dennis Hedke

Staff Present Sharon Wenger, Kansas Legislative Research Department Lauren Douglass, Kansas Legislative Research Department Jason Long, Office of Revisor of Statutes Tamera Lawrence, Office of Revisor of Statutes Nick Myers, Office of Revisor of Statutes Sue Mollenkamp, Committee Assistant

Conferees Don Kossler, Customer Support Manager ,Legislative Office of Information Services (LOIS) Dr. Randy Watson, Commissioner, Kansas Department of Education (KSDE) Alan Conroy, Executive Director, Kansas Pubic Employee Retirement System (KPERS) Others Attending See attached list .

Chairperson Highland asked Committee members and staff to introduce themselves and asked members to have their calendars available for scheduling the next meeting.

The Chairperson invited Don Kossler, Customer Support Manager, LOIS, to address the Committee about the use of Dropbox for Committee documents. Mr. Kossler discussed the Dropbox setup, answered questions from Committee members, and gave personal attention to members needing help with their electronic setup.

Sharon Wenger, Principal Fiscal Analyst, KLRD, provided the Committee with a table of contents for the documents posted to Dropbox (Attachment 1).

Chairperson Highland commented on the charge given to the Committee to make recommendations to both chambers and on the need for these recommendations to be based on good information. Chairperson Highland stated the Committee’s job is to gather information and boil it down to make good recommendations.

Classroom Expenditure Data

Chairperson Highland invited Dr. Randy Watson, Commissioner, KSDE to address the Committee about the costs of classroom instruction. Dr. Watson introduced Dale Dennis and Brad Neuenswander, Deputy Commissioners, KSDE, as presenters of the information prepared for the Committee.

Instructional Costs

Mr. Dennis provided information on instructional expenditures for school years 2013-14 through 2015-16 ( Attachments 2 , through 5 ). In answer to a question from Senator Baumgardner, Mr. Dennis indicated the most recent numbers on student enrollment were released the previous day. The Chairperson requested this information be provided to Committee members. Senator Abrams asked for clarification of the blank boxes found in the data. Mr. Dennis stated some districts may have used different categories when posting figures to their accounting systems, and that some services may not be provided in the smaller districts. In response to a question from Representative Trimmer, Mr. Dennis confirmed the numbers given would be higher for districts that are the sponsoring district for a special education cooperative.

Mr. Dennis also reviewed information regarding average instructional costs per pupil for 2014-15 and budgeted instructional costs per pupil for 2015-16 ( Attachments 6 and 7 ). During his explanation, Mr. Dennis informed Committee members the median enrollment in Kansas school districts is approximately 550 students.

Special Education, Bilingual Education, and Vocational Education

Mr. Dennis explained the data provided for expenditures on special education, bilingual education, and vocational education. Because some federal funds go to districts directly and

Kansas Legislative Research Department 2 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 some go to special education cooperatives, two spreadsheets were provided, one giving state- funded expenditures for 2014-15 and one giving federal allocations for that same school year ( Attachments 8 , through 11 ). Blank boxes in the spreadsheets indicate the school district does not provide the service. Smaller districts located near a technical school or community college often utilize the services available at these institutions rather than providing their own. Under SB 155, which was passed in 2012, the costs of utilizing these technical or community college services are paid by the state rather than the school district.

Federal funds for special education go primarily to the special education cooperatives and interlocals, but the larger school districts, which stand alone in providing these services, also receive federal funding. Mr. Dennis explained the column titles on the federal allocation spreadsheet refer to age groups: ‘3-5’ refers to ages 3 through 5 and ‘3-21’ refers to ages 3 through 21.

Information by Sub-functions

Turning to data showing details of the different sub-functions of instructional expenditures, Mr. Dennis explained the various sub-functions ( Attachments 12 , through 19 ). When pointing out the column giving figures for employee benefits, Mr. Dennis indicated many districts are struggling in this area due to changes in the cost of health insurance.

Senator Arpke requested the data be updated with information detailing the number of certified teachers and non-certified teachers. Mr. Dennis clarified that all teachers are certified, pointing out that column 2 of KSDE SF16-007 provides figures for teachers and column 3 provides figures for support personnel.

