1. Office of Superintendent of Public Instruction K-12 Financial Resources Slide 1 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction School Finance Reform Update and Look Forward Jennifer Priddy, Office of Superintendent of Public Instruction

2. Slide 2 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Overview Financial Context for School Districts Finance Reform – Funding Formula Revision – QEC Recommendations for New Funding – Next Steps in Finance Reform Near-term Finance Outlook 2010 and 2011 Legislatures – Impact on 2011-12 school year

3. Slide 3 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction FINANCIAL CONTEXT How much of basic education do levies subsidize?

4. Slide 4 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Of $6.6 Billion in State funds, $5.14 Billion is Driven Through a Single Formula Learning Assistance 2. Staff Ratios 3. Salaries & Benefits 4. Operating Costs (NERC) = State General Apportionment for Basic Education Pupil Transp. Special Education Bilingual 1. District Enrollment I-728 Gifted Levy Equalization

5. Slide 5 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factors That Contribute to the Crisis 2. Staff Ratios 3. Salaries & Benefits 4. Operating Costs (NERC) = State General Apportionment for Basic Education 1. District Enrollment #2 Districts do not have enough staff to provide ample opportunity to all students and keep the district running #3 Districts heavily subsidize compensation costs #4 Districts heavily subsidize basic operating expenditures  Costs increase faster than state revenue and faster than local revenue

6. Slide 6 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor #2 (Instruction): Districts Hire More Instructional Staff Than Are Funded by the State In addition to the staff depicted here, federal funds and I-728 are used to employ staff. 92% of 2,770 Local-Funded Staff are Teachers

7. Slide 7 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor #2 (Classified): Districts Hire Many More Classified Staff Than Are Funded by the State 43% of 2,735 Local-Funded Staff are Facilities Maintenance Personnel; 36% are School Office Personnel

8. Slide 8 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor # 3: Levies Subsidize Compensation Costs Salaries and Mandatory BenefitsLevies Paid Value of Equalization (not incl Special Education) Instructional Staff$608.8 million Classified Staff$210.7 million$86.8 million of this amount Certificated Admin$169.7 million$111.8 million of this amount

9. Slide 9 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional Instructional Salaries Total value is $711.1 million (not including National Board Bonus) – Not all of this is paid for by levy – Title I and IDEA support the additional salary of the staff employed on these programs – Same for I-728, LAP, TBIP Basic and Special Education and CTE must be covered by levy, $608.8 million – Includes associated mandatory benefits

10. Slide 10 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor # 3: Levies Also Subsidize Increases State PaysLevy Pays State Funded Staff Units I-732 COLAOn BlueOn Green Pension Rate Inc. On BlueOn Green Negotiated COLA/Sal. NoneOn All Extra Staff Hired with Levy I-732 COLANoneOn All Pension Rate Inc. NoneOn All Negotiated COLA/Sal. NoneOn All

11. Slide 11 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor # 3: Annual Percent Increase in the Cost of Staff has Doubled

12. Slide 12 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor # 3: Additional Salaries Increased an Average of 9.6% Annually During Prior 5 Years School Year (Source: LEAP)

13. Slide 13 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional Salaries = TRI + Supplemental Salaries TRI: Additional compensation associated with additional time (district- or teacher-directed), additional responsibilities, or incentives – All teachers in a district; typically education and experience drive amount Supplemental Salaries: Coaching stipends, vocational leadership, department chair, curriculum committees, mentoring for students and/or other teachers, National Board bonuses – Some teachers; dependent on position/requirements State has little data to quantify each

14. Slide 14 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Example Factors Driving Increases in Additional Salary 1.National Board Challenging School Bonus and many more teachers qualifying 2.Increase in extra duties (new curriculum adoptions) 3.Higher or more frequent class size overload pay 4.New incentives (seniority incentive) 5.State COLA applied to TRI schedule 6.COLA above state COLA

