1. Office of Superintendent of Public Instruction K-12 Finance: Depth, Breadth, and Causes of a Looming Finance Crisis 1.What is the Basic Education Finance Task Force? 2.What is the financial outlook for school districts? 3.What are the funding shortfalls? 4.What solutions are proposed? 5.What are some implications for school finance re- design?

2. Office of Superintendent of Public Instruction 2

3. Basics of the Basic Education Finance Task Force 3 SB 5627: This act is intended to make provisions for some significant steps towards a new basic education funding system by establishing a joint task force to address the details and next steps beyond the 2007-2009 biennium necessary to implement a new comprehensive K-12 finance formula or formulas. The formula(s) will provide Washington schools with stable and adequate funding as the expectations for the K-12 system continue to evolve.

4. Office of Superintendent of Public Instruction BEFTF Has Several Proposals to Sift Through for Final Recommendations 12/1/08 Proposals in JuneProposals Expected in October Superintendent of Public Instruction Full Funding Coalition (WASA, WSSDA, PSE, AWSP, WEA) League of Education Voters Task Force Legislators Task Force Chair 4

5. Office of Superintendent of Public Instruction 5

6. K-12 Financial Outlook Why do school districts’ budget problems seem deeper and more widespread than in past years? 1.In the recent past, how were districts balancing budgets? 2.What is the magnitude of the problem for 2008-09 school year and beyond? 6

7. Office of Superintendent of Public Instruction Local Funds are typically levy and local effort assistance (LEA) dollars ▫Includes Federal and I-728 funds in this analysis ▫Common elements: discretionary, not state basic education, do not inflate with staffing-based costs Local Funds are commonly thought to employ “enhancement” staff and programs In reality, Local Funds cover major state-funding shortfalls Local Funds increases barely cover compensation increases for levy, federal, and I-728 employees State and local funds increase too slowly to cover compensation plus all of the other emergencies and pressures to improve student achievement 7 State Underfunding Pushes Costs Onto Maxed-Out Local Funds

8. Office of Superintendent of Public Instruction How Have Districts Balanced Their Budgets in the Last Few Years? 2000-20082009 and Beyond Reduction in pension rates saved $364 million 2003-05 COLA suspension (3.1%) saved $187 million Increases in I-728 revenue and federal funding totaled $614 million Increase in levy authority to recognize I-732 suspension and I-728 delay Pension rates increase I-728 and federal dollars flatten Local funds continue to support COLAs Other costs continue to increase faster than inflation ▫Health benefits ▫Fuel Levy authority increases an average of 5% Levies approved to utilize 92% of authority 8 Appendix slides quantify these statements.

9. Office of Superintendent of Public Instruction 2000-2008: State Savings of $1.3 Billion in Employer Pension Contributions; $364 Million for Local Funds 9

10. Office of Superintendent of Public Instruction Quantifying School District Outlooks for 2008-09 to 2010-11 Revenue increases: I-728, federal, levy, enhanced state funding Cost increases: Salary, benefit, and retirement increases not covered by state, and fuel increases In 2008-09, districts will have a remaining $38 million in new revenue to cover all remaining cost increases on a $2.8 billion base 2009-10 and beyond -- same magnitude of problem 10

11. Office of Superintendent of Public Instruction With $38 Million Net Growth in Local Funds, Little Room Left for Other Needs Education programs to provide more assistance and/or instructional expertise for students to meet achievement expectations or reduce drop-out rates Utilities, Insurance Maintenance Emergencies Curriculum Adoption Increased Salaries Beyond Estimated COLA Health Care Costs Above State Allocation Rate New Mandates from State/Federal Policymakers 11

12. Office of Superintendent of Public Instruction Spending Ending Fund Balance Only Delays Cuts; Many Districts Have No Balance to Spend 12

13. Office of Superintendent of Public Instruction 13 Largest Change for Smallest School Districts

14. Office of Superintendent of Public Instruction Operating Fund Value of Districts with Less than 2% EFB Steady but Large 14

15. Office of Superintendent of Public Instruction Summary for 2008-09 School Year Statewide average Ending Fund Balances (EFB) held steady for 2008-09, but too many districts are on the financial edge Roughly 600 staff positions eliminated statewide (equivalent to 1 school district serving 4,000 students) 7 districts on Binding Conditions (BC) (1 may exit) At least 5 districts carefully watching for possible BC $2 Billion operating value for districts with 2% or less EFB 15

16. Office of Superintendent of Public Instruction Look Forward for 2009-10 SY Little EFB cushion for 2009-10; without new state resources schools face deep and devastating budget reductions State COLA is projected at 5%; pension rates increase; health benefits inflation consistent trend up Fuel stabilized but high and subject to spikes Utilities consistent trend up More students in public schools More needy students $3.2 Billion projected state deficit for 2009-11 Biennium 16

