How will school districts pay?

WNPA Olympia News Bureau

School districts around Washington are priming their fiscal pumps in coming weeks, asking local constituents to support special maintenance and operations tax propositions to maintain current programs, as well as bond measures to support facilities development and transportation needs.

Meanwhile, at the state Capitol, lawmakers have yet to come to grips in the early days of the 2015 legislative session with education financing plans to meet the state Supreme Court’s mandate that they must fully fund basic education as defined in the state constitution.

Legislators and Gov. Jay Inslee agree that education is and should be the dominant issue before them this session. They do not agree, however, on a means and method to resolve the dilemma: finding the dollars to avoid the Supreme Court’s clutches under a contempt order, the result of the Legislature’s failure to meet the terms the court has set for basic education funding.

Local school districts are holding levy and bond elections in February so they are able to maintain current operating levels while the Legislature continues to struggle with its role and responsibility to support basic-education programs.

Added to the education funding challenge is the voter-approved Class Size Reduction Measure – Initiative 1351 – passed in November. That measure requires the state to lower class sizes in grades K-12, and adds additional teachers and support staff in order to do so.

The Office of Financial Management estimates implementing I-1351 could cost the state $4.7 billion through fiscal year 2019 and an additional $1.9 billion each year thereafter.

The initiative did not include a funding source and has a four-year phase-in, with 50 percent implementation in the 2015-2017 biennium and 100 percent implementation in 2018-2019.

Local school districts, however, would have an additional fiscal challenge to meet the I-1351 mandate. Statewide they would need to fund $1.3 billion with local levy dollars through school year 2018-2019 to implement this initiative due to the difference between what the state allocates for teachers’ pay and what local school districts actually pay their teachers.

Why has the education funding issue emerged to haunt state legislators?

In the 2012 McCleary case, the state Supreme Court ruled that the state was in violation of the constitution because of its reliance on local levies and federal funds to fund basic education, rather than direct state-financing programs. The court reaffirmed that it was the Legislature’s responsibility to define what basic education would look like in terms of dollar amounts and programs, but concluded legislators had not done that job.

In the 2009-11 biennium, two pieces of legislation, ESHB 2261 and SHB 2776, were enacted to expand the definition of basic education and restructure the K-12 funding formulas in response to the McCleary court case that was filled in 2007.

ESHB 2261 created a new K-12 funding model called the “Prototypical School Model,” which allocates a ratio of teachers and support staff based on the number of students in the school. It also expanded the definition of basic education, which must be fully funded by the state.

SHB 2776 took the funding formula created in ESHB 2261 and made it law. It also established a timeline for reducing class sizes and phasing in the expanded definition of education based on the funding formula established by the Prototypical School Model.

“We defined what basic education should look like, but we haven’t put the money into sustaining that system,” said Rep. Lillian Ortiz-Self, D-Mukilteo, vice chair of the House Education Committee. “That’s where we lost our [McCleary] case.”

Inslee’s proposed budget for the 2015-2017 biennium includes a $3.6 billion education package, of which $1.3 billion is dedicated to lowering class sizes in grades K-3, an overlap between the initiative and the state’s McCleary obligation, which mandates class-size reductions in the lower grades.

And though his proposal is championed as the largest increase in basic-education funding in nearly a quarter century, it still falls short of the $4.7 billion needed to fund I-1351.

“They’re not funding 1351,” said Randy Dorn, state superintendent of public instruction, referring to Inslee’s budget proposal. “The governor made no attempt to fix it or give us a plan on how he’s going to get to fully fund education.”

Dorn says some kind of levy transfer in which school-district levies are reduced and the same amount is captured by the state property tax might be part of the solution.

“I believe in the end you have to look at some kind of levy exchange to pay for it,” Dorn said. “I don’t think you will have enough money to pay for all of I-1351, but you can do all day K, K-3 class-size reduction, and then you have to do something about the 25 to 1 ratio in middle school and high schools.”

House Appropriation Committee Chairman Rep. Ross Hunter, D-Medina, in the past has also proposed a revenue-neutral levy swap, where the state takes a greater share of local school tax levies, as a means to fund the Supreme Court’s mandate. Taxpayers would pay the same amount in taxes but to the state instead of the local districts. However, this time around, he says a levy swap, where you change out local money for state money, is not effective because it doesn’t add any new revenue.

“It makes people crazy because its just moving a lot of money around and everyone is nervous about doing that even though the overall tax burden to the state stays about the same,” Hunter said.

A major area of concern raised by I-1351 hinges on the state’s funding of teacher salaries. The initiative falls short in adequately funding teachers’ salaries because the state does not provide adequate funding for school districts, Hunter said.

“The teachers are actually getting paid enough because the local school districts make it up,” Hunter said. “They raise money with local property tax [special levies] and pay the extra cost of hiring teachers.”