15. Slide 15 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional Salary is 18.7% of Base Salary School Year (Source: LEAP) Statewide Average Full Time Teacher Salaries with Additional Salary as Percent of Base (All Programs, Outliers Excluded, Minimal Activities Coaching) 9.9%10.5% 10.9% 11.5% 11.2% 11.8% 11.9% 13.0% 13.7%14.5% 15.2% 15.6% 17.5% 18.7%

16. Slide 16 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Compensation Dynamics and the Financial Crisis 1.State does not pay for enough instructional; class sizes are too high with too little support 2.State does not pay for enough classified staff 3.State does not pay for the full cost of Basic Education Classified and Administrative staff salaries 4.Cost of COLAs on the differential between State-funded and Actual Salaries is Significant 5.State does not pay for basic education-related TRI/Supplemental Salaries 72% of levy expenditures are for compensation costs, all of which increase faster than levy revenue

17. Slide 17 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional Salaries are an Increasing Share of Levy/LEA Revenue

18. Slide 18 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor #4: Districts Spent $500 Million More on NERC Than the State Funds 8-yr cycle 18-yr cycle

19. Slide 19 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Factor # 4: Nearly 13% of Districts Will Spend Nearly 100% of Their NERC Allocation on Utilities and Insurance Alone

20. Slide 20 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Pupil Transportation is Heavily Subsidized by Local Funds

21. Slide 21 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Levy Expenditures are Largely Basic Compensation Program/Expenditure Purpose Levy Funds Expended Salaries and Benefits Only 1 Extra Curricular/Community$85.5 --- 2 Pupil Transportation$130.8$95.4 3 State Special Education$77.2$64.4 4 Non-Employee Related Costs (Operations)$502.6 $0 5 Extra BE/CTE Classified Staff$168.5 6 Extra BE/CTE Instructional Staff$195.0 7 Actual BE/CTE Salary (Class)$210.7 8 Actual BE/CTE Salary (Admin)$169.7 9 Additional BE/SE/CTE Salary (Instructional)$608.8 10 Food and Nutrition$11.7 --- 11 Subtotal Supported by Levy in 2008-09$2,160.5$1,512.5 State compensation changes and decisions impact this base also.

22. Slide 22 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction FUNDING FORMULA REVISIONS New Funding Formulas are Designed and Ready for Adoption

23. Slide 23 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction ESHB 2261 Set Us on the Path of Formula Revisions Elements of an expanded “Program of Basic Education” and the funding to support it are phased-in and intended to be fully implemented by 2018 This legislation includes the following: – Increased Instructional Hours – Enhanced High School Diploma requirements – New Transportation Funding Formula – All-Day Kindergarten added to “basic education” – Funding allocations and reporting on expenditures will use a prototypical school model – Governor vetoed: Designation of Early Learning for disadvantaged students as “basic education” Highly Capable safety net structure

24. Slide 24 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Given a school of a certain size and demographic mix, what programs and services does this school “require” to provide students opportunity to meet standards? – Hours of instruction – Numbers and type of teachers (including course load assumptions) – Early childhood to K-12 articulation – Hours/days of professional development – Counseling, social/health and other support services Based on Elementary of 400 students; Middle of 432; High School of 600 Translate these resource assumptions and extrapolate to actual district and statewide enrollment What is a Prototypical School Model?

25. Slide 25 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Funding Formula Technical Workgroup Recommended the Details OFM convened 14 members representing the WEA, PSE, WSSDA, WASA, AWSP, the Legislative Evaluation and Accountability Program Committee, and eight school district or ESD business officers (WASBO) from across the state July – December 1 Recommended the details of the funding formulas and the translation from the current formula to the new QEC has recommended adoption of the translation that the FFTWG designed

26. Slide 26 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction “Crosswalk” Takes Current Law Formula Below and… Per 1,000 Students 49 Certificated Instructional Staff (CIS) (K-3) 46 CIS per 1,000 (4-12) 16.67 Classified Staff 4 Certificated Administrative Staff (values above represent the Basic Education Act funding level, some values are enhanced in the operating budget (K-4 CIS and Classified))