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18. Office of Superintendent of Public Instruction State Underfunding is Not Disputed Questions to answer: ▫What is the appropriate definition of basic education? ▫Will that definition fix the shortfalls between district reality and state funding? 18

19. Office of Superintendent of Public Instruction 6 Key Funding Shortfalls Must be Addressed Learning Assistance (4) B. Staff Ratios (1) (Certificated Instructional, Administrative & Classified) C. Salaries (2) & Benefits D. Operating Costs (NERC) (3) = State General Apportionment Busing (6) Special Education Bilingual (5) A. District Enrollment 19 I-728 Gifted

20. Office of Superintendent of Public Instruction Resource Level vs. Funding Formula Formula(s) must: ▫Drive the right resource ▫Account for district differences ▫Provide stable and ample funding for decades More critical that BEFTF recommendations specifically identify the resource that must be driven by a formula ▫Re-defining the basic education resource that represents ample funding of a stable, general and uniform public school system is the fundamental change required ▫Without a specific set of resource recommendations, future Legislatures can implement the TF formula design but at an inadequate funding level 20

21. Office of Superintendent of Public Instruction A.Certificated Instructional Staff B.Classified Staff 21

22. Office of Superintendent of Public Instruction Certificated Instructional Staff Ratios (1A) The ratios do not represent true class sizes. Class sizes increase when planning periods, specialist teachers, librarians, counselors, etc., are purchased from the ratio above. Certificated Instructional Staff K-4: 1:18.8 5-12: 1:21.7 Includes All Teachers, Instructional Coaches, Nurses, Counselors, Librarians, and all other Pupil Support 22

23. Office of Superintendent of Public Instruction Current Definition Re-Stated to Reflect Staffing Array: Districts Choose Between Lower Class Sizes, More Hours per Day, and Student Support Certificated Instruction Staff K-4: 1:18.8 5-12: 1:21.7 Students per 1 FTE Staff 6 periods + 1 hr planning Teachers Grades K-5 Grades 6-8 Grades 9-12 Instructional Coaches Librarians Guidance Counselors & Pupil Support Nurses = 1:24.7 1:29.0 1:1,250 1:2,659 1:786 1:462 23

24. Office of Superintendent of Public Instruction SPI Recommendations to BEFTF: Define Instructional Staff Ratios as Follows Current Proposed Elementary Proposed Middle Proposed High Class SizePrior slide21.225.5 Assumed 6 period day for all students Students per StaffCurrent Proposed Elementary Proposed Middle Proposed High Instructional Coaches1,2501,000 Librarians786500 Nurses2,6595007501,000 Guidance & Counseling & Pupil Support 462 500350 24

25. Office of Superintendent of Public Instruction Districts Hire Many More Classified Staff Than Are Funded by the State (1B) 25

26. Office of Superintendent of Public Instruction SPI Recommendations to BEFTF: Define Basic Education at 25.1 Staff per 1,000 26

27. Office of Superintendent of Public Instruction A.Certificated Instructional (Primarily Teachers) B.Classified (Non-Certificated) and Administrative (Certificated but Supervise) 27

28. Office of Superintendent of Public Instruction Districts Subsidize State Salaries, Issues Differ by Group Teachers and Other CertificatedClassified and Administrative 1.State sets salaries based on a salary schedule and pays some teachers on a greater schedule than others 2.State has not evaluated salary levels or purposes for decades; districts pay for some supplemental salaries that are likely a basic education responsibility 3.State salary schedule has not been updated to reflect research on compensation incentives or latest research on appropriate base compensation (State does not set salaries for classified and administrators; instead the state allocates a salary average for each group) 4.State allocates different salary averages among districts based on 30-year-old snapshot 5.State has no method to allocate staff salaries to reasonable cost of attracting and retaining 28

29. Office of Superintendent of Public Instruction 55,322 12,878** Differences in Teacher Salary Impacts Morale and Retention 1.Base salary most districts 2.Base salary of Everett  Equalizing will cost $167 million and raise most teacher salaries by 5% 3.Additional (supplemental) salaries on average nearly $8,500 per teacher statewide $61,154 2008-09 Teacher Salaries (average experience and education) $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Base Salary Additional Salaries TypicalEverett 52,706 29 8,448* $68,200 * Projected from 2006-07 ** 2006-07; full-time staff only

