Updated January 8, 2016

Where We’ve Been◦ McCleary v. State of Washington Refresher

Where We Are◦ McCleary Implementation

◦ 2015-17 Budget Overview

Where We’re Going◦ 2016 Session—Major Issues to Address

Compensation and Levy Reform (and Levy Cliff)

Teacher Shortage

School Facilities

2

McCleary v. StateThe Basics

0

2

4

6

8

10

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State Funding Actual District Costs

Statewide Funding – all 295 School Districts

2007-08 School Year

State’s “basic education” funding

Other State funds

School facilities

Classroomteachers

Pupil transportation

Librarians, counselors, safety personnel, health

Principals, etc.

Utilities, insurance, etc.

ExtracurricularFood service

Capital Project Fund expenses

ASB Fund expenses

Dollars

in B

illions

Local levy revenue at the same level as before Doran Decision

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%Percent of State and Local Revenue Sources

(excludes federal and other revenue sources)

State Revenue

Local Revenue

20.5%

Source: OSPI 5/10

Supreme Court rules (January 2012):◦ The State “has consistently failed” to provide the

ample funding required by the Constitution.

◦ “Reliance on levy funding to finance basic education was unconstitutional 30 years ago in Seattle School District, and it is unconstitutional now.”

Supreme Court Orders State to:◦ “demonstrate steady progress” under ESHB 2261;

and

◦ “show real and measurable progress” towards full Article IX, Section 1 compliance by 2018.

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McCleary v. State

Basic Education Finance Reform

ESHB 2261—adopted 2009

Redefined and expanded Basic Education:◦ Increased instructional hours◦ Pupil transportation◦ All-day kindergarten◦ Highly Capable program◦ LAP and TBIP◦ Special Education

Required to be fully implemented and funded by Sept. 1, 2018

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Basic Education Finance Reform

SHB 2776—adopted 2010

Implemented Prototypical School Funding Formula

Provided implementation schedule for required Basic Education elements:◦ Pupil transportation (2014-15)◦ MSOC (2015-16)◦ All-day kindergarten (2017-18)◦ K-3 class size reduction (2017-18)

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McCleary v. StateImplementation Progress

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2015-17 Operating Budget(as adopted, June 2015)

Total Spending $38.22 billion

K-12 Education 2013-15 $15.27 billion

K-12 Education 2015-17 $18.16 billion (47.5% share of GF-S)

Total K-12 increase $2.89 billion (18.9% increase)*

($4.5 billion increase in last 3 years)*

Basic Education Enhancement $1.27 billion

*Includes mandatory “maintenance level” increases

11Source: Senator Andy Hill, 10/15

MSOC 741.5

K-3 Class Size Reduction 350.2

Full-Day Kindergarten 179.8

BASIC EDUCATION (HB 2776) 1,271.5

COLAs 383.3

Health Benefit Rate Adjustment 24.4

I-1351 Class Size (2,042.7)

Staff Mix (35.7)

Levy Equalization (20.5)

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2015-17 K-12 Budget – Major Highlights(dollars in millions)

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Education Funding Task ForceAdopted Spending Plan

Source: Joint Task Force on Education Funding, Final Report, 12/12

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$0.0

$1.4

$3.3

$4.5

$0.0

$1.0

$2.3

$0

$1

$2

$3

$4

$5

2013-15 2015-17 2017-19

Task Force

Proposal

Legislative

Investment

McCleary Basic Education Investments2013-15 & 2015-17 Operating Budgets

$5

$4

$3

$2

$1

$0

Billions

State’s K-12 Funding PromisesTestimony Under Oath During McCleary Trial

(Per Pupil State Funding)

Source: Network for Excellence in Washington Schools, 9/14

Real and Steady Progress Towards Full Funding—State Testimony vs. Actual Funding—

(Per Pupil State Funding)

Source: Network for Excellence in Washington Schools, 10/15

● $7,279/pupil is at p.6 of the State's 2013-15 Operating Budget Overview for Striking Amendment to 2ESSB 5034 [the adopted 2013-15 biennium budget].

♦ $12,701/pupil is a minimum level based on the State's trial testimony and compensation study. The State testified ESHB 2261’s reforms will increase State funding to $9,710/pupil before market rate salaries, inflation after 2008, or capital construction needs. The June 2012 Final Report of ESHB 2261's Compensation Technical Work Group then determined the cumulative increases needed to cover the market rate salary part is $2.991 billion/year before adding the I-732 COLAs. That equals about $2,991/pupil for 1 million students; $9,710 + $2,991 =$12,701. As noted below, OSPI’s 2015-17 Capital Budget submission confirms this $12,701/pupil figure is at least $2,000/pupil too low, as it acknowledged the expansion to full day and lowering K-3 class sizes require construction of approximately 5,698 more classrooms at a cost of $2 billion (about $2,000/pupil spread over 1 million students).