27. Slide 27 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Translates Old Funding Levels into the New Structure Current Law Funding (RCW 28A.150.260) Elementary (400)Middle (432)High (600) Class Size Class Size K-3 25.23 Class Size 4-6; 7-8; 9-12 27.0028.5328.74 Other Staff per Prototypical School Principal (and Other School Administrators) 1.2531.3531.880 Teacher Librarians.663.519.523 Guidance Counselors.4931.1161.909 Nurses/Social Workers.135.068.118 Professional Development Coaches.00 Instructional Aides.917.685.638 School Office & Non-Instructional Aides 1.9712.2773.201 Custodians 1.6221.9022.903 Student and Staff Safety.077.090.138 Districtwide Support Warehouse/Laborer/Mechanics.325 staff per 1,000 students Facilities Security, Maintenance, Grounds 1.776 staff per 1,000 Technology.615 staff per 1,000 Central Administration 5.39% of Staff Above

28. Slide 28 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction FFTWG Approach State funding translated into prototype categories proportionally based on how districts deploy those resources – We know districts buy more staff than the state funds – Assumed extra staff are peanut-buttered across the system, not selectively levy funded – Not perfect, but leaves less room for fiddling

29. Slide 29 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Did FFTWG Calculate Class Size? We know students and teachers; either display very low class size or assume planning time in the calculation Crosswalk assumes 45 minutes of planning time for elementary teachers; 60 minutes for secondary teachers: results in percent of student instructional day But, what is the student instructional day? – Crosswalk 5.6 hours elementary; 6 hours secondary  13% planning time for elementary; 17% secondary But, all teachers need planning time  State will assume it must “buy” 15.5% more elementary teachers and 20% more secondary teachers in order to have a teacher in front of all students at all times and give all teachers planning time

30. Slide 30 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Student Instructional Hours Ends 30-year debate about what the state is paying for: – 1,008 hours elementary – 1,080 hours secondary Means that the ESHB 2261 defined instructional hour goal is already being met Does not mean that the state can implement Core 24 without more funding

31. Slide 31 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Did FFTWG Approach Categoricals? Extra hours of instruction per week: Class size of 15 $0 for materials (but formula is defined) $0 for central administration (but formula is defined) Associated teachers are allocated full benefits and planning time (e.g., not extra contract time) Additional work to define additional needs of older ELL and beginning ELL Hold harmless for discontinuation of LAP concentration factors 2007-082009-10 Learning Assistance Program1.303 hours1.5156 hours Transitional Bilingual Instruction Program4.826 hours4.7780 hours Highly Capable Program2.196 hours2.1590 hours

32. Slide 32 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Did FFTWG Approach Small School/District Factors? Leave the current formulas alone, what we have today works just fine Silent re: adoption in Basic Education Act

33. Slide 33 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Did FFTWG Approach Central Administration and Support? Central office support is a function of how many staff a district employs, not a function of how many students a district educates Central office is a mix of classified employees and certificated instructional employees The current allocations for CAS and CLS were divided between school-level staff, district-wide support, and central support Remaining central support staff are then calculated as a percent of all other current state funded staff

34. Slide 34 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction What is Complete? New Formula and Crosswalk for: Staffing at: – Basic Education Act, – Operating Budget, and – I-728 levels Categorical program (LAP, TBIP, Gifted) Materials, Supplies, Operating Costs State-assumed Planning Time State-assumed Instructional Hours

35. Slide 35 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Formula Revisions: Progress to Date Official FFTWG Crosswalk is Complete – Modeled at state, district and school level – Cost neutral (less $3 million) – Tweaks occasionally since FFTWG report 12/1 – http://www.ofm.wa.gov/k12funding/report.pdf http://www.ofm.wa.gov/k12funding/report.pdf HB 2776 and SB 6760 adopt new formula – Senate, perfectly mirrors FFTWG but also increased funding for utilities and insurance – House, perfectly mirrors FFTW and fully funds NERC/MSOC as a second step