Senator Baumgardner referred to administrators who also provide classroom instruction and asked if the figures for certified salaries include the full salary of these administrators. Mr. Dennis indicated the percentage of salary attributed to teaching is calculated based on the amount of time spent in the classroom, and this calculated amount is included in Column 2, certified salaries.

Senator Masterson asked if the figures for purchasing professional and technical services listed in column 5, reflect uniform accounting. He pointed out differences he did not understand based on similar demographics in various districts. Mr. Dennis listed the various professional services covered in column 5 and indicated the differences could result from unique needs in each district. Senator Masterson commented on the problem he sees in understanding the numbers mentioned in public debate because they seem nebulous and without a uniform method of accounting.

Mr. Dennis completed his explanation of sub-function data. Chairperson Highland asked who makes the decision about what will be included in these sub-functions. Mr. Dennis stated local board clerks or business managers make that decision based on definitions found in the Accounting Handbook, which can be found on the KSDE website.

Representative Trimmer inquired how funds awarded to a school district from a private grant would be reflected in the district budget. Mr. Dennis indicated the grant would be entered into the district’s gift fund, and then use of those funds would be recorded in the same manner as any other expenditure.

Kansas Legislative Research Department 3 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 Chairperson Highland asked if there are federal guidelines for the accounting of classroom instruction and whether these guidelines can be found on the KSDE website. Mr. Dennis replied in the affirmative to both questions. Senator Abrams asked for clarification about whether the Accounting Handbook provided by KSDE is a federal document. Mr. Dennis indicated the Accounting Handbook provides federal guidelines used by all states, but that it has been adapted for Kansas. Kansas is required to report certain information to the federal level, so only limited changes can be made to the definitions found in the Accounting Handbook.

Senator Arpke asked for a definition of adjusted full time equivalent (FTE). Mr. Dennis indicated the number is based on an average of the prior year’s enrollment, the current year’s enrollment, and a three-year average.

Senator Hensley asked if a printout of KSDE SF016-007 column 12 could be prepared showing cost per pupil from high to low. Mr. Dennis agreed to provide this information.

Mr. Dennis discussed KSDE SF16-008, which details the 2100 series of instructional costs. Mr. Dennis indicated there would be a lot of blanks for smaller districts in this spreadsheet of sub-functions for student support services. Many of the services are special education related, and the figures for the districts which sponsor a cooperative will be higher. The Chairperson inquired whether these employees will typically be licensed but not as a teacher. Mr. Dennis indicated this to be true. Senator Arpke asked Mr. Dennis to clarify whether this spreadsheet provides in more detail the 2100 series costs indicated in previous spreadsheets; it does.

Senator Abrams asked if there is a way for the data to be separated to reflect costs per student in each district even though services are provided by the cooperatives and interlocals. Mr. Dennis provided information on cooperatives and interlocals. The Chairperson asked how many interlocals there are in Kansas. Mr. Dennis indicated there are 15 to 20 interlocals involved in special education across the state. Chairperson Highland asked Mr. Dennis to provide information on how the interlocals are set up.

Representative Campbell commented the complexity and uniqueness of the interlocals and cooperatives should not effect the cost per pupil given in column 12, and if they do the numbers are skewed. Mr. Dennis acknowledged this to be true. The numbers as given with the cooperatives and interlocals included are skewed. Representative Campbell commented the Committee needs to know the true cost per pupil. Mr. Dennis offered possibilities on how to figure a more accurate cost per pupil. Representative Seiwert asked whether the figures in column 12 are calculated using the total number of students in the district or the number of students using the services. Mr. Dennis replied that the figures are calculated using the total number of students in the district. Representative Trimmer commented on the need to get to the heart of the issue in calculating a true cost per pupil. Senator Abrams asked if it is possible to come up with a more accurate number. Mr. Dennis suggested it could be possible to separate the expenditures of a cooperative or interlocal as should be allocated to those districts involved for use in calculating a more accurate figure.

