As SB 727 Becomes Law, What Leaders Need to Know

The 2024 session was dominated by the consideration and eventual passage of SB 727. While our organizations opposed this bill, the bill was passed over our objections, and as of August 28, 2024, the bill is now law. Missouri must now turn the page to the law's implementation.

As we discussed in the spring, much of the consternation expressed by our organizations focused on the financial situation the bill creates for both the state and local school district budgets.

As schools are back in session and our administrators begin to look forward the 2025 legislative session, and the local budgeting process looms later this year and into the spring, we would like to revisit some of the provisions of SB 727. Rather than rehash every provision of SB 727, instead, this is intended to address the items that require additional legislative action and monitoring by school leaders in the weeks, months, and years ahead.

Minimum Teacher Salary

Beginning in the 2025-26 school year, the statutorily required minimum teacher salary will be $40,000 for starting teachers and $46,000 for teachers with master’s degrees plus ten years of experience. The salary threshold for master’s degree automatically increases by $1,000 each year for two consecutive years. The law places an inflationary adjustment (not to exceed 3% in any one year) on both minimum salary mandates each year beginning in the 2028-29 school year. 

What you need to know: The legislature included funding for the Missouri’s Teacher Baseline Salary Grant Program in the current school year. This program pays for 100% of the increase to a local school district’s move to the $40,000/$46,000 minimum. As many of you know, the decision of a school district to avail themselves of this grant program has been voluntary, however, moving forward the law will now require salary schedules to adjust to the minimum levels. 

SB 727 provided some direction that the state should continue to offer a grant program to assist districts in paying for the mandated salary increases, however, that language does not provide any direction as to how much the assistance should be for districts and it by no means guarantees that money is appropriated by future legislatures.

As we move into the upcoming session, districts impacted by the teacher salary requirements should pay close attention to the budget process. If state funding were to ever be eliminated, reduced, or remain flat as the salary thresholds increase, it will be up to local school districts to meet the salary demands with existing state, local, or federal sources.

Combination of Enrollment & Attendance Funding

SB 727 begins the process of moving the state towards funding schools based on enrollment in addition to attendance.

Beginning with the 2025-26 school year "weighted membership" is created which will be the average number of students enrolled in a school district who attended school at least one day during the ten days at the end of January and September multiplied by the weighting factors used in the current formula for those students above the threshold calculations.

In the 2025-26 school year, a district's weighted average daily attendance shall be calculated as the sum of 90% of such district's weighted average daily attendance as calculated in current law, plus 10% of such district's weighted membership. The percent of weighted membership included in such calculation increases by 10% each year until 2030, when a district's weighted average daily attendance shall be calculated as the sum of 50% a district's weighted average daily attendance plus 50% of such district's weighted membership.

What you need to know: This change does not begin until the 2025-26 school year. This is certainly a positive change as it will help inoculate districts from seeing fluctuations in the attendance calculations because of student absenteeism or school discipline issues. As such, every district in the state should begin to see an uptick in the number of students utilized to calculate state aid payments due to this change though it goes without saying that districts with higher absentee rates are likely to see a greater benefit from the change.

The increased WADA will result in the need for additional state resources in order to fund those students. The state estimated that this change would add between $40-$47 million in additional costs to the formula as a result of the increased WADA calculations. If, at any point the funding was not provided by the state, it is likely that the shortfall would result in a corresponding proration of the SAT.

Small Schools Grant

The Small Schools Grant is increased from $15 million to $30 million. As is the case with the existing small schools grant program, 2/3rd of the funding ($20 million) will be distributed based on average daily attendance while the other 1/3rd of the funding ($10 million) will be distributed equally to each school district that qualifies for the grant.

What you need to know: This change technically took effect August 28, 2024, though funding was not included in the 2024-25 state budget. As a result, there will need to be a supplemental appropriation to fund this when the General Assembly returns in January for districts to see this funding increase in the current school year’s state aid payments. Going forward in future budgets, this will be a specific line item in the state’s budget that will need to be funded by the General Assembly for districts to see the increased funding.

Local Effort & Merchants and Manufacturer’s Tax

SB 727 contains a provision that allows school districts to update the local effort deduction contained in the formula to account for revenues from intangible taxes, the merchants' and manufacturers' surcharge, and payments in lieu of taxes (other than tax increment financing) within the district's teacher and incidental funds. Previously, if a district had not included them in the capital projects fund, caused a larger local effort calculation within the formula and resulted in less state aid through the formula for the district. 

