1. Office of Superintendent of Public Instruction K-12 Financial Resources Slide 1 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction School Funding Update Outlook for Next 3 School Years is Bleak but Legislature Considering Landmark Legislation as Next Step in Finance Reform

2. Slide 2 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction BUDGET DEFICIT IMPACTS What impact will state budget deficits and exhausted levy funding have on schools?

3. Slide 3 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction State Fiscal Outlook for 2009-11 Biennium * It should be noted that these are estimated budget problems based on available information. In some cases, information for prior fiscal periods might not be comparable. Source: SWM

4. Slide 4 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction New Problems for 2010 Legislature  Only 15months left in biennium after session ends Revenue Losses ($ millions) June Revenue Forecast Update686 September Forecast Update238 November Forecast Update 760 1,684 New Expenses ($ millions) Caseload/Enrollment/Other Mandatory Increases760 Health Insurance Benefit Fund (PEBB) Deficit 103 Other Policy Adds 36 Total Deficit$2.6 billion Source: OFM

5. Slide 5 10/4/2015 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)

6. Slide 6 10/4/2015 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)

7. Slide 7 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Next Steps for 2010 Legislature $2.6 billion deficit will be adjusted Next revenue forecast is February 12 – Caseload forecast that same week No cuts to schools in 2009-10 school year are proposed by Governor in Book 1 or Book 2 Complete Guess: Senate budget the week of February 15 House budget week following

8. Slide 8 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Additional 2010-11 Budget Cuts will Cause Significant Financial Distress Jobs Lost Due to Budget Cuts/Crunch Instructional ClassifiedTotal 1 Rough 2009-10 (not final preliminary until 1/22/10) (1,166)(876)(2,042) 2 20010-11 Impacts: 3 Increase in Levy Revenue 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 Projected Cost of Unemployment Insurance ??? 9 Total Potential Additional Cut for 2010-11 (4,143)(633)(4,776) 10 Cumulative Impact for 2010 and 2011 (5,309)(1,509)(6,818)

9. Slide 9 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 2011-13 Biennium Outlook for State State economy is on track to rebound but slowly State must: – Replace 1-time federal stimulus and other 1-time funding used this biennium, not available next biennium (about $3 billion out of $33.4 billion state budget) – Restore cuts to I-728 and I-732 over 4 years, beginning in the 2011-12 SY ($560 million per year once fully restored) – Increase employer pension contributions (roughly $350 million per year increase over current biennium contributions) State funding for K-12 will be impacted by all above hurdles; outlook for 2011-12 is bleak

10. Slide 10 10/4/2015 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

11. Slide 11 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction All Translates 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%

12. Slide 12 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction 2011-12 Holds Even More Upheaval Jobs Lost Due to Budget Cuts/CrunchInstructionalClassifiedTotal 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 Compensation Above I-732 COLA (405)(336)(741) 9 Cost of Unemployment Insurance ??? 10 Change in State Funding (HB 2356 to Restore I-728) ??? 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%)

13. Slide 13 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction QUALITY EDUCATION COUNCIL RECOMMENDATIONS What impact with Quality Education Council legislation have on schools?

14. Slide 14 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction QEC January 2010 Recommendations 1.Do not decrease funding in 2009-10 2.Specifics of new formula adopted 3.3-year phase-in of Transportation, beginning 2011-12 4.3-year phase-in of 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

15. Slide 15 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction Recommendation #2: New Funding Formula Fills the funding values into the structure adopted in 2009 Cost neutral translation or “Baseline” Specifies the amount of funding in common- sense categories for prototype schools – OSPI will allocate resources to districts, much the same way as today – Report enrollment, scale prototype funding up or down, send the money to the district

16. Slide 16 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction “Baseline” 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))

17. Slide 17 10/4/2015 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) 1.251.3531.88 Teacher Librarians.66.52 Guidance Counselors.491.121.91 Nurses/Social Workers.14.07.12 Professional Development Coaches.00 Instructional Aides.92.69.64 School Office & Non-Instructional Aides 1.972.283.20 Custodians 1.621.902.9 Student and Staff Safety.08.09.14 Districtwide Support Warehouse/Laborer/Mechanics.33 staff per 1,000 students Facilities Security, Maintenance, Grounds 1.78staff per 1,000 Technology.62 staff per 1,000 Central Administration 5.3% of Staff Above

18. Slide 18 10/4/2015 K-12 Financial Resources Office of Superintendent of Public Instruction QEC Recommendations 3-7 $ in Millions2011-12 SY2012-13 SY2013-14 SY 3Pupil Transportation $50.2M$103.9M$155.8M 4Materials, Supplies, Operating (New NERC) $194.3M $415.3M $643.1M 5Full-day Kindergarten $21.2M$60.6M$103.3M 6K-3 Class Size Reduction $149.6M$312.6M$488.8M 7Early Learning for At-Risk 3 and 4 Year Olds $10.9M$27.3M$58.2M Total $426.2M$919.7M$1,449.2M