■ $8,634, $9,990, and $11,345 are 1/4, then 2/4, then 3/4 of the way between the previously-noted $7,279 in 2013-14 and $12,701 in 2017-18.

▲ $7,785, $8,541, and $9,024 are from Chart B in the State’s 2015 Report To The Supreme Court By The Joint Select Committee On Article IX Litigation.

$14,701 is based on OSPI’s 2015-17 Capital Budget submission, which acknowledged the expansion of kindergarten to full day and lowering of K-3 class sizes will require the construction of approximately 5,698 more classrooms at a cost of $2 billion (about $2,000/pupil if evenly spread over 1 million students). Adding that $2,000/pupil to the previously-noted $12,701/pupil equals $14,701/pupil.

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State’s K-12 Funding Promises

Source: Network for Excellence in Washington Schools, 8/15

Supreme Court (Jan 2012): “The legislature recently enacted a promising reform package under ESHB 2261, which if fully funded, will remedy deficiencies in the K-12 funding system.”

Has McCleary been fully implemented?

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Sen. Hill (Nov. 2014): “The McCleary ruling’s statutory components derive from HB 2776 (2010) which required funding enhancements in four areas [pupil transportation; MSOC; all-day kindergarten; K-3 class size reduction] by the 2017-18 school year.”

Sen. Hill (Oct. 2015): “In 2015, the Legislature enacted a budget that fully funds the statutory components of [HB 2776].”

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Rep. Kristiansen (Oct. 2015): “The Legislature has followed through on all McCleary funding commitments. Our state remains on track for full compliance of the 2012 McCleary order by the original 2018 deadline.”

Attorney General brief (Dec. 2015): “The Legislature is on track to fully fund all the commitments it made in SHB 2776 by the deadlines it enacted in 2010.”

What about compensation?

What about levy reform?

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2016 Session

“Short” (60 day) non-budget session

Necessary actions:◦ McCleary funding plan◦ Compensation/Levy reforms◦ Emergency funding (wildfires, lawsuits)◦ Mandatory caseload adjustments

Obstacles to action:◦ Politically divided Legislature◦ Power struggle between branches of government◦ Dispute about what (if anything) needs to be done for

McCleary◦ “Changing of the guard”◦ 2016 is an election year

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In 2009, ESHB 2261 adopted, establishing a new definition of basic education and a new education funding system.

ESHB 2261 stated the Legislature’s intent to “enhance the current salary allocation model,” with the understanding that “continuing to attract and retain the highest quality educators will require increased investments.”

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“Substantial evidence at trial also showed that the State consistently underfunded staff salaries and benefits. Testimony revealed that the State allocation for salaries and benefits fell far short of the actual cost of recruiting and retaining competent teachers, administrators, and staff.”

- McCleary ruling

Jan. 5, 2012

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“Another area in which the State's [2013 Progress] Report falls short concerns personnel costs. Quality educators and administrators are the heart of Washington's education system. The Report … skims over the fact that state funding of educator and administrative staff salaries remains constitutionally inadequate.”

- McCleary Order

Jan. 9, 2014

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“Nothing could be more basic than adequate pay. The inescapable fact is that salaries for educators in Washington are no better now than when this case went to trial....It is deeply troubling that the State's [2013 Progress] Report does not address this component of ESHB 2261 or offer any plan for meeting its goals.”

- McCleary Order

Jan. 9, 2014

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“This leads to the matter of personnel costs, for which the State has wholly failed to offer any plan for achieving constitutional compliance....A major component of the State’s deficiency in meeting its constitutional obligation is its consistent underfunding of the actual cost of recruiting and retaining competent teachers, administrators, and staff.”

- McCleary Order

Aug. 13, 2015

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Note: Salaries are for all programs and do not include benefitsSource: OSPI, 9/14

School District Employee SalariesPercentage of Average Salary Paid by State and Local District

(Historically through 2012-13)

99.2%

90.8%

85.7%

79.7% 78.9%77.2%

0.8%

9.2%

14.3%

20.3% 21.1%22.8%

$(1,400)

$(1,200)

$(1,000)

$(800)

$(600)

$(400)

$(200)

$-0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1987-88 1992-93 1997-98 2002-03 2007-08 2012-13

Millions

Total $ Underfunded % of Average Salary Paid by State % of Average Salary paid by District

School District Employee SalariesPercentage of Average Salary Paid by State and Local District

(Historically through 2012-13)

Sen. Hill concedes that “too large a portion of salaries are funded via local levies.”

