Ospi K 12 Finance Outlook And 6 Key Recommendations Vancouver 10 23 08

K-12 Finance: Depth, Breadth, and Causes of a Looming Finance Crisis
What is the Basic Education Finance Task Force?
What is the financial outlook for school districts?
What are the funding shortfalls?
What solutions are proposed?
What are some implications for school finance re-design?

Basics of the Basic Education Finance Task Force
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.

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

State, Local, and Federal Funds Total $9.3 Billion

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

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
State Underfunding Pushes Costs Onto Maxed-Out Local Funds

Total Compensation Ranges Between 82% and 84% of Total Expenditures

School Districts Spend $1 Billion on Health, Life and Disability Insurance

HLD Expenditures per Student Have Increased Steadily Since 1999 HLD as % of per Student Expenditures

School Districts Expend 8-9% More for HLD Benefits than the State Allocates per Teacher

Mandatory Pension Contributions Increasing Rapidly

Cost of Living Increases
For every $100 million in state funds for COLA, districts expend $44 million in local funds to extend the COLA to all employees (caution, update required)
Hold that thought

Additional Salaries Increase 6%+ Annually

How Do Supplemental Salaries Increase?
6.3% increases driven by multiple factors:
State COLA applied to TRI schedule
Increase in extra duties (new curriculum adoptions)
Higher or more frequent class size overload pay
New incentives (seniority incentive)
COLA above state COLA
National Board Certification increasing

At State Level, No Systematic Data on COLAs Included in Contracts
Example contracts of random large districts
Columns A-L represent percentage increase above state COLA applied to total salary
In some cases, percentage is linked to extra time (district- and/or teacher-directed)
“ ? ” Indicates COLA is dependent on negotiations for current contract; outcome unknown
--- Indicates that contract will be open for this year
*Projected I-732 COLA State A B C D E F G H I J K L 07-08 3.7 - 4.3 1.0 2.0 1.5 1.0 3.0 0.0 0.0 0.0 0.0 1.5 .5 2.5 08-09 4.4 - 5.1 .75 2.0 1.5 1.25 5.2 – 5.9 0.0 0.0 1.5 0.0 1.5 1.0 --- 09-10 5.0* ? 3.0 2.0 --- --- 0.0 0.0 1.0 ? --- 1.0 --- 10-11 3.1* ? --- --- --- --- 0.0 0.0 3.0 ? --- --- ---

1% COLA Drives Significant Percentage Increase in TRI Schedule

Compensation Expenditures Grow Faster than Local, State and Federal Revenue *Budgeted

Structural Disconnect Continues in 2009-10 School Year 1% COLA above I-732 COLA for all Teachers in a District $28 - $35 per student Cost of 2009-10 I-732 COLA on Local Funds (COLA projected at 5%) $99 per student Typical Levy Growth (2007 to 2008) $60 - $100 per student

How Have Districts Balanced Their Budgets in the Last Few Years?
2000-2008
2009 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
Appendix slides quantify these statements.

2000-2008: State Savings of $1.3 Billion in Employer Pension Contributions; $364 Million for Local Funds

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

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

Spending Ending Fund Balance Only Delays Cuts; Many Districts Have Little Balance to Spend

Largest Change for Smallest School Districts

Operating Fund Value of Districts with Less than 2% EFB Held Steady/Remains Large

Summary for 2008-09 School Year
Statewide average Ending Fund Balances 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

Look Forward for 2009-10 SY
Little 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

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?

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 I-728 Gifted

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

Certificated Instructional Staff
Classified Staff

Certificated Instructional Staff Ratios (1A) 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 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.

Districts Choose Between Lower Class Sizes, More Hours per Day, and Student Support Instructional Coaches Librarians = = Nurses Current Proposed Guidance Counselors & Pupil 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 1:24.7 1:29.0 1:29.0 1:1,250 1:2,659 1:786 1:462 Certificated Instruction Staff K-5: 15.89 6-12: 18.43 1:21.2 1:25.5 1:25.5 1:1,000 1:500 1:750 1:403 Students per 1 FTE Staff 6 periods + 1 hr planning

Districts Hire Many More Classified Staff Than Are Funded by the State (1B)

SPI Recommendations to BEFTF: Define Basic Education at 25.1 Staff per 1,000
Current ratio: 17 per 1,000 students
Proposed: 25 per 1,000 students

Certificated Instructional (Primarily Teachers)
Classified (Non-Certificated) and Administrative (Certificated but Supervise)

Districts Subsidize State Salaries, Issues Differ by Group
Teachers and Other Certificated
Classified and Administrative
State sets salaries based on a salary schedule and pays some teachers on a greater schedule than others
State has not evaluated salary levels or purposes for decades; districts pay for some supplemental salaries that are likely a basic education responsibility
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)
State allocates different salary averages among districts based on 30-year-old snapshot
State has no method to allocate staff salaries to reasonable cost of attracting and retaining

