by Tom Loftus
The beginning of a new school year is often a time of excitement for kids, parents and educators. But it’s also a time state funding cuts and freezes to K-12 education may create difficulties for some school districts as they make decisions about what they can and cannot afford.
Kentucky’s K-12 funding cuts among the deepest
In last year’s report on K-12 funding by the Center on Budget and Policy Priorities, Kentucky continued its decline in national education funding rankings, sliding to third worst in the nation based on cuts in per-student core formula funding for local schools, which in Kentucky is known as SEEK. Kentucky ranked sixth worst in the previous year’s report. SEEK funding declined 13.1 percent between 2008 and 2016 once inflation was taken into account. Our state also received an “F” in Education Week’s 2017 Quality Counts report for education spending — ranking us 37th in the nation.
A recent report by Moody’s indicates these funding problems will worsen when Kentucky’s first charter schools open, likely next year.
Funding makes a difference for student success
Research shows school funding makes a real difference in children’s lives, with adequate school funding being important to student success. One study found when school spending increased by 10 percent, over the 12 years a low-income child was in attendance, that child was less likely to be poor as an adult, more likely to graduate from high school and had a nearly 10 percent increase in earnings as an adult. Another study found the achievement gap between rich and poor students shrank by around 20 percent in school districts located in states where funding reforms took place to address wealth inequities among districts — while the gap grew in states where there was no funding reform.
Kentucky is a state that benefitted from such reforms. The Kentucky Education Reform Act (KERA), enacted in 1990, established a funding system that provides more financial assistance to low wealth school districts. The funding formula relies on state resources to equalize funding among rich and poor districts, with more state funds going to low-wealth districts in recognition of their diminished capacity to raise funds. Immediately after the passage of KERA, funding disparities between wealthy and poor districts were reduced, and overall school funding in Kentucky was more equitable. Unfortunately, funding inequalities among school districts have been on the rise in recent years due to state budget cuts and funding freezes — and the gains we made through KERA are at risk.
Increased shift to local funding worsens inequalities among schools
A funding formula is only as good as its funding level, and reductions in state contributions for education have increased the pressure on local school districts to make up for reductions with additional local levies. But districts with low property values have substantially less capacity to generate additional funds than districts with high property values. According to the 2017 Quality Counts report, the difference in per-pupil spending between the highest- and lowest-spending districts in Kentucky is $2,343.
As shown in the graph below from an analysis by the Council for Better Education, 40 percent of SEEK funding per pupil was from local sources in 2008. This amount grew to 47 percent in 2016.
You can see how individual districts have fared here.
A particular area of current concern in school district funding in Kentucky is the transportation component of the SEEK formula. The statutes establish a formula for determining the amount of transportation funding each school district should receive based on the characteristics of that district. Beginning in the late 2000s as part of the budgeting process, the General Assembly elected to only partially fund this part of the formula, resulting in a transportation amount in the SEEK formula substantially less than the total cost determined under the formula. This means local districts must use their own resources to make up the difference. The graph below shows the shift in funding for student transportation to local school districts as a result of this reduction.
The growing reliance on local sources to fund school districts has widened funding inequities among districts. Poorer school districts have a harder time raising the revenue needed to make up for declining state funding. The same local property tax increase yields 10 times more funding per student in the richest Kentucky school districts than the poorest ones. Between 2000 and 2010, the gap in per-pupil state and local spending between the richest 20 percent of Kentucky school districts and the poorest grew by 40 percent, and it has continued to widen. If additional state resources are not devoted to education funding in the upcoming budget, the already wide gap between wealthy and poor districts will continue to increase, placing further strain on schools, especially the poorer districts that simply lack the capacity to contribute more. These inequities make it less likely that Kentucky will achieve the goal of providing equal educational opportunity for all children.
Since 2014, the federal financial assistance for out-of-pocket health care costs known as Cost Sharing Reductions (CSRs) has been under threat – first from a lawsuit filed by the House of Representatives, and now by threats from President Donald Trump to stop paying for it. In either case, ending those payments would hurt middle-class families who purchase insurance through the exchanges, destabilize the insurance market and raise costs for the federal government.
What are CSRs and how do they work?
CSRs help low-income people use the insurance they purchase on the marketplace, thereby accessing the regular care they need to address conditions and improve health. Through CSRs, consumers who purchase coverage through the exchanges can receive help paying for out-of-pocket costs like deductibles, co-pays and co-insurance. Insurance customers are eligible for CSRs if they earn below 250 percent of the federal poverty level (FPL) and select a silver-level insurance plan on the marketplace. The amount of out-of-pocket costs the CSRs cover depends on the income of the consumer, as shown in the table below.
For example, silver level plans, which are more generous than bronze plans and less generous than gold, normally require the enrollee to cover 30 percent of their health care costs and the insurance company pays 70 percent. But, if an enrollee earns less than 150 percent of the federal poverty level (FPL) the enrollee only has to cover 6 percent of the after-premium health care costs associated with a silver plan and the insurance company pays 94 percent. This percentage of health care costs insurers must pay is known as the actuarial value of a plan.