Senator Baumgardner asked for clarification of whether there is a means to identify what each district pays for services within the district and for services provided by a cooperative. Mr. Dennis explained some services provided by cooperatives are not involved in special education and all special education costs must be paid from special education funds. Senator Baumgardner also asked who pays for the employee benefits for personnel employed by a cooperative. Mr. Dennis indicated these benefits are paid by the district sponsoring the cooperative; however, all districts involved in the cooperative contribute to the costs of the

Kansas Legislative Research Department 4 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 cooperative and record their contributions as a transfer to the cooperative. Cooperative expenditures can be found in the accounts of the sponsoring district. Senator Masterson asked whether payments to KPERS are considered an employee benefit or are a separate item. They are a separate item coming out of a separate fund for KPERS.

Mr. Dennis explained KSDE SF15-009, detailing the 2200 instructional series. Mr. Dennis indicated some districts are making use of library aides rather than a licensed librarian in order to reduce costs. The Chairperson again asked if definitions of the various columns can be found in the Accounting Handbook; they can.

Mr. Dennis discussed KSDE SF16-010, indicating the spreadsheet combines the previous sub-function spreadsheets into one document. Chairperson Highland asked Mr. Dennis to confirm that this spreadsheet provides an accounting of all costs involved in classroom instruction for each district. Mr. Dennis confirmed that it does. Senator Hensley requested a printout of column 12, per pupil cost, listed from high to low. Representative Trimmer asked that, in the printout requested by Senator Hensley, an asterisk be placed by the name of districts which sponsor a cooperative so they can be easily recognizable.

Representative Lunn asked whether information technology is included in the total classroom expenditure. Mr. Dennis indicated only technology costs related to instruction will show in these spreadsheets. Other technology costs are recorded in other areas of a district’s budget. Representative Lunn commented on the historical guideline of targeting 65 percent of state funding for instructional expenditures and asked how technology costs have been used when calculating adherence to this guideline. Mr. Dennis indicated the 65 percent guideline targeted operating expenses, but these spreadsheets include everything. Assistance for teachers in learning how to develop lessons is an example of instructional information technology costs that would be included in these spreadsheets.

Representative Campbell again sought to clarify that the numbers per pupil given in SF16-010 are skewed due to cooperatives and interlocals. Mr. Dennis agreed that they are. The Chairperson asked for confirmation that KSDE will provide more accurate numbers. Mr. Dennis indicated they would try, but there are some difficulties due to the variety of services provided and the possibility of creating an inflated enrollment number in the process. There was further discussion about the best way to come to a more accurate number.

Senator Baumgardner asked for confirmation that KPERS expenditures are not included in SF16-010. Mr. Dennis indicated all expenditures, including KPERS, are reflected in the spreadsheet.

Representative Seiwert inquired about the number of subcontractors hired by districts to provide services. Mr. Dennis gave various examples and indicated most districts would hire some subcontractors.

Senator Masterson followed up on Senator Baumgardner’s question about KPERS being included on the spreadsheets being discussed and asked specifically where it would be included. Mr. Dennis indicated it is included in column 4, employee benefits.

Senator Hensley inquired about the large per pupil figure for the West Elk district. Mr. Dennis indicated this district sponsors a cooperative and has a large number of students in special education.

Kansas Legislative Research Department 5 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 Historical Expenditure Data

Mr. Dennis pointed out files providing expenditure data for each school year from 2005- 06 to 2012-13, which were provided as a resource for the Committee’s use (Attachments 20, through 35 ).

Teacher Benefit Packages

Turning to information providing average teacher salaries including fringe benefits for school years 2013-14 and 2014-15, Mr. Dennis indicated negotiations in a few districts had not been completed when the data was prepared, causing some zeroes to be found in the spreadsheet. While explaining the different columns of the spreadsheets, Mr. Dennis noted the figures given in column 6 for board paid fringe benefits primarily reflect health insurance costs. Dr. Watson cautioned Committee members to be careful not to judge the figures in smaller districts too quickly because average salaries in those schools can vary significantly from year to year ( Attachments 36 , through 39 ).