Differences in Teacher Salary Impacts Morale and Retention
Base salary most districts
Base salary of Everett
Equalizing will cost $167 million and raise most teacher salaries by 5%
Additional (supplemental) salaries on average nearly $8,500 per teacher statewide
55,322 12,878** $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 Typical Everett 52,706 8,448* $68,200 * Projected from 2006-07 ** 2006-07; full-time staff only Base Salary Additional Salaries

Districts Must Subsidize Classified/Admin Salaries by $ 366 Million
Average total salary
State average allocation
District allocations vary, first step is to equalize salary allocations ($226 million state cost to equalize)
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 Classified Administrative 30,688 4,539 1,316 57,065 23,742 15,638 State Avg. Allocation Addt’l $ Above Max Rate State Allocation at Max Rate

Local Funds Pay COLA on 4 Levels
COLA on average salary paid for “local staff units” ($54 million)
COLA on all supplemental salaries, all staff ($24 million)
COLA on unequalized portion of Classified and Administrative salaries, all staff ($12 million)
COLA on difference between the state maximum allocation and the salary districts actually pay, all staff ($6 million)
$58,340 $36,593 Local Funds COLA Effect (5% in 2009-10) $96 million total $96,445 2007-08 Building Blocks of K-12 Staff Average Salaries $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Instructional Classified Administrative 50,393 7,947 30,688 4,539 1,316 57,065 23,742 15,638 State Avg. Allocation Supplemental Salaries Actual Avg. Paid State Allocation at Max Rate

SPI Salary Recommendations to BEFTF
Teachers and Other Certificated
Classified and Administrative
Equalize base salaries to Everett level
Complete BEFTF research on supplemental salaries and comparisons of teacher salaries to other occupations /states; identify appropriate salary and appropriate state contribution
Adopt a new salary schedule with higher lifetime earnings and increases for certification-based demonstrations of excellence
Equalize salary allocations across districts
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

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

Districts Spend Over $500 Million More on NERC Than the State Funds (3) 18-yr Cycle 8-yr Cycle

An Increasing Number of Districts Spend Over 80% of Their NERC Allocation on Utilities and Insurance

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

Poverty is Now the Funding Driver; Lap Funds, in Total, LAP Funds Have Increased Substantially.

Despite Large Increases in Funding, Buying Power Remains Constant

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

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

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

Buying Power of State Transitional Bilingual Program is Constant

Funding for English Language Learners (5)
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

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

Transportation Funding Gap is Widening JLARC est. for basic education responsibilities underfunding in 2004-05: $92.6 - $114 Million

Diesel $ per Gallon up 48% Over Sept 2007 Price West Coast Monthly Average Retail Price per Gallon of Diesel

Districts Budgeted 28% More for Fuel in 2008-09

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

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?

Minimum Outcomes Needed from the BEFTF
Improve funding ratios for Certificated Instructional and Classified Staff
Salary Policy and Funding
First, equalize classified and administrator allocations
Then, allocate classified/administrator based on common-sense methods that cover actual costs
Address state underfunding of teacher compensation
Compensate teachers for excellence

Minimum Outcomes Needed from the BEFTF
Improve funding level for NERC, inflate with common sense measures
Improve funding for LAP
Staffing formula driven by instructional programming reality and informed by research
Improve funding for ELL
Staffing formula driven by instructional reality and diverse community needs and informed by research
Implement a new formula with adequate funding for pupil transportation
Special Education
New $ driven via components 1-3

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)

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)
Publically recognize the difficult job that policymakers face
Identify I-728-supported programs
Publically identify reduction options and impacts
Speak with one-voice on way-forward
“ Must-do” list from Task Force recommendations
Communicate re: need for foundational resources to afford compensation increases

For More Information
Jennifer Priddy: (360) 725-6292, or by email, [email_address]
Superintendent Bergeson's BEFTF Proposal: http://www.k12.wa.us/Communications/BasicEdFundingTaskForce.aspx
Basic Education Finance Task Force: http://www.leg.wa.gov/Joint/Committees/BEF/

2003-05 and Beyond, Impact to Local Funds Was Minimized by Suspension of I-732 COLA

2000-2008: Local Funds Avoided $551 Million in Compensation Costs

From 1999-2008, I-728 and Federal Funds Increased by $614 Million; B eginning 2008-09 Only Small Increases

Districts are Already Maximizing Levy Authority

LAP $ per LAP “Poverty Unit” Now Greater Than 1992-93 Level

Combined Resources for Struggling Students Have Consistently Increased

Ospi K 12 Finance Outlook And 6 Key Recommendations Vancouver 10 23 08

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Ospi K 12 Finance Outlook And 6 Key Recommendations Vancouver 10 23 08 Presentation Transcript