36. Slide 36 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Why Go Through This? Transparency We know class size We know I-728 doesn’t move us very far We know CTE class size is not really 19.5; it isn’t that different from high school We know how many staff districts can afford to provide to a school We know that planning time is “basic” We know how much time districts can actually provide to struggling students and ELL We know the state-paid curriculum adoption cycle

37. Slide 37 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction New Formula Operational for 2011-12 School Year 2010 Legislature: – Agree and adopt the specifics of the new formula in law – Appropriate the resources for Cal Cal re-programs the apportionment systems for the new formula 2011 Legislature adopts operating budget for the 2011-12 and 2012-13 school years with the new structure

38. Slide 38 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction QUALITY EDUCATION COUNCIL RECOMMENDATIONS The New Funding Formula is Cost Neutral; Must Have Improved Funding

39. Slide 39 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction QEC January 2010 Recommendations 1.Do not decrease funding in 2009-10 2.Adopt Crosswalk/Baseline 3.3-year phase-in of Transportation, beginning 2011-12 4.3-year phase-in of MSOC/NERC, beginning 2011-12 5.7-year phase-in of Full-day Kindergarten 6.5-year phase-in of K-3 Class Size to 1:15, beginning 2011-12 7.3-year phase-in of Early Learning for at-risk 3&4 year olds, beginning 2011-12 8.Other recommendations in report: http://www.k12.wa.us/QEC/default.aspx

40. Slide 40 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Workgroups Levy: starts a bit earlier and finishes sooner Compensation: – Senate, starts 1 year earlier, finishes sooner – House, start-date is same, finish sooner Formula: continues and re-convened periodically by OFM

41. Slide 41 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 2010 Bills HB 2776: Codifies QEC recommendations – Early Learning in separate legislation SB 6761: Does not reflect QEC recommendations – FDK, yes – Pupil Transportation, no – NERC, partial utilities/insurance in SB 6760 – K-3 class size, no

42. Slide 42 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction NEXT STEPS IN FINANCE REFORM Next Steps Must Address Staffing Levels and State-Funded Compensation

43. Slide 43 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Many Staff Should the State Allocate for Student Support? Librarians Counselors Nurses and Social Workers Instructional Specialists School Office Technology

44. Slide 44 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Much Should the State Fund for Facilities Maintenance? Goal for facilities maintenance supplies has been defined by QEC Goal for facilities maintenance staff has not been addressed by QEC How much is the state funding per square foot? – How does this compare to state facilities? Washington community colleges and universities? Schools nationally?

45. Slide 45 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction How Much Should the State Allocate for Categorical Programs? Is 1.5 hours per week for struggling students, 4.8 hours per week for ELLs, and 2.2 hours per week for gifted students the appropriate number of hours? What hours of extra instruction, or other program models, are successful? What funding level in this formula would drive enough money to implement proven models? What are the implications of this data for accountability?

46. Slide 46 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Grades 4-12 Class Size Are these class sizes the state’s funding goal for 2018? Or does the state think that lower class sizes are necessary to meet our student achievement goals? When the state adopted its learning expectations, what class size was assumed? How does the state reconcile funded class size, funded assistance for struggling students, and learning expectations that are increasing? What are the implications of the state-funded class size level on compensation?

47. Slide 47 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Lots of Work Beyond Funding Values A cohesive funding structure will include: Improved teacher compensation system Improved levy system (lid and/or equalization) Improved classified/administrator salary allocations An accountability system A schedule of funding phase-in between now and 2018-19

48. Slide 48 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Compensation Questions for Future Legislatures Classified and Admin Salary Allocations What state allocation level and method is the state’s responsibility? Should there be a differential allocation by region? Teacher Compensation What salary structure should the state deploy? What salary level should the state set as its responsibility; for what components of salary? Should there be a differential allocation by region?

