School Finance Reform Update and Look Forward

Office of Superintendent of Public InstructionK-12 Financial Resources

Slide 104/19/23

K-12 Financial ResourcesOffice of Superintendent of Public Instruction

School Finance Reform Update and Look Forward

Jennifer Priddy,Office of Superintendent of Public

Instruction

/19/23


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

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FINANCIAL CONTEXTHow much of basic education do levies subsidize?

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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 GeneralApportionment for Basic Education

Pupil Transp.

SpecialEducation

Bilingual

1. District EnrollmentI-728

GiftedLevy

Equalization

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Factors That Contribute to the Crisis

2. Staff Ratios

3. Salaries & Benefits

4. Operating Costs (NERC)

=

State GeneralApportionment 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

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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

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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

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Factor # 3: Levies Subsidize

Compensation Costs

$52,783 $32,294

$59,929

$9,870

$10,878

$46,618

Instructional Classified Administrative

Average Compensation DistributionState Paid Levy Paid

Salaries and Mandatory Benefits Levies 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

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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

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Factor # 3: Levies Also Subsidize Increases

$52,783 $32,294

$59,929

$9,870

$10,878

$46,618

Instructional Classified Administrative

Average Compensation DistributionState Paid Levy Paid

State Pays Levy Pays

State Funded Staff Units

I-732 COLA On Blue On Green

Pension Rate Inc. On Blue On Green

Negotiated COLA/Sal. None On All

Extra Staff Hired with Levy

I-732 COLA None On All

Pension Rate Inc. None On All

Negotiated COLA/Sal. None On All

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Factor # 3: Annual Percent Increase in the Cost of Staff has Doubled

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Factor # 3: Additional Salaries Increased an Average of 9.6% Annually During Prior 5 Years

School Year (Source: LEAP)

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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

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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 pay4. New incentives (seniority incentive)5. State COLA applied to TRI schedule6. COLA above state COLA

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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%

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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 staff3. State does not pay for the full cost of Basic Education Classified and

Administrative staff salaries4. Cost of COLAs on the differential between State-funded and Actual

Salaries is Significant5. 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

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Additional Salaries are an Increasing Share of Levy/LEA Revenue

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Factor #4: Districts Spent $500 Million More on NERC Than the State Funds

8-yr cycle

18-yr cycle

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Factor # 4: Nearly 13% of Districts Will Spend Nearly 100% of Their NERC Allocation on Utilities and Insurance Alone

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Pupil Transportation is Heavily Subsidized by Local Funds

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Levy Expenditures are Largely Basic CompensationProgram/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 $168.5

6 Extra BE/CTE Instructional Staff $195.0 $195.0

7 Actual BE/CTE Salary (Class) $210.7 $210.7

8 Actual BE/CTE Salary (Admin) $169.7 $169.7

9 Additional BE/SE/CTE Salary (Instructional) $608.8 $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.

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FUNDING FORMULA REVISIONSNew Funding Formulas are Designed and Ready for Adoption

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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

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• 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?

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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

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“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))

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Translates Old Funding Levels into the New StructureCurrent 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 27.00 28.53 28.74

Other Staff per Prototypical School

Principal (and Other School Administrators) 1.253 1.353 1.880

Teacher Librarians .663 .519 .523

Guidance Counselors .493 1.116 1.909

Nurses/Social Workers .135 .068 .118

Professional Development Coaches .00 .00 .00

Instructional Aides .917 .685 .638

School Office & Non-Instructional Aides 1.971 2.277 3.201

Custodians 1.622 1.902 2.903

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

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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

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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

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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

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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

2007-08 2009-10

Learning Assistance Program 1.303 hours 1.5156 hours

Transitional Bilingual Instruction Program 4.826 hours 4.7780 hours

Highly Capable Program 2.196 hours 2.1590 hours

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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

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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

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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

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Formula Revisions: Progress to DateOfficial 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

• 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

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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

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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

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QUALITY EDUCATION COUNCIL RECOMMENDATIONS

The New Funding Formula is Cost Neutral; Must Have Improved Funding

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QEC January 2010 Recommendations1. Do not decrease funding in 2009-102. Adopt Crosswalk/Baseline3. 3-year phase-in of Transportation, beginning 2011-124. 3-year phase-in of MSOC/NERC, beginning 2011-125. 7-year phase-in of Full-day Kindergarten6. 5-year phase-in of K-3 Class Size to 1:15, beginning

2011-127. 3-year phase-in of Early Learning for at-risk 3&4 year

olds, beginning 2011-128. Other recommendations in report:http://www.k12.wa.us/QEC/default.aspx

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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

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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

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NEXT STEPS IN FINANCE REFORMNext Steps Must Address Staffing Levels and State-Funded Compensation

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How Many Staff Should the State Allocate for Student Support?

• Librarians• Counselors• Nurses and Social Workers• Instructional Specialists• School Office• Technology

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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?

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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?

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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?

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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

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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?

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NEAR-TERM FINANCIAL OUTLOOK

New Funding Must Start in 2011-12 and Will Likely Only Hold the System Steady

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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

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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

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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

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Governor’s Proposed Cuts for 2010-11 School YearChange to Underlying BudgetMillions 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) (133.9)I-728 (78.5) (96.9) (96.9)Full-Day Kindergarten (33.6) (41.3) 01 Learning Improvement Day (15.0) (18.6) (18.6)

Gifted Education (7.4) (9.0) 0Apportionment Delay for 1 Day (June 30 to July 1) (379.1) 0 0Transfer School for the Blind to OSPI 0 0 0Transfer School for the Deaf to OSPI 0 0 0Eliminate Middle School CTE (1.9) (1.9) 0Eliminate BEST (New Teacher Mentors) (2.4) (2.4) (2.4)Career and Technical Ed Grants (2.8) (2.8) (2.8)Reading Corps (1.1) (1.1) 0Readiness to Learn (3.6) (3.6) (3.6)Total (not including Apportionment Delay) $(399.8) $(502.2) $(228.8)

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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

1 I-728 $(355.8) $(96.9) $(452.7)

2 K-4 Enhancement (133.9) (133.9)

3 Pupil Transportation (12.5) (12.5)

4 Full-day Kindergarten (41.3) (41.3)

5 Gifted Ed (9.0) (9.0)

6 Levy Equalization (190.6) (190.6)

7 Subtotal Non Compensation $(368.2) $(471.8) ($840.0)

8 Learning Improvement Day (18.6) (18.6) (37.2)

9 COLA (approx) (203.2) (203.2)

10 Total with Compensation $(590.0) $(490.4) $(1,080.4)

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$ 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

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Additional 2010-11 Budget Cuts will Cause Significant Financial Distress

Employment Impact of Each Factor Instructional Classified Total

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) 861 713 1,574

4 Health/Life/Disability/Utilities/Insurance (135) (112) (247)

5Estimated Value of $166 M Reserves Used in 2009-10 (1,190) (987) (2,177)

6 Assume Large Districts Drop to 2% ($157.9 M) 1,132 938 2,070

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)

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TRS Rates Double in 2011-12

School Year (*Projected by State Actuary in October 2009)

Employer Rates for Certificated and Classified Staff Pension Contributions

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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%

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12,000 Jobs Lost by 9-1-11Employment Impact of Each Factor Instructional Classified Total

1 Cumulative Impact for 2010 and 2011 (5,309) (1,509) (6,818)

2 Increase in Levy Revenue 861 713 1,574

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%)

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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

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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?

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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.

School Finance Reform Update and Look Forward

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