30. Office of Superintendent of Public Instruction Additional Salaries Increase Faster than Levy Revenue 30

31. Office of Superintendent of Public Instruction Districts Must Subsidize Classified/Admin Salaries by $366 Million 1.Average total salary 2.State average allocation 3.District allocations vary, first step is to equalize salary allocations ($226 million state cost to equalize) 4.After equalization, the state still must identify an appropriate method to address true costs districts experience ($140 million difference between equalized allocations and district costs)  Districts also pay difference in salary and COLA/benefits $36,593 $96,445 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 State Avg. Allocation Addt’l $ Above Max Rate State Allocation at Max Rate Classified Administrative 30,688 4,539 1,316 57,065 23,742 15,638 31

32. Office of Superintendent of Public Instruction SPI Salary Recommendations to BEFTF Teachers and Other CertificatedClassified and Administrative 1.Equalize base salaries to Everett level 2.Complete BEFTF research on supplemental salaries and comparisons of teacher salaries to other occupations /states; identify appropriate salary and appropriate state contribution 3.Adopt a new salary schedule with higher lifetime earnings and increases for certification-based demonstrations of excellence 4.Equalize salary allocations across districts 5.Identify an appropriate method to allocate salaries at a level consistent with what districts must pay ▫Classified salaries based on state salary schedules ▫Administrative salaries— TBD but must reflect near current actual salaries 32

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34. $9,476 per CIS (2006-07 SY) $468 per student = State NERC Funding Intended to Cover All Non- Employee Costs Related to Basic Education = 34

35. Office of Superintendent of Public Instruction Districts Spend Over $500 Million More on NERC Than the State Funds 18-yr Cycle 8-yr Cycle 35

36. Office of Superintendent of Public Instruction An Increasing Number of Districts Spend Over 80% of Their NERC Allocation on Utilities and Insurance 36

37. Office of Superintendent of Public Instruction SPI Recommendation to BEFTF: NERC Define basic education at $1,101 per student instead of $468 (2006-07 dollars) Fully funds operating costs that relate to basic education Includes $126 per student for curriculum, a 6-year adoption cycle Inflate with measures specific to cost Add $282 per student for instructional technology Phase-in over 7 years 37

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39. Office of Superintendent of Public Instruction 39 Poverty is Now the Funding Driver; Lap Funds, in Total, LAP Funds Have Increased Substantially.

40. Office of Superintendent of Public Instruction 40 Despite Large Increases in Funding, Buying Power Remains Constant

41. Office of Superintendent of Public Instruction Current LAP Funding Must be Redefined LAP/Title 1/I-728/PAS buying-power (teacher hours) is roughly the same as in 1992-93 Learning Assistance Program (LAP) allocates 3.46 staff units per 1,000 poverty students (1 staff per 289 poverty students) This equates to a teacher spending 30 minutes per day with groups of 28 struggling students ▫No resource for materials, program support or professional development 41

42. Office of Superintendent of Public Instruction SPI Recommendation to BEFTF: LAP Redefine the LAP formula with 6 formula components based on successful programs: 1.Reduce class sizes for severe poverty districts  Immediate class size reduction for poorest students; general staffing ratios may be implemented slowly 2.Hire teachers for small group tutoring (10% of students + more as poverty increases)  Groups of 15 students for 1 teacher, 30 to 50 minutes per day 3.Hire teachers for intensive tutoring (1% of students + poverty)  Groups of 3 students for 1 teacher, 30 to 50 minutes per day 4.Add program administrative support 5.Provide professional development for the teacher staffing units driven by parts 1, 2, 3, and 4 6.Buy instructional materials 42

43. Office of Superintendent of Public Instruction LAP Recommendations Continued LAP must remain a “basic education” program Must be a staffing model or risk losing teacher buying power Must be based on a model of service proven successful Categorical allocation from state to school district ▫Districts can implement a different model, hire different mix of staff ▫Districts decide how to allocate among schools ▫Must serve struggling students $325 M increase over current funding ▫I-728 currently pays for a portion of this now 43

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45. Office of Superintendent of Public Instruction Buying Power of State Transitional Bilingual Program is Constant 45

46. Office of Superintendent of Public Instruction Funding for English Language Learners Current allocation is $904 per student ▫Funding generates 1 teacher per 75 ELL students ▫At this staffing ratio, no resources are available for interpreters, program administration, professional development, instructional materials, translations, family outreach Some districts significantly subsidize the ELL program and positively impact student learning 46

47. Office of Superintendent of Public Instruction Redefine the ELL formula with 6 formula components based on successful programs: 1.Reduce class sizes for ELL 2.Provide “floor” funding for districts with few ELL 3.Enhance funding for high ELL/multiple language districts 4.Middle/High school enhancement 5.Provide professional development 6.Buy instructional materials and assessments $96 M increase over current funding Categorical allocation from state to districts 0 SPI Recommendation to BEFTF: ELL 47