49. Slide 49 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction NEAR-TERM FINANCIAL OUTLOOK New Funding Must Start in 2011-12 and Will Likely Only Hold the System Steady

50. Slide 50 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 2009 Legislature State deficit for 2009-11 biennium, totaled $9 billion – $3 billion in ARRA total Impact on schools – 75% reduction in I-728 – No COLA – Use of federal stimulus for General Apportionment, I-728, and LEA – Cut $337.3 million from schools for 2009-10 SY – Cut $368.2 million from schools for 2010-11 SY

51. Slide 51 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Why are Districts Solvent in 2009-10? Levies increase by $120 million per year (just inflation factors) No COLA (saved $80 million in local funds) Extra Federal Title I ($67 million each year) Extra Federal Special Education ($221 million over 2 years) – Congressional authority to use up to $100 million to reduce levy contribution to Special Education Pension Costs – No pension contributions increase, as had been scheduled – Pension rate drop saved another $40 million in local funds Spending down reserves

52. Slide 52 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Reserves are Dropping 2008-09 final of 6.4% was highest in 11 years – Districts cut 2008-09 spending mid-year in order to carry more forward 2009-10 budget of 4.6% is lowest in 11 years – Districts appear to be spending down reserves to cushion 2009-10 cuts ($166 million) – 10% of system value is operating with 2% or less in reserve At a minimum, with no additional cuts to 2010- 11, districts will have to cut their budgets by $166 million

53. Slide 53 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Governor’s Proposed Cuts for 2010-11 School Year Change to Underlying Budget Millions of Dollars Book 1: 2011 Fiscal Year Book 1: 2010- 11 School Year Book 2: 2010- 12 School Year Levy Equalization $(142.9)$(190.6)$29. 5(approx) K-4 Staff Enhancement (110.6)(133.9) I-728 (78.5)(96.9) Full-Day Kindergarten (33.6)(41.3)0 1 Learning Improvement Day (15.0)(18.6) Gifted Education (7.4) (9.0)0 Apportionment Delay for 1 Day (June 30 to July 1) (379.1)00 Transfer School for the Blind to OSPI000 Transfer School for the Deaf to OSPI000 Eliminate Middle School CTE (1.9) 0 Eliminate BEST (New Teacher Mentors) (2.4) Career and Technical Ed Grants (2.8) Reading Corps (1.1) 0 Readiness to Learn (3.6) Total (not including Apportionment Delay) $(399.8)$(502.2)$(228.8)

54. Slide 54 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Cumulative Budget Reductions for 2010-11 School Year (Governor Proposed Book 1) $ Millions per School Year 2010-11 Cuts by 2009 Legislature New 2010- 11 Cuts; Book 1 Proposed Cumulative Cuts for 2010-11 1I-728$(355.8)$(96.9)$(452.7) 2K-4 Enhancement(133.9) 3Pupil Transportation(12.5) 4Full-day Kindergarten(41.3) 5Gifted Ed(9.0) 6Levy Equalization(190.6) 7Subtotal Non Compensation$(368.2)$(471.8)($840.0) 8Learning Improvement Day(18.6) (37.2) 9COLA (approx)(203.2) 10Total with Compensation$(590.0)$(490.4)$(1,080.4)

55. Slide 55 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction $ Cuts = Staff Reserves are or will be at an absolute minimum – In 2009-10, some districts spending down $166 million; in 2010-11, these districts must cut $166 million b/c savings is spent – In 2010-11, districts with >5,000 students can spend down $157 million more and end with a 2% reserve Districts have a very marginal ability to defer textbook replacement or other non-staff costs Any other increase in cost, or cut in funding, equals staffing cuts