What you need to know: First, there is no action a school district impacted by this change needs to take. DESE has made the change administratively. Going forward, impacted districts will see an increase in their state aid payments to account for the drop in local effort in their formula calculation. These districts should be aware of the change in order to project future revenues for local budgeting purposes.

This change could technically impact all districts in the state because this change will result in the need for additional $14 million in state resources to ensure the current SAT is fully funded. The absence of this appropriation would result in a corresponding proration of the SAT.

Early Childhood Education

As a result of SB 727, children between three and five years old who are eligible for free and reduced-price lunch and attend an early childhood education program operated by a school district may be included in the district's calculation of average daily attendance, provided that the total does not exceed 8% of all pupils in the entire district who are eligible for free and reduced-price lunch. This cap is doubled from the previous limit of 4% of a district’s free and reduced-price lunch counts.

What you need to know: This change also took effect August 28 and districts with early childhood programs should start seeing an increase in their state aid payments as a result of this change in their state aid payments immediately.

The fiscal note of SB 727 indicated that the total cost of the increased statewide ADA is projected to be approximately $61 million to the state of Missouri which will need to be appropriated to fund the increase in students receiving the funding. Because the change is impacting the current school year’s state aid payments, a supplemental budget request during the 2025 legislative session to fund the increase for the current school year. The absence of an appropriation to fund the additional students would result in a proration of the state adequacy target.

School Calendar

Beginning in 2026-27 school year, school districts located in charter counties or in cities with more than 30,000 inhabitants must have a school term that consists of at least 169 school days, unless the district has adopted a four-day school week, in which case a school term shall consist of at least 142 school days. Adopting a modified schedule in these districts would require voter approval.

Additionally, any district in the state that maintains a calendar of at least 169 days will receive a 1% increase to their state aid payments for the 2025-26 and 2026-27 school years with the multiplier increasing to 2% in the 2027-2028 school year. The law requires that this funding be dedicated to teacher salaries.

What you need to know: First, districts outside of the areas discussed above may continue to adopt a four-day week simply with a vote of the school board.

Regarding the funding enhancements, DESE will utilize school districts’ 2024-25 school calendar to determine if districts are eligible for the 1% increase in the 2025-26 school year. Going forward, we expect the department to continue to utilize a district’s previous school year’s calendar to determine eligibility for the formula payment multiplier.

A number of our organizations’ members have asked a plethora of questions regarding the definition of school day for the purposes of this statute. These questions typically are extremely specific and unique to your districts, as a result, those questions should be directed towards DESE as they will be the entity ultimately responsible of making the finale determination.

Charter School Expansion – Boone County

SB 727 contained a provision that allowed charter schools to open in school districts within Boone County.

What you need to know: It is still early, but as of today, there have been no applications for new charter schools to open in any school district in Boone County. The expectation is that we will see applications in the coming months.

Voucher Program Expansion

SB 727 expanded the state’s existing Education Savings Account program. First, students from any district in the state that are in families that make less than 300% of the federal poverty level in the state are now eligible to receive a voucher from a scholarship granting organization to attend a school of their choice, including private, parochial, or home schools. The funding mechanism for this program is through tax credits to donors that make contributions to the organizations that provide vouchers to students. SB 727 expanded the tax credits available to $75 million and allows the amount to grow by inflation each fiscal year.

What you need to know: Obviously, these vouchers create an incentive for students to leave public schools to attend alternative options, so it is likely districts could see some drop in enrollment from students availing themselves of these options. However, as was the case with the program before it was expanded, more than 60% of these vouchers have went to students that were already enrolled in private schools. We expect that trend to continue with the expanded program.

More importantly, the $75 million price tag of the program, which grows by CPI each year, will impact overall state revenue collections in the coming years. Tax credits are automatic tax incentives that taxpayers can utilize to reduce the their state tax liability each year. They are essentially a way for the state to direct funds directly to a purpose without going through the budget process as the funding comes out of state revenues before policymakers ever consider the state’s budget.

As the state considers the other provisions of SB 727 that seek to increase spending on K-12 education, tax credit programs like this stand to contribute to budget shortfalls that could result in cuts or stagnation in state spending on K-12 education.