Sen. Hill disagrees, however, that the State must assume the full cost. He notes “the constitutional imperative is simply that adequate funds are provided to ‘recruit and retain’ K-12 staff with state appropriations.”

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Sen. Hill believes that “salaries are adequate to recruit and retain; they just need to come from the state not local levies....The bottom line is there is adequate and ample money already going into the K-12 system for salaries.”

Sen. Hill also rejects the notion that there is any type of teacher shortage, saying “each year there are more people entering the profession statewide than available openings.”

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Levy Cliff

Levy lid increases (4%) and LEA increases (2%) implemented in 2010 (Chapter 237, Laws of 2010) are set to expire on January 1, 2018.

WASA/WASBO: Legislature must fund the full cost of basic education labor first AND recognize and mitigate impact of any reduction to local levy authority on districts’ ability to meet financial obligations.

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33Source: OSPI, 11/15

DIS

TRIC

TSTA

TE

LEVY CLIFF IMPACTS – TIMELINE

2016 2017 2018

2016 SHORT

Board must adopt Reduced Educational Program (R.E.P.) prior to end of regular session.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Legislative action required to avoid impact of cliff.

2017-2019 BIENNIAL

Levy Cliff

60 Days 105 30 30 30 Days

District begins to engage community in plans to cut $4.6 million for cliff.

Community, students, and staff members.

School Board reviews $4.6 million R.E.P.

Staff prepare RIF notices.

School Board community meeting on on Reduced Education Program.

R.E.P. Board hearing. Deadline for budget.

Reduction in Force (R.I.F.) deadline.

FISCAL ADVISORY COUNCIL 31st

21st

BUDGET DEVELOPMENT

18th

Develop two budgets based upon funding

15th

REDUCED EDUCATION PROGRAM

(R.E.P.)

R.I.F

Credit: Everett Public Schools/Franklin Pierce Schools, 11/15

WASA supports legislative efforts in the 2016

Legislative Session to protect school districts from

the detrimental impacts of the “levy cliff.” This will

cause levy lids to be cut by four percent and State

funding for the Local Effort Assistance program to

be reduced from 14 -12 percent. To ensure school

district budget stability while the Legislature works

to fully fund basic education, WASA supports a

temporary extension of the levy lid and LEA or

other provisions that would hold school district

budgets harmless during the funding transition.-Adopted, WASA Board of Directors, Dec. 16, 2015

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Teacher & Substitute

Teacher Shortages

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Substitute Teacher Shortage is Real

Substitute shortage is impacting Elementary, Middle and High Schools—in Rural, Suburban and Urban schools

Source: OSPI/AWSP/UW Survey, 11/15 Survey Summary: http://bit.ly/1O25hwZ

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Teacher Shortage is Real

Teacher shortage is impacting Elementary, Middle and High Schools—in Rural, Suburban and Urban schools

Source: OSPI/AWSP/UW Survey, 11/15 Survey Summary: http://bit.ly/1O25hwZ

• Hiring Incentives • Retired Teachers

• Beginning Teacher Pay • Conditional Loan Forgiveness

• Expanded Reciprocity • Suspend ProCert for experienced Out-of-State Teachers

• Recruitment Campaign

• Statewide Application Depository

• Hiring Technical Assistance

• Careers in Education Course

39http://bit.ly/1OJNlaP

School Facilities

Additional Facility Capacity NeededAll-Day Kindergarten & Class Size Reduction

Total Cost of Needed K-3 Classrooms = $1.98B

(5,698 classrooms X $347,165 per classroom = $1.98 Billion)

Source: OSPI, 10/15

Grade Level or Facility

Type

Current Allocation

per Square Foot

OSPI

2015-17 Request

K-6 90 140

7-8 117 155

9-12 130 165

Facilities for the disabled 144 165

Release Year Funded Cost per

Square Foot

OSPI Request

FY 2014 $194.26 $256.00

FY 2015 $200.40 $264.09

FY 2016 $206.76 $278.89

FY 2017 $213.23 $287.62

Eligible Area – Student Space Allocation (SSA)

Cost per Square Foot – Construction Cost Allowance (CCA)

Current Construction Formulas

Source: OPSI, 7/15

2016 Legislative Platform

Comply with the Paramount Duty

Expand Available State Resources

Ensure Competitive Public School Employee Compensation

Enhance School Construction Assistance

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WASA believes the Legislature should continue to be held accountable for complying with its “paramount duty” to provide ample funding for all K–12 children by implementing the new basic education finance system as adopted in both ESHB 2261 (2009) and SHB 2776 (2010). To ensure the new system is completely implemented—with full and equitable funding—by 2018, as consistently ordered by the Supreme Court in McCleary v. State, the Legislature must demonstrate steady progress towards compliance with the constitution.