56. Slide 56 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional 2010-11 Budget Cuts will Cause Significant Financial Distress Employment Impact of Each Factor Instructional ClassifiedTotal 1 Preliminary 2009-10 (1/15/10) (1,166)(876)(2,042) 2 20010-11 Impacts: 3 Increase in Levy Revenue (w/o Lid Lift) 8617131,574 4 Health/Life/Disability/Utilities/Insurance (135)(112)(247) 5 Estimated Value of $166 M Reserves Used in 2009- 10 (1,190)(987)(2,177) 6 Assume Large Districts Drop to 2% ($157.9 M) 1,1329382,070 7 Projected Value of Governor’s Proposed (Book 1) (4,811)(1,186)(5,997) 8 Negotiated Compensation ??? 9 Projected Cost of Unemployment Insurance ??? 10 Total Potential Additional Cut for 2010-11 (4,143)(633)(4,776) 11 Cumulative Impact for 2010 and 2011 (5,309)(1,509)(6,818)

57. Slide 57 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction TRS Rates Double in 2011-12 School Year (*Projected by State Actuary in October 2009) Employer Rates for Certificated and Classified Staff Pension Contributions

58. Slide 58 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Other Factors Translate to Terrible Impact for 2011-12 Levies will increase by about $120 million But, if pension rates increase as projected by the State Actuary, levy funds will incur $83 million cost NERC/ Transportation Costs Increase Faster than State Revenue – Others also ARRA funds for Special Education/Title I are gone – $178 million reduction from 2010-11 COLA? Health benefits inflation, 6-11%

59. Slide 59 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 12,000 Jobs Lost by 9-1-11 Employment Impact of Each FactorInstructionalClassifiedTotal 1 Cumulative Impact for 2010 and 2011 (5,309)(1,509)(6,818) 2 Increase in Levy Revenue 8617131,574 3 Health/Life/Disability/Utilities/Insurance (135)(112)(247) 4 IDEA and Title I ARRA Gone (1,276)(1,058)(2,334) 5 Large Districts now cut for 2010-11 Reserve Spend-down (1,132)(938)(2,070) 6 Pension Contribution Increase on Levy Compensation (606)(502)(1,108) 7 I-732 COLA (1%) (123)(102)(224) 8 Negotiated Compensation Above I-732 COLA (405)(336)(741) 9 Cost of Unemployment Insurance ??? 10 Change in State Funding ??? 11 Total for 2011-12 SY (2,816)(2,334)(5,151) 12 Cumulative Impact for 2010, 2011, 2012 (8,125)(3,844)(11,969) 13(13.1%)(11.2%)(12.4%)

60. Slide 60 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Risk to Projection 12,000 FTE staff by 9-1-11 assumes: – Governor’s Book 1 Budget – No Levy Lid Lift and No Increase in LEA Assumed – No Increased Costs for Unemployment Insurance (wrong) – Low Increases in Compensation (unlikely) These assumptions mean: – K-3 class size increase of about 3 students; 4-12 increase of about 4 over 2008-09 – Reduction of facilities maintenance and cleaning by 2.7 million person-hours over 2008-09 – Unsustainable, low levels of reserves – State averages mask fragility of many districts that have already spent down reserves

61. Slide 61 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 2010 Legislature Will the 2010 Legislature cut K-12 funding for 2010-11? – K-4 staffing – I-728 – Levy Equalization Will the 2010 Legislature: – increase the levy lid? – increase the levy base? – Increase levy equalization?

62. Slide 62 9/5/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Even if no more cuts in 2010-11… staffing outlook for 2011-12 is terrible Projected Number of Staffing FTEs Reduced by 9-1-11 (Beginning of 2011-12 SY) IF: FTEs Cut 2010-11 Cuts at Governor’s Proposed Book 1 Level(11,969) 2010-11 Cuts at Governor’s Proposed Book 2 Level(8,891) No 2010-11 Cuts (K-4, LEA, I-728 funded at current budget level; reserves low; low compensation assump) (6,319) Status Quo funding does not avert the crisis in 2011-12. Levies carry too high a basic education salary load and do not inflate as fast as compensation. Roughly $540 million would be needed to restore the system back to 2008-09 staffing levels in 2011-12.