Representative Campbell pointed out the FTE’s are skewed because of cooperatives. Mr. Dennis confirmed the district that writes the salary check is the district where it is counted.

Senator Baumgardner inquired whether it would be possible to get a breakdown of salaries into salaries for academic instruction and salaries for extracurricular athletic instruction. Mr. Dennis indicated the information can be provided but a survey of the districts will be necessary to obtain it.

Mr. Dennis provided data showing the lowest and highest teacher salaries in each district (Attachment 40). Districts have indicated some salaries reflect pay for multiple functions by one teacher. In one instance, a teacher received roughly 80 percent of his salary as supplemental pay for his responsibility outside the classroom.

Senator Masterson referred back to the historical data mentioned earlier and asked if an accurate comparison could be run between the figures for school year 2005-06, and the figures for the current year. Mr. Dennis indicated the only factors that might affect such a comparison would be changes in cooperatives and interlocals or changes in KPERS.

Representative Lunn asked Dr. Watson what he is hearing about possible efficiencies through sharing services while conducting listening tours across the state. Dr. Watson indicated the listening tours did not focus on efficiencies but on curricular outcomes and opportunities for students, how to make students more successful wherever they are. Representative Lunn indicated he had some questions about the optimal way to structure a district or to provide shared services to function efficiently. Dr. Watson noted, smaller districts are already accessing shared services through service centers and some larger districts are researching the possibility of sharing services on a regional or national basis.

Review of Bond and Interest Statutes

Chairperson Highland asked Jason Long, Office of Revisors of Statutes, to give a review of bond and interest statutes and to provide information on the Kansas’ state aid portion of bond and interest payments. Mr. Long answered questions from the Committee (Attachment 41).

Kansas Legislative Research Department 6 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 Senator Masterson commented on the debate that has taken place during the past two years regarding the average valuation per pupil (AVPP) on which the formula for determining the amount of state aid each school district receives is based. The AVPP basically provides equalization rights or poverty aid; however, the way it is calculated can cause exaggerated problems. For example, as people leave western Kansas and student enrollment decreases, the AVPP in those districts increases under the formula while in larger, urban districts where enrollment has increased, the AVPP decreases under the formula. This has created an inaccurate understanding of which districts should be considered ‘poor’ and which should be considered ‘rich’ and has also resulted in an exaggerated jump in the Kansas’ poverty aid as the formula dictated that poverty aid be sent to the richest district in the state. Some adjustments were made to this formula under SB7, which was passed during the 2015 Legislative Session, but further consideration needs to be given to how the AVPP is calculated. Senator Masterson asked Mr. Long to confirm the base information from this formula is corrupt.

Chairperson Highland asked if state aid for municipalities refinancing bonds will now be figured under the old formula or the new formula established in SB 7. Mr. Long explained the amount and purpose of the bonds do not change when bonds are refinanced, so another election is not needed. Thus, it is Mr. Long’s understanding that refinancing of bonds approved by an election prior to July 1, 2015, when SB 7 went into effect, would be governed by the old formula, and going forward, refinancing of bonds issued during the two-year period governed by SB 7 would be governed under the formula established by that bill.

The Chairperson asked Mr. Long to confirm that school districts do not use the same bonding group as state agents use. Mr. Long stated this is correct. With that being true, the Chairperson asked if it is also true that the responsibility for payment of bonds contracted by a school district which defaults on bonds belongs to the district and not to the state. Mr. Long confirmed that the district is responsible for the bond payments and indicated that an attempt to re-structure or refinance the bonds is made before a default can happen.

Representative Ryckman referred to the historical effect of the state aid portion on expenditures noting the increase in the amount of this portion since 2011. He commented on the issues created by this required expenditure, which is not actually appropriated and the need to examine how this effects the moneys available for use in the classroom.

Senator Masterson inquired about restrictions on a district when refinancing bonds and the possibility of refinancing bonds could result in the taxpayers paying an increased amount. Mr. Long indicated there are specific restrictions placed on the details of the refinancing process and bond counsels are responsible to see that those regulations are met.

