Most Kentucky School Districts Will Receive Less in State SEEK Payments Next Year
School districts across Kentucky face challenges as they craft their budgets for the 2026-2027 year, and falling state funding is a primary reason why. Recent projections from the Kentucky Department of Education (KDE) show that two-thirds of Kentucky school districts expect to receive less from the state to support the core funding formula (known as SEEK) in 2027 than they are receiving currently. The challenges school districts face become even greater when considering inflation, which has spiked recently with the rise in gas prices. Adjusting for inflation, 95% of districts will receive fewer state SEEK dollars in 2027, and 89% will receive less on a per-pupil basis.
Find the potential impact on your school district below:1
New state budget contains further erosion in state SEEK funding
The amount of state SEEK money a school district receives is determined by a combination of factors, including growth in local property values, student attendance trends, and changes in the number of students with special needs. Also critical in determining state SEEK payments is the minimum amount per pupil the General Assembly establishes in the state budget that each district will receive from a combination of state and local resources (known as the base per-pupil guarantee). The base per-pupil guarantee is adjusted by “add-ons,” or extra funding to address the additional costs associated with educating at-risk, exceptional, and limited English proficiency students. In addition, districts receive state funds for transportation costs.
Holding all other factors constant, increases in local property values reduce the state share of SEEK funding, while declines in property value raise the state contribution. The KDE’s forecast predicts that property assessments statewide will grow 6% next year as rising property values in certain parts of the state since 2020 are included in the assessment base. Changes in assessments vary widely across districts, however, with 14 of Kentucky’s 171 school districts projected to have no or negative growth in their property assessment while 17 districts expect assessment growth of between 8% to 20%.
Because SEEK funding is distributed to school districts on a per-pupil basis, school attendance also factors into how much SEEK funding a district receives. More students and higher attendance rates increase state SEEK funding, while decreases in attendance reduce the amount a district will receive. KDE currently expects state-wide attendance to decline by 1% next year. But as with property values, changes in enrollment and attendance are not uniform across districts. A total of 14 districts are projected to see attendance increase between 1% and 7% and 24 districts expect attendance declines of between 5% to 16%.
These and other local factors, combined with where the General Assembly sets the base per-pupil guarantee in the budget, determine how much state SEEK funding each district will receive. In the new two-year state budget, the SEEK base per-pupil guarantee grew from $4,586 per student in 2026 to $4,636 in 2027, an increase of only 0.9%. Lawmakers also froze the funding for SEEK transportation at $399 million in 2027, the same amount as was provided in 2026 and $93 million less than state law requires.
These choices limit how much the state sends to districts under the SEEK formula. Because state-wide property assessments are rising much faster than the increase in the base per-pupil guarantee established in the budget, and due to a small decline in the number of students and other factors, the state will contribute $42 million less overall in SEEK payments to all districts in 2027 than in 2026.
Rising inflation is making budgets tighter
In recent years, high inflation has made even nominal increases in school funding result in less money for education once increases in costs are considered. Consumer prices have increased by 28% since 2020. Pay for teachers and other school employees has not kept up, making it more difficult for public schools to attract and retain staff. Also increasing are prices for school buses, diesel, maintenance and insurance. The cost of new school construction is up 37% since 2020 and utility bills are much higher.
And inflation has increased further now because of the gas price hike resulting from the war in Iran. Consumer prices are up 3.8% over the last year, and the Federal Reserve Bank of Cleveland projects inflation to rise another 3.5% over the next year. That makes the $42 million reduction in state SEEK payments equal to a cut of $137 million once adjusted for inflation.
Ability to make up with local taxes varies widely, and the legislature increasingly limits local tax options
The ability of school districts to address these budget pressures with local tax dollars varies widely. Districts rely primarily on property taxes for local revenue (and have a few other smaller sources, though those are being restricted as described further below). With the same effort — for example, a property tax increase of one cent per $100 of valuation — property wealthy districts can generate over 10 times the amount per pupil that the poorest districts can generate. And some of the same districts that are losing students are experiencing declining property values. While lower property values result in more state SEEK funds, lower attendance results in less SEEK dollars and reduced property values result in a declining ability to raise revenue from local taxes.
Faster-growing districts face a different but also significant set of challenges. School districts with growing enrollment may need to build costly new facilities as space becomes crowded. Districts with more students with special needs, like those with limited English proficiency, face new instruction costs. Districts with rising property values also face extra pressure to pay teachers and staff more to be competitive. And state law discourages districts from increasing revenues from real property taxes by more than 4% over revenue raised in the prior year by making such an increase subject to recall by the voters. Fast-growing districts can potentially lose more in state SEEK money because of their growing tax bases than they can gain from local revenue increases needed to make up the difference because of the fear of recall.
And the General Assembly has recently made it more difficult for districts to raise taxes locally. Legislation passed in 2021 reduced the number of local signatures required in larger districts to trigger a referendum recalling a property tax increase that raises revenues by more than 4% over the prior year. And lawmakers passed HB 757 in 2026, which prohibits school districts that are not already imposing an occupational license tax on local wages, salaries and corporate profits from doing so after January 1, 2027 and prohibits those who do have the tax from increasing the rate after January 1, 2028. In addition, beginning in 2029 additional imitations will be placed on the ability of districts to levy higher tax rates on personal property.
The combination of decreased state funding, increased costs and growing restrictions on the ability of districts to raise revenue locally have created a difficult environment for school districts to acquire the funding that they need for all kids to get the education they deserve.
The post Most Kentucky School Districts Will Receive Less in State SEEK Payments Next Year appeared first on Kentucky Center for Economic Policy.