Education Funding in Washington State Issaquah Schools Foundation Chad Magendanz | 5th LD 5/31/2017

The state school levy as we know it today was enacted in 1975. The state school levy provides about a quarter of the money in the General Fund that the state spends on public schools. In addition, revenues from the sales tax, business and occupation tax, real estate excise tax, and other sources support public schools. The state school levy as we know it today was enacted in 1975. Prior to 1975, property owners paid a local regular school levy of $3.60 per $1,000. The local regular levy was replaced by the regular state levy and state aid was increased to replace the lost local revenue. Over the following few years, the state moved to fully fund basic education from the state General Fund. 2/17/2019

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Above graph is not pro-rated for 180-day school year Above graph is not pro-rated for 180-day school year.  Teachers work 36 weeks per year vs. more typical 48-50 weeks per year, so average weekly teacher salary is actually 50% higher than the median household income. Current per-pupil funding is now $12,652, which is over $300,000 per classroom!

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According to OSPI's final report that was released in December, the average WA full-time teacher salary in 2015-16 increased by 4.2% to $68,853. This doesn't include benefits, which increased 9.7% to $22,994. So, the average teacher now costs our school districts $91,847! There is really no justification for increasing average teacher compensation, but we probably should decrease the variance to increase starting salaries (and reduce the number collecting six figures). Note: This still also doesn’t fully capture the 3% COLA increase ($231M) and additional one-time 1.8% salary increase ($152M) that we approved for teachers in the 2015-17 budget. 2/17/2019

Since the school year shown in this graph…you have increased the pupil transportation by $108M, MSOC by $280M, and staffing allocations by $316M per school year. = $704M each year 2/17/2019

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Any McCleary school funding solution needs to recognize that housing costs for school employees vary widely throughout the state.  In fact, the median home price in a school district ranges from $864K to just $49K.  Our compensation system needs to account for this so that we can offer a competitive salary at every location. We already do this for our state troopers (Geographical Pay) and military (Basic Housing Allowance). Ideally, we’d use an index for the overall regional cost of living, but those aren't readily available.  The best we can get (National Center for Education Statistics’ Comparable Wage Index) divides the state into only 16 regional labor markets. This is not a COLA!  The adjustment only affects the distribution, so you can’t game the system to bump every district like we have with LEA.

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Local Per-pupil Funding Local funding per pupil generally ranges from Seattle at $3,578 to 9 small districts that raise nothing. The differences in the ROI, however, are quite striking. For example, consider how much is raised per pupil for every dollar in levy rate: Seattle ($2,714) Highline ($693) Tacoma ($668), Vancouver ($572), Spokane ($552), Pasco ($309), and Yakima ($302). 2/17/2019 CONFIDENTIAL

Right now we have a highly regressive system where large school districts with high property values pay less than half the average levy rates. If we move local spending for basic education to the state, everyone pays the same rate. That means property tax relief for most districts, but an increase for districts like Seattle and Bellevue. (However, these areas would get more money back from the state because of their higher regional cost of living, as suggested above.) Overall, it's revenue neutral, less regressive, and satisfies McCleary. 2/17/2019

Estimated SB 6109 Impact by District Includes LEA, but excludes HB 2776 District Levy Rate Rate Diff School Impact District Net Seattle $1.32 +$1.43 +$105M -$97M Tacoma $4.39 -$1.64 -$2M +$30M Spokane $4.52 -$1.77 -$32M -$3M Kent $4.42 -$1.56 +$6M +$34M Puyallup $4.06 -$1.31 +$12M +$28M Kennewick $3.45 -$0.70 +$4M +$9M Issaquah $2.16 +$0.59 +$19M +$7M Yakima $2.91 -$0.16 +$0.6M +$1.3M Bellingham $2.37 +$0.38 -$2.9M -$7.7M Wenatchee $2.79 -$0.04 +$0.9M +$1.0M Walla Walla $3.56 -$0.81 +$0.5M 2/17/2019 CONFIDENTIAL