Mr. Dennis returned to the podium to provide information on bond and interest expenditures and answered questions from the Committee (Attachments 42, through 45).

Representative Lunn inquired about the cause for the sudden increase in bonding elections. Mr. Dennis indicated it could be due to the combination of districts trying to get bond issues passed before new laws come into effect, to enrollment increases in suburban districts requiring building projects, and to rural districts needing to have old buildings replaced. Dr. Watson indicated when old bonds are paid off, it provides an opportunity for districts to pass new bond issues without changing the level of money being paid by taxpayers.

Representative Ryckman asked if it would be possible to obtain information about the cost per square foot of the buildings being built, and whether it has stayed in line with inflation or is escalating along with the escalation of the state aid portion. Dr. Watson stated more districts

Kansas Legislative Research Department 7 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 are putting in place safe shelters after the tornadoes that took place in Chapman and Greensburg, and these can have a high square footage cost.

Senator Denning inquired about how development plans affect funding for school districts. Mr. Dennis indicated in some instances the valuation goes up and the state will receive money but the district will not receive money, resulting in an increase in the local mill levy. Senator Masterson questioned the statement by Mr. Dennis that the state would get money and the school would not, asking for confirmation that the money that goes to the state is passed onto the school district. Mr. Dennis stated this is correct.

Senator Masterson returned to Representative Ryckman’s request for information about square footage costs and requested information about the amount of square footage per student the state is maintaining now and will be maintaining when planned projects have been finished. Mr. Dennis suggested that a comparison of ten years ago to now could be made.

Senator Hensley agreed with Senator Denning’s comments and also commented on the building of federally certified shelters by school districts. In response to a question from Senator Hensley, Mr. Dennis estimated there may have been 100 such shelters built by districts in the past 7 to 8 years. Dr. Watson stated entrance security and safe shelters have effected significant changes in buildings and have added to square footage costs.

Kansas Public Employee Retirement System School District History

Alan Conroy, Executive Director, KPERS, addressed the Committee on the history of the KPERS School Group and answered questions from members (Attachments 46 and 47).

Representative Trimmer asked Mr. Conroy to confirm that Kansas did not make the last actuarial liability payment and expressed his concern that missed payments could extend the time frame for completing payments. Mr. Conroy confirmed the last payment was not made and also indicated there has been no change in the date for completing the payments. If payments are missed, adjustments will have to be made along the way to complete the payments as scheduled.

Representative Lunn asked if consideration has been given to the effect of a national or global financial crisis on the KPERS fund. Mr. Conroy did have information available that can be given to the Committee.

Representative Lunn asked Mr. Conroy to comment on the increase in pension spiking and how decisions made by school districts are effecting this. Mr. Conroy stated the Legislature draws the line on what is included in the KPERS benefit structure and gave examples of how decisions made by the Legislature have affected school district decisions.

Senator Masterson asked if it is possible to calculate by school district the amount owed on the unfunded liability so the amount each school district owes can be seen. Mr. Conroy stated it is. Senator Masterson next asked if it is possible to show by what amount each district’s share of the unfunded liability has been helped by the $1,000,000 in bonds passed. Mr. Conroy stated it is possible.

In response to questions about the laws passed in 1993 that paved the way for the current unfunded liability, Mr. Conroy indicated an error was made in the actuarial estimate

Kansas Legislative Research Department 8 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015 made at that time and also there had been a tremendous positive growth in the investments of the trust fund, so the Legislature decided to decrease payments while increasing benefits.

Chairperson Highland asked members to consult their calendars for consideration of a date for the next Committee meeting. After consideration, the next meeting has been scheduled for November 10, 2015, at 9:00 a.m.

The Chairperson indicated non-classroom expenditures and outcomes would be addressed at the November 10, 2015, meeting and asked members to contact him with any requests for information they wish the Committee to handle.

The meeting adjourned at 12:25 p.m. Prepared by Sue Mollenkamp Edited by Sharon Wenger

Approved by the Committee on:

November 10, 2015 (Date)

Kansas Legislative Research Department 9 2015 Special Committee on K-12 Student Success Minutes for October 23, 2015