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

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?

Office of Superintendent of Public Instruction 2


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.


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

4



State, Local, and Federal Funds Total $9.3 Billion

6


K-12 Financial Outlook

Why do school districts’ budget problems seem deeper and more widespread than in past

years?

1. What is at the core of the problem?2. In the recent past, how were districts balancing

budgets?3. What is the magnitude of the problem for 2008-

09 school year and beyond?

7


• 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

8

State Underfunding Pushes Costs Onto Maxed-Out Local Funds


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

9


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

10


HLD Expenditures per Student Have Increased Steadily Since 1999

HLD as % of per Student Expenditures

11


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

12


Mandatory Pension Contributions Increasing Rapidly

13


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

14


Additional Salaries Increase 6%+ Annually

15


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

16


At State Level, No Systematic Data on COLAs Included in Contracts

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 1.255.2 – 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 ? --- --- ---

• 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

17


1% COLA Drives Significant Percentage Increase in TRI Schedule

Base Salary (projected 2007-

08 Avg)

Value of Supplemental

Salary Total SalaryValue of 1%

COLA

Increase in TRI Schedule of 1%

COLA

1% COLA Per Student Increase

$50,393 $1,000 $51,393 $514 51.4% $28$50,393 $2,000 $52,393 $524 26.2% $28$50,393 $3,000 $53,393 $534 17.8% $29$50,393 $4,000 $54,393 $544 13.6% $29$50,393 $5,000 $55,393 $554 11.1% $30$50,393 $6,000 $56,393 $564 9.4% $30$50,393 $7,000 $57,393 $574 8.2% $31$50,393 $8,000 $58,393 $584 7.3% $31$50,393 $9,000 $59,393 $594 6.6% $32$50,393 $10,000 $60,393 $604 6.0% $32$50,393 $11,000 $61,393 $614 5.6% $33$50,393 $12,000 $62,393 $624 5.2% $34$50,393 $13,000 $63,393 $634 4.9% $34$50,393 $14,000 $64,393 $644 4.6% $35

18


Compensation Expenditures Grow Faster than Local, State and Federal Revenue

19

% Increase in Local Revenue

% Increase in State Revenue

% Increase in Federal Revenue

1993-94 -7.1% 4.0% -2.4%1994-95 -0.7% 1.1% 0.1%1995-96 -1.7% 1.6% 4.1%1996-97 -2.9% 2.3% -2.0%1997-98 4.6% 2.5% -9.3%1998-99 0.0% 1.2% -5.1%1999-00 -4.7% 3.0% -12.2%2000-01 12.7% 14.1% 4.4%2001-02 0.4% 0.6% -9.6%2002-03 -2.1% 2.5% -7.3%2003-04 -2.8% 1.3% -3.3%2004-05 0.4% 1.8% -1.8%2005-06 0.4% -0.2% 4.4%2006-07 0.8% -0.8% 6.7%

2007-08* 2.2% 0.0% -3.8%

% Increase in Compensation Expenditures in Excess of:

*Budgeted


Structural Disconnect Continues in 2009-10 School Year1% 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

20


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

21

Appendix slides quantify these statements.


2000-2008: State Savings of $1.3 Billion in Employer

Pension Contributions; $364 Million for Local Funds

22


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 23


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 24


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

Spend

25


Largest Change for Smallest School Districts


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

27


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

28


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 Biennium29



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?

31


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 GeneralApportionment

Busing (6)

SpecialEducationBilingual

(5)

A. District Enrollment

32

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

33


A. Certificated Instructional StaffB. Classified Staff

34


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: 1:18.85-12: 1:21.7

IncludesAll Teachers,Instructional

Coaches, Nurses, Counselors, Librarians,

and all other Pupil Support

35


Districts Choose Between Lower Class Sizes, More Hours per Day, and Student Support