Impact for 5th District District Levy Rate Rate Diff School Impact Includes LEA, but excludes HB 2776 District Levy Rate Rate Diff School Impact District Net Bellevue $1.30 +$1.45 +$37M -$29M Issaquah $2.16 +$0.59 +$19M +$7M Tahoma $3.51 -$0.76 +$6.9M +$10.5M Enumclaw $3.53 -$0.78 +$1.9M +$4.1M Snoqualmie Valley $2.49 +$0.26 +$6.4M +$4.8M Riverview $2.70 +$0.05 +$2.4M +$2.3M Kent $4.31 -$1.56 +$6.0M +$33.8M 2/17/2019 CONFIDENTIAL

Includes LEA, but excludes HB 2776 2/17/2019 CONFIDENTIAL

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The Proposals

Both: House Democrats propose to spend $22.0 billion on K-12 schools in their budget proposal. Senate Republicans propose to spend almost exactly the same amount, $21.9 billion. These means that in the next biennium over 50 percent of the state budget, the highest proportion since 1983, will be spent on K-12 schools. These proposals would deliver $3.8 billion more to schools, a 20% increase over the current budget. Total funding would climb to about $13,000 per student by 2018-19, placing Washington state among the top states in the nation in school funding.   Nearly $3 billion new revenue in the current 2015-17 budget! House Democrats propose to spend $22.0 billion on K-12 schools in their budget proposal. Senate Republicans propose to spend almost exactly the same amount, $21.9 billion. These means that in the next biennium over 50 percent of the state budget, the highest proportion since 1983, will be spent on K-12 schools. These proposals would deliver $3.8 billion more to schools, a 20% increase over the current budget. Total funding would climb to about $13,000 per student by 2018-19, placing Washington state among the top states in the nation in school funding.   2/17/2019 CONFIDENTIAL

Senate Proposal (SB 5607) Positives Everyone pays same levy rate for basic education, with no new taxes Supplemental per-pupil funding for special education, poverty, bilingual, CTE, highly capable & homeless Reimbursing taxing districts that might be squeezed out by 1% constitutional limit Reviews, OSPI approval and audits for accountability of excess levy spending School district performance targets and timelines Additional flexibility for high performing school districts Voter referendum 2/17/2019 CONFIDENTIAL

Senate Proposal (SB 5607) Concerns Hold harmless provision should be based on current funding levels Housing allowance must be part of basic education, and based on better index than average residential property value Set starting salaries and per-pupil funding levels don’t consider local purchasing power Some terms used (e.g. “local effort levy”) create confusion on what is state and local funding Keeping the levy lid as a percentage of state and federal funding perpetuates the “double whammy” Difficulties measuring performance for top teacher recognition grant program 2/17/2019 CONFIDENTIAL

House Proposal (HB 1843) Positives Raises minimum statewide average salaries for teachers, administrators and classified staff Addresses staff mix inequities Increases prototypical school allocations for parent involvement coordinators and guidance counselors Increases vocational education funding by reducing class sizes for career and technical education and skills centers Increases the state-funded instructional hours for the Learning Assistance, Highly Capable, and Transitional Bilingual Instructional program 2/17/2019 CONFIDENTIAL

House Proposal (HB 1843) Concerns Replaces state salary allocation model with minimum statewide average salaries rebased every 6 years, leaving more scope for local bargaining and opportunity for future “levy creep” Local levy lids are lowered to 24%, which provides little property tax relief Punts to OSPI working groups for reforms to accounting practices, regional adjustments, and special education COLA is based on CPI Seattle, which is overly generous for most of state Depends on $7.1B in new taxes over next 4 years (7% capital gains tax, raise B&O tax to 20%, Internet sales tax, progressive real estate excise tax, and repealing some tax exemptions) 2/17/2019 CONFIDENTIAL

Thank you.