In the McCleary decision the court ruled that the state did not provide adequate teacher salaries and needed to bring salaries to the market rate that districts are paying to actually hire a teacher, Hunter added.

“The state gives the schools a certain allocation for basic education to fund teachers’ salaries, but the amount is not sufficient to attract teachers in the field, or enough to be able to meet their basic needs,” Ortiz-Self said.

Mary Howes, executive director of Class Size Counts, a statewide coalition of families, educators, students and community leaders, notes that all the teachers in Washington State have the same base salaries because they’re all on the state salary schedule. I-1351 doesn’t have a funding source but would allocate state money to school districts to hire additional teachers to accommodate the reduction in class sizes.

However some districts give teachers additional compensation on top of what the state is allocating, and because this additional pay called TRI (time, responsibility and incentive) is locally bargained, the amount varies from district to district, Howes said.

“The state would provide the salaries for additional teachers,” Howes said. “For locally bargained additional compensation – that doesn’t come from the state, so it wouldn’t be provided by the state.”

Melissa deVita, deputy superintendent of Financial Services and Operations for the Bellevue School District, says the district pays its teachers more than what’s allocated by the state’s salary schedule because the district has expectations of their teachers beyond what the state pays.

“The state basically funds teachers a six-hour day and we ask our teachers to work an eight-hour day, so we use local levies to pay for that additional two hours,” deVita said. “We also use those funds to pay those teachers to stay for tutorials after the school day is finished so they can work one-on-one with those students.”

In order for schools to maintain these current expectations of their teachers and programs, funds will have to be raised by local levy dollars because the amount is more than what I-1351 would fund, says deVita.

“Even if they fund I-1351, they will not fund it from a local district perspective,” deVita said. “If they do fund it and it moves forward, then we’ll have to look at realigning the use of our local levy dollars.”

DeVita said that state funding accounts for 56 percent of the general-fund revenue of the Bellevue School District, which in the 2013-2014 school year is roughly $117.1 million out of the district’s $209 million total budget.

The Bellevue School District ran a levies election last February, raising an operation and maintenance levy for ongoing school needs, a capital levy for technology and a bond election to continue the third phase of rebuilding a school.

DeVita also expressed concern with the availability of teachers in the marketplace.

“It’s important that we have quality teachers in our classroom to support I-1351,” deVita said. “It’s important that we have the classroom and the space, and we don’t all have that space right now.”

Ben Rarick, executive director at the State Board of Education, says the initiative would impact all 295 school districts differently depending on their use of local levy dollars.

With the funding school districts could receive for I-1351, some districts might have an easier time meeting the required class sizes because some districts have already invested local levy money in hiring more teachers. On the other hand, districts with limited levy capacities may struggle to hire more teachers or find adequate classrooms for them, Rarick said.

“It creates a teacher supply-and-demand situation in our state and it’s not quite clear how it will shape out for each individual factor,” Rarick said.

In regards to levy swaps, Rarick says the board supports that maneuver as long as the levy swap adds new money to the system.

“Our goal is to fundamentally strengthen and expand programs and services for kids,” he said. “We don’t want to play a game of musical chairs.”

Rarick says the state salary-allocation model, which sets the amount a teacher earns and pay raises, has become more irrelevant as local pay has become a larger percentage of a teacher’s salary.

“I think it’s necessary to place some new limits on how local levy money can be spent,” Rarick said. “It’s not clear whether or not we will be able to devise a cookie-cutter approach that applies to all 295 districts, but I am convinced, one way or another, that we are going to have to talk about local levy reform.”

Alan Burke, executive director of Washington State School Directors Association, also expressed concern with the funding and facilities portion of I-1351 because many school districts do not have the capability to add additional classrooms.

Lisa Nelson, superintendent of the Naselle-Grays River Valley School District, says her district has an upcoming special levy election for regular maintenance and operation.

In the 2013-2014 school year, the district’s levy brought in $695,000. This year, the district is hoping the same levy rate will bring in $750,000, a slight increase due to inflation and cost of living adjustments.

“We have small class sizes in most of our grades,” Nelson said. “In our lower grades we have a Mandarin immersion program so we already split up our kids half a day anyway when they go to their Mandarin group.”

Nelson says the district supports smaller class sizes, but if doing so cuts state support for every social service then they would definitely need to think twice.

“If you cut programs that feed, nourish and provide mental health services, then kids supported by those programs aren’t ready to learn when they walk in the door. I don’t know that you’ve necessarily helped anything” in that scenario, Nelson said. “There are other funding mechanisms and ways for districts to achieve smaller class sizes, and I like the idea of local control.”

Nelson says her district would prefer more local control and authority over their levy tax dollars. She said a levy swap may affect the district’s ability to work with local constituents and make it more challenging to have school programs that taxpayers want.

“What the citizens of my district want and are willing to fund may not match what communities statewide are willing to do,” Nelson said. “It creates a disconnect between what the school thinks its mission is and what the taxpayers and communities would like to see in the school.”