Insurance companies can configure the out-of-pocket costs any way they choose through increasing or decreasing deductibles, co-pays and co-insurance as long as the total doesn’t exceed the actuarial value or a specific out-of-pocket maximum. The federal government then reimburses insurance companies for the added expense they incur.
How many Kentuckians get CSRs?
Just over half of Kentuckians who bought insurance through the marketplace qualified for and chose a plan with CSRs during the 2017 open enrollment period, according to HealthCare.gov data. However, 71 percent of silver plan enrollees, or 41,209, received CSRs. Among those, approximately:
- 21 percent earned below 150 percent of FPL.
- 49 percent earned between 150 and 200 percent of FPL.
- 30 percent earned between 200 and 250 percent of FPL.
While people in every county in Kentucky receive a cost sharing reduction, perhaps unsurprisingly the poorer parts of the state receive a larger share of the CSRs. In Elliott, Magoffin, Leslie, Clay and Rockcastle counties, over 70 percent of marketplace enrollees receive help paying for out-of-pocket costs. Here is the number and percent of marketplace enrollees with a CSR in each county:
What would it mean if CSR payments to insurers were cut off?
Insurers who sell plans on the marketplace are required to offer CSRs regardless of whether the federal government reimburses them for the added expense of paying an increased share of health care costs. So if the President decides to cut off those payments or the court decides against the legality of CSR payments to insurers, the result would be an unstable individual insurance market in the short term, more expensive plans for people who earn too much for premium subsidies and increased cost for the federal government.
Insurers would raise premiums or exit the marketplace altogether
Because insurers would still have to offer the CSRs to qualifying enrollees, without receiving federal payments, insurers would make up the added cost by raising premiums. The Congressional Budget Office (CBO) estimates that if the CSR payments are not made, nationally, silver plan premiums would rise 20 percent in 2018 and 25 percent in 2020 and afterward. More specifically for Kentucky, the Kaiser Family Foundation estimates that in states that expanded Medicaid, insurers would have to raise premiums by 15 percent. The threat of lost CSRs is already being reflected in insurance companies’ rate filings for 2018, which have started to factor in a premium increase to compensate for the potential of losing CSR payments.
Some insurers, however, would likely decide to no longer participate in the exchanges and exit them altogether. In fact, according to a joint letter from health groups to Congress — including America’s Health Insurance Plans (AHIP), the health insurance industry association — some insurance companies are already deciding to exit the marketplaces because of uncertainty around the CSR payments. The CBO estimates that in 2018 and 2020, approximately five percent of the country’s population would live in counties without any insurers. In Kentucky, Anthem stated explicitly in its rate filing justification that if the CSR payments are not made, they too may raise rates or exit Kentucky’s marketplace.
People who earn too much for the subsidies would feel premium increases the most
Because people who earn up to 400 percent FPL ($48,320 for an individual) receive premium tax credits that tie the cost of premiums to a percentage of their incomes, if an insurance company were to raise premiums, they would not be affected. In Kentucky there are 18,168 people covered through the marketplace who did not receive financial assistance to help pay for premiums — most often because their incomes were too high to qualify. It is for these people that a premium rate increase would be most harmful; they would be completely unshielded from escalating premiums due to non-payment of the CSRs. According to CBO, the average premium in 2026 for someone earning 450 percent FPL ($68,200) would be substantially higher than if the CSR payments were made:
- $1,300 more for a 21 year old
- $1,700 more for a 40 year old
- $3,900 more for a 64 year old
For this group, CBO believes they would almost entirely stop using the marketplaces to purchase insurance because they could find less expensive options off the exchange.
It would be more expensive to stop making CSR payments
Initially, it may seem intuitive that ending payments for the CSRs would save the federal government money, but in reality the federal government will be paying for it one way or the other. Because insurance companies would likely pass off the cost of providing CSRs, which is roughly $7 billion per year, through higher premiums for everyone on the exchanges, the federal government would subsequently increase the amount it pays for premium subsidies. This means even if it stopped making CSR payments, the federal government would still be paying for CSRs through enrollees who qualify for premium tax credits. The CBO estimates that between 2018 and 2027 the federal government would pay $118 billion less in CSR payments but have to increase its spending on premium assistance by $365 billion. Along with other budgetary effects, ending the CSR payments would cost the country $194 billion more over 10 years.
Congress should act to stabilize the individual market
The law specifies insurers are due the payments to cover CSRs, and insurers must provide CSRs regardless of payment. Due to a flaw in the statutory language, however, there is still a question about the legality of paying insurance companies for the CSRs they are providing (which is the basis of the lawsuit currently being litigated). Congress can and should explicitly appropriate those funds. As it stands, the Trump administration has near complete discretion as to whether or not to make the payments, but low-income insurance customers shouldn’t have to face premium hikes set on that uncertainty. Without Congressional action, Kentuckians may be needlessly harmed by the uncertainty around these payments. The CSRs are integral to providing usable coverage for low-income Kentuckians, and choosing not to pay for them is a lose-lose proposition.
by Becca Shimmel
by Josh James
While community college is typically thought of as an affordable option for earning a degree, a recent report shows this is often not the case. Too many community college students do not have consistent access to food or stable housing, which makes it difficult for them to be academically successful. These issues likely contribute to Kentucky’s low community college graduation rates as well as achievement gaps for low-income and underrepresented minority students.