CertificatedInstruction Staff

K-4: 1:18.85-12: 1:21.7

Students per 1 FTE Staff 6 periods + 1 hr planning

TeachersGrades K-5

Grades 6-8Grades 9-12

Instructional Coaches

Librarians=

1:24.71:29.01:29.0

1:1,250

1:2,659

1:786

1:462

36

CertificatedInstruction Staff

K-5: 15.896-12: 18.43

=

Nurses

1:21.21:25.5

1:25.5

1:1,000

1:500

1:750

1:403

Students per 1 FTE Staff 6 periods + 1 hr planning

Current Proposed

Guidance Counselors & Pupil Support


Districts Hire Many More Classified Staff Than Are Funded by the State

(1B)

37


SPI Recommendations to BEFTF: Define Basic Education at 25.1 Staff per 1,000

38

Current ratio: 17 per 1,000 students

Proposed: 25 per 1,000 students


A. Certificated Instructional (Primarily Teachers)B. Classified (Non-Certificated) and Administrative

(Certificated but Supervise)

39


Districts Subsidize State Salaries, Issues Differ by Group

Teachers and Other Certificated Classified 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

40


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

Typical Everett

52,706

41

8,448*

$68,200

* Projected from 2006-07** 2006-07; full-time staff only


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

4,5391,316

57,065

23,742

15,638

42


Local Funds Pay COLA on 4 Levels

1. COLA on average salary paid for “local staff units” ($54 million)

2. COLA on all supplemental salaries, all staff ($24 million)

3. COLA on unequalized portion of Classified and Administrative salaries, all staff ($12 million)

4. 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 ofK-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

State Avg. Allocation

Supplemental Salaries

Actual Avg. Paid

State Allocation at Max Rate

Instructional

Classified Administrative

50,393

7,947

30,688

4,5391,316

57,065

23,742

15,638

43


SPI Salary Recommendations to BEFTF

Teachers and Other Certificated Classified 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

44


$9,476per CIS

(2006-07 SY)

$468per student

=

State NERC Funding Intended to Cover All Non-Employee Costs Related to Basic Education

=

46


Districts Spend Over $500 Million More on NERC Than the State Funds (3)

18-yr Cycle

8-yr Cycle

47


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

Insurance

48


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

49



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 development53


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 support5. Provide professional development for the teacher

staffing units driven by parts 1, 2, 3, and 46. Buy instructional materials

54


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

55



Buying Power of State Transitional Bilingual Program is Constant

57


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

58


• Redefine the ELL formula with 6 formula components based on successful programs:1. Reduce class sizes for ELL2. Provide “floor” funding for districts with few

ELL3. Enhance funding for high ELL/multiple

language districts4. Middle/High school enhancement5. Provide professional development6. Buy instructional materials and assessments

•$96 M increase over current funding•Categorical allocation from state to districts

0

SPI Recommendation to BEFTF: ELL

59



Transportation Funding Gap is Widening

61

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

62


Districts Budgeted 28% More for Fuel in 2008-09

63


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

64



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? 66


Minimum Outcomes Needed from the BEFTF

1. Improve funding ratios for Certificated Instructional and Classified Staff

2. Salary Policy and Fundinga) First, equalize classified and administrator

allocationsb) 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

67


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

68


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 (biennial 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)69


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

70


For More Information

•Jennifer Priddy: (360) 725-6292, or by email, [email protected]

•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/

71



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

73

Instructional Classified Administrative1999-00 6.4%* 3.0% 3.0%2000-01 3.0% 3.0% 3.0%2001-02 3.7% 3.7% 3.7%2002-03 3.6% 3.6% 3.6%2003-04 0.4%** 0.0% 0.0%2004-05 0.4%** 1.0% 0.0%2005-06 1.2% 1.2% 1.2%2006-07 4.5% 4.5% 4.5%2007-08 3.7 + .6% 3.7% 3.7%2008-09 3.9 + .7 + .5% 3.9 + .5% 3.9 + .5%

2009-10 (p) 5.0% 5.0% 5.0%2010-11 (p) 3.1% 3.1% 3.1%2011-12 (p) 2.4% 2.4% 2.4%

*Increases between 4.7% and 12%; 3 LID added**Increases between 3% and .05% for staff in 1st 7 years only

(p), projected I-732 COLA

Annual Average Compensation Increases, COLA and Other


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

74


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

75


Districts are Already Maximizing Levy Authority

76

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