48. Office of Superintendent of Public Instruction 48

49. Office of Superintendent of Public Instruction Transportation Funding Gap is Widening 49 JLARC est. for basic education responsibilities underfunding in 2004-05: $92.6 - $114 Million

50. Office of Superintendent of Public Instruction Diesel $ per Gallon up 48% Over Sept 2007 Price West Coast Monthly Average Retail Price per Gallon of Diesel 50

51. Office of Superintendent of Public Instruction Districts Budgeted 28% More for Fuel in 2008-09 51

52. Office of Superintendent of Public Instruction Proposed Transportation Solutions and Timeline Oct 1: 2-3 formula options fully developed and presented to Advisory Committee Nov 15: Final report to OFM/Legislature Early December: Actual funding gap is known for basic education (to/from) transportation, 2007-08 school year Jan 15: OSPI completes modeling of district-by- district impact of 2-3 formula options 52

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54. Office of Superintendent of Public Instruction Last Thoughts Very few opportunities to redefine Basic Education Basic Education shortfalls are so large, fixes will take many years ▫Requires prioritization ▫Much of the early investments do not buy new programs Recommendations must address the resource level needed, but formula structure will drive district practice for decades ▫General apportionment allocation vs. Categorical allocation BEFTF needs specific recommendations ▫What needs to be purchased and why? ▫What is the formula that would drive this resource or where does it fit into a formula? ▫What is the phase-in priority? 54

55. Office of Superintendent of Public Instruction Minimum Outcomes Needed from the BEFTF 1.Improve funding ratios for Certificated Instructional and Classified Staff 2.Salary Policy and Funding a)First, equalize classified and administrator allocations b)Then, allocate classified/administrator based on common-sense methods that cover actual costs c)Address state underfunding of teacher compensation d)Compensate teachers for excellence 55

56. Office of Superintendent of Public Instruction Minimum Outcomes Needed from the BEFTF 3.Improve funding level for NERC, inflate with common sense measures 4.Improve funding for LAP  Staffing formula driven by instructional programming reality and informed by research 5.Improve funding for ELL  Staffing formula driven by instructional reality and diverse community needs and informed by research 6.Implement a new formula with adequate funding for pupil transportation 7.Special Education  New $ driven via components 1-3 56

57. Office of Superintendent of Public Instruction Budget Context $3.2 Billion projected deficit for biennium ▫K-12 “share” ~$1.34 B COLA is 5% in 2009-10; 3.1% in 2010-11 ▫$590 M cost included in deficit projection ▫Drives an additional $257 M in local funds needed State cannot cut “basic education” Non-basic items include (b iennial savings): ▫K-4 enhancement ($388 M) ▫2 LID ($75 M) ▫Levy equalization ($456 M) ▫I-728 ($908 M) ▫Gifted education ($20 M) ▫Health Benefits inflation ($96 M if 7% inflation) 57

58. Office of Superintendent of Public Instruction What should K-12 do? Start Now Communicate that all districts are facing deficits Project 2-year deficits now, after Governor’s budget released (mid-December), after each chamber (March) Identify I-728-supported programs Publically identify reduction options and impacts Publically recognize the difficult job that policymakers face Speak with one-voice on way-forward ▫“Must-do” list from Task Force recommendations ▫Communicate re: need for foundational resources to afford compensation increases 58

59. Office of Superintendent of Public Instruction For More Information Jennifer Priddy: (360) 725-6292, or by email, jennifer.priddy@k12.wa.us jennifer.priddy@k12.wa.us Superintendent Bergeson's BEFTF Proposal: http://www.k12.wa.us/Communications/BasicE dFundingTaskForce.aspx http://www.k12.wa.us/Communications/BasicE dFundingTaskForce.aspx Basic Education Finance Task Force: http://www.leg.wa.gov/Joint/Committees/BEF/ http://www.leg.wa.gov/Joint/Committees/BEF/ 59

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61. Office of Superintendent of Public Instruction 2003-05 and Beyond, Impact to Local Funds Was Minimized by Suspension of I-732 COLA Annual Average Compensation Increases, COLA and Other 61

62. Office of Superintendent of Public Instruction 2000-2008: Local Funds Avoided $551 Million in Compensation Costs 62

63. Office of Superintendent of Public Instruction From 1999-2008, I-728 and Federal Funds Increased by $614 Million; Beginning 2008-09 Only Small Increases 63

64. Office of Superintendent of Public Instruction Health Benefit Costs Increase Rapidly 64

65. Office of Superintendent of Public Instruction Districts are Already Maximizing Levy Authority 65

66. Office of Superintendent of Public Instruction 66 LAP $ per LAP “Poverty Unit” Now Greater Than 1992-93 Level

67. Office of Superintendent of Public Instruction 67 Combined Resources for Struggling Students Have Consistently Increased