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Real and Steady Progress Towards Full Funding—State Testimony vs. Actual Funding—

(Per Pupil State Funding)

Source: Network for Excellence in Washington Schools, 8/15

The current state budget structure cannot accommodate the required—and needed—increases in basic education to comply with the Supreme Court’s McCleary decision, nor allow the state to address educator compensation or capital costs in a comprehensive way. WASA supports the enhancement of state revenues to ensure the Legislature is able to fully comply with the constitutional paramount duty with “regular and dependable” sources of funding and also prevent drastic reductions of other necessary government services—which would have significant direct and indirect impacts on K–12 education.

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November 2015 Outlook

Source: ERFC, 11/15

Washington Personal Income

Source: ERFC, 11/15

General Fund-State Revenues asPercentage of Washington Personal Income

Source: ERFC, 12/15

Taxable Sales as Percentage of Personal Income

Source: Economic & Revenue Forecast Council, 9/15

Source: Office of Financial Management, 8/14

In 1995, Washington ranked 11th in State and LocalTax Collections; by 2011, Washington ranked 35th

Washington’s current tax system isInadequate AND Inequitable

Source: Institute on Taxation & Economic Policy, 1/15

Who Pays? Fifth Edition: http://bit.ly/155azIO“Washington has the most unfair state and local tax system in the country.”

WASA urges the Legislature to fully fund a competitive compensation system to ensure the state not only meets its responsibility to establish an equitable and ample allocation system, but maintains the present pension offerings and provides competitive benefits. Failure to address the state’s obligation to adequately fund educator salaries will continue to force an unconstitutional overreliance on local levies. The order of implementation is critical; current basic education labor costs must be funded first, before any potential reduction of local levies. Any proposal to fund compensation that simply “swaps” state and local property tax authority without providing new state funding will not work and cannot be supported.

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Note: Salaries are for all programs and do not include benefitsSource: OSPI, 9/14

School District Employee SalariesPercentage of Average Salary Paid by State and Local District

(Historically through 2012-13)

99.2%

90.8%

85.7%

79.7% 78.9%77.2%

0.8%

9.2%

14.3%

20.3% 21.1%22.8%

$(1,400)

$(1,200)

$(1,000)

$(800)

$(600)

$(400)

$(200)

$-0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1987-88 1992-93 1997-98 2002-03 2007-08 2012-13

Millions

Total $ Underfunded % of Average Salary Paid by State % of Average Salary paid by District

School District Employee SalariesPercentage of Average Salary Paid by State and Local District

(Historically through 2012-13)

To fully comply with McCleary, a significant enhancement in school construction funding is required to ensure the state is amply funding the actual cost of constructing facilities necessary to reduce class sizes and implement full-day kindergarten. Understanding that a local contribution will likely still be required to access most state construction assistance, WASA also urges the Legislature to advance a constitutional amendment to the people authorizing school district bond issues to be approved with a simple majority vote.

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Additional Facility Capacity NeededAll-Day Kindergarten & Class Size Reduction

Total Cost of Needed K-3 Classrooms = $1.98B

(5,698 classrooms X $347,165 per classroom = $1.98 Billion)

Source: OSPI, 10/15

Grade Level or Facility

Type

Current Allocation

per Square Foot

OSPI

2015-17 Request

K-6 90 140

7-8 117 155

9-12 130 165

Facilities for the disabled 144 165

Release Year OSPI Request Funded Cost per

Square Foot

FY 2014 $256.00 $194.26

FY 2015 $264.09 $200.40

FY 2016 $278.89 $206.76

FY 2017 $287.62 $213.23

Eligible Area – Student Space Allocation (SSA)

Cost per Square Foot – Construction Cost Allowance (CCA)

Current Construction Formulas

Source: OPSI, 7/15

Daniel P. SteeleAssistant Executive Director,

Government Relations825 Fifth Avenue SEOlympia, WA 98501

360.489.3642

dsteele@wasa-oly.org

2016 Legislative PreviewUpdated: January 8, 2016