The report describes findings from a survey of basic needs insecurity (i.e. food and housing) among community college students in 24 states. Of those surveyed, 67 percent struggle to afford food and 51 percent are housing insecure. This means the majority of community college students have difficulty getting nutritious food consistently and easily (known as food insecurity), and they have difficulty paying rent and utilities (known as housing insecurity). An additional 14 percent are homeless.
Even community college is often not affordable for many students
Although community college tuition and fees are typically less expensive than other higher education options, many students have difficulty being able to afford to stay enrolled. This is the case even for students receiving Pell Grants and those who work while attending school.
A Pell Grant may cover tuition and fees, but there are a number of other costs associated with attending college, including housing, utilities, frequent moving, books, supplies and transportation. The graph below shows the difference between the maximum Pell Grant amount (many who receive Pell Grants do not get this maximum amount) and the estimated cost of attendance — typically a pretty conservative estimate — at Kentucky community colleges.
Because financial aid is insufficient for many, students often struggle to balance classwork with low-wage jobs that still do not cover all their bills. Approximately one-third of community college students who receive financial aid and work still experience food and housing insecurity. Homeless students have more difficulty securing work and when they did work, they worked longer hours, worked jobs with less reliable work schedules and are less likely to report being able to do schoolwork at their jobs.
Former foster youth, students of color and student parents particularly at risk
While basic needs insecurity appears to be a problem for community college students across the country, the report found that some students are more likely than others to be food and/or housing insecure:
- Foster youth are a particularly vulnerable group and are more likely to struggle to secure reliable access to basic needs compared to other students. The report found 75 percent of former foster youth are housing insecure and 30 percent are homeless while attending community college, compared to 13 percent of non-former foster youth. Former foster youth are also more likely to have the very lowest levels of food security.
- A disproportionate share of homeless students are students of color. Community colleges with greater percentages of students of color are more likely to have housing and food insecurity among their student body.
- Students with children also experience increased difficulty with food and housing security. This group typically has more additional expenses outside of basic needs and educational expenses. The survey found 63 percent of parenting community college students are food insecure and almost 14 percent are homeless; only 5 percent receive any child care assistance.
Additional research based on Census data finds food insecurity is a particularly big problem for adults and African American students at community colleges.
Although Kentucky students are not specifically included in these studies, our state should be concerned about these findings particularly given the growing number of children in foster care and the racial disparities in educational attainment and wages.
Report points to importance of critical federal and state investments
The report’s findings underscore the importance of critical federal and state investments that can help Kentucky community college students be more successful.
Federal programs such as Pell Grants for low-income students and the Supplemental Nutrition Assistance Program (SNAP), formerly known as “food stamps,” are currently at risk in the federal budget. The recent House budget resolution proposed cutting the Pell Grant program by $80 billion over 10 years and SNAP by at least 20 percent — or $150 billion — during that time period. As of February 2017, 102,360 students in Kentucky receive Pell and 651,889 participate in SNAP. Cuts to these programs would only worsen the issues of food and housing insecurity described in the report.
The House budget would also cut non-defense discretionary funding, which provides Kentuckians with housing and child care assistance, among other critical services. These cuts would harm many low-income Kentuckians, including those attempting to climb the economic ladder by earning a community college degree.
Greater state investment in higher education and need-based financial aid, among other supports, would also help to increase basic needs security among community college students. Food and housing insecurity would likely worsen as college increasingly becomes more expensive in Kentucky, in large part due to state budget cuts to higher education. It is important to note minority and low-income students especially feel the weight of budget cuts and resulting tuition increases because of existing financial difficulties. Studies show these students are less likely to enroll in college when tuition rates increase and, as mentioned previously, students of color and low-income students are more likely to experience food and housing insecurity. This is especially significant given the lower rates of degree completion for minority college students in Kentucky. College affordability and state funding for higher education are major factors that influence success for low-income and minority students.
While the new Work Ready scholarship will help some Kentuckians attend community college who would not otherwise, it’s not likely to alleviate the burdens of food and housing insecurity. Starting this fall, the program will cover the equivalent of community college tuition and mandatory fees for short-term certificates/diplomas in five occupational areas, including advanced manufacturing and health care, at schools in the Kentucky Community and Technical College System, several public universities and two private institutions. It is a last-dollar program, which means that Pell and other scholarships will be applied to a student’s tuition and mandatory fee bill first so many students who receive Pell — and struggle to secure adequate food and housing once tuition and fees are covered — will not end up benefitting from the scholarship.