Budget Update and Thoughts on Teacher Compensation and Levy Reform

4th Graders Visiting the Capitol
4th Graders Visiting the Capitol

4th Graders Visiting the Capitol

I write this on Tuesday April 21st. At this point I do not expect that the Legislature will agree on a budget before the regular session ends on Sunday April 26th. The Seattle Times published a lot of articles this weekend about the budget, and I’m structuring this newsletter around them. The first article in the collection discusses in detail all the press conferences that the two sides had all week. We’ve had a number of meetings between the two negotiating teams to try to set up the framework for talks, but we’re not making much progress.

I think it’s mostly about the different approaches the two sides take to the budget. The House Democrats look at the various categories of spending and make recommendations about what we think the state should invest in, then work back to figure out how much revenue we need based on that. This is a balancing decision, and lots of desired spending doesn’t get done in the budget proposal. The Senate Republicans make a decision that they won’t vote for taxes (except for roads) and try to deal with the huge increase in required K12 spending by cutting everything else and using a lot of one-time gimmicks. This results in many bad outcomes.

I made a proposal that both sides work through all the areas where we have significant differences and resolve the details of what we want to purchase. The Senate suggested we set a dollar limit (theirs) and work within that. The limit was low enough that it prevents making reasonable decisions. We are at a temporary impasse.

Education funding stuff after the break.

Our job is to find a balance between the two approaches. Taxes have an impact on the economy, but so does lack of services. Finding the right balance of investment in infrastructure, education, human services, etc. will require much discussion. Sen. Hill and I will talk every day. We had lunch on Friday and agreed to try to get a number of bills resolved before the end of the week, simplifying the eventual agreement.

Education Funding

Last week saw a flurry of proposals for resolving the second half of the McCleary decision: the unconstitutional dependence on local levies to fund compensation. The Times opines that we should do this. I agree, and have worked on a variety of proposals for the last several years. Four years ago I made a revenue-neutral proposal for a “levy swap” that would have addressed most of the problem. (The proposal is now out of date, but I leave it up because there are a lot of links to it on the web.) This week Sen. Bruce Dammeier, Superintendent of Public Schools Randy Dorn, and several Democratic Senators each made suggestions. I have a detailed proposal I’ve worked out that addresses most of the concerns addressed by each of the other groups as well, but I have not made it public. I will later this week just to have a reference point, but all of our actual proposals don’t actually help resolve the issue.

In an attempt at a different direction Reps. Sullivan, Lytton, and Carlyle and I introduced a bill laying out a two-year process for resolving the issue, which is much less detailed than the other proposals, but might actually force us to discuss these issues in public. The bill lays out details of every decision that must be made and a required timeline for making them. This is the same process that we used to accomplish the complete re-write of the basic education definition in 2009. It should work again.

I agreed to this because I’ve changed my mind some about how we should go about it, not because I want to delay the decision. There are dozens of specific choices that go into each of these proposals. The end result of all the decisions is a spreadsheet with 295 rows (one for each district) and about 15 columns detailing both the funding impacts for school districts and the taxpayer impacts by school district of the collective weight of the decisions.

Every time I have tried to walk a proposal through the legislature I run into resistance – “the tax impact on my district is too high”, “the levy equalization reduction can’t be sustained”, “the bargaining changes are too extreme”, etc. Mostly the proposal is just too complex to be easily understood by people not steeped in education finance. My conclusion from this experience is that with a complex bill like this one that has very large consequences the entire legislature and all of the outside interest groups must be able to see the process of making the tradeoffs or the bill will fail to gain enough votes to pass.

School districts spend a lot of money on compensation for teachers and other educational staff above what the state provides. Much of it goes to support people in the “prototypical school model” which means that they are “basic education” employees, and their compensation should be paid for by the state. The prototypical school model is an outline of all the jobs that a school building needs, with a count of how many of each type they need per student at the school. It’s a way to figure out how much money we should provide to each district to fund their schools.

Here is a summary of the problems:

  • Of the amount paid out from levy funds in compensation:
    • How much is for basic education employees? (Somewhere between 80 and 90%, but this is debatable.)
    • Do school districts pay more than they need to?  (We have studies that say yes, but not by large amounts.)
      • What is the required starting pay, average pay, and max pay for each of the categories in the prototypical school model? What methodology do you use to determine this?
    • Is the amount different between districts? (Yes)
      • If so, is the difference predictable based on some observable factor, like cost of living in the district?
      • Do we want to provide different amounts of money to different districts based on the costs they face?
        • Sen Dammeier proposes a regional model, as do I.
        • I disagree with him about some of the methodology he uses.
      • How would the regional differences be calculated and by whom? This might be contentious…
    • Do we give money to districts based on the actual teachers they have, or on an average cost per teacher? The average model is easier to figure out. We do the specific-teacher model today, and it has both good and bad points.
  • How do you decide how much to pay any individual teacher? Today we have a goofy system that has the highest bonus for teachers having master’s degrees in the country. It’s pretty clear from research that master’s degrees have little impact on student outcomes except in very limited circumstances.
    • There are over 50,000 teachers who have invested in the current system. Do you change compensation rules for existing teachers? (It may cost someone $20,000 to get a master’s degree. Do we deprecate this investment overnight?)
    • Are teacher salaries determined at the state level or can they vary by district?
      • Superintendent Dorn proposes state-wide bargaining (with him, not the governor).
      • Sen. Dammeier proposes a completely new set of compensation rules based on the recommendations of a committee we appointed (the Compensation Technical Working Group). It’s possibly a good idea, but complicated.
  • How should we determine the cost of benefits provided to school district employees? The state has to provide enough money for this, but the actual healthcare costs are bargained locally.
    • Sen. Dammeier’s proposal shifts to a state-run program, simplifying this.
    • My proposal would use the amount allocated to the state healthcare system, but allow districts to bargain healthcare locally.
  • Do we continue the arbitrary differences between districts that were set 40 years ago? This is called “grandfathering” and it affects districts in many different ways.
    • If we eliminate grandfathering, do we lose the votes of legislators from districts that lose historical (but unjustified) advantages? This is a bigger problem than you might think.
  • What rules do we have for local districts in supplementing the program of basic education paid for by the state? Everyone agrees that they should be able to hire teachers to coach football or the robotics club, but there are more serious questions:
    • Can districts hire additional teachers and have lower class sizes?
    • Can districts pay existing teachers more than other districts do? (This has very serious long-term problems that we are trying to unwind today, so probably not.)
    • Should middle-school special education teachers get paid more than kindergarten teachers? (They seem to when you look at the data, but it’s not clear how this works out legally…)
    • If not, how would you implement a system that prevented this?
      • Sen. Dammeier proposes a single state-wide schedule of compensation.
      • I don’t address this, but probably should. His proposal would have great difficulty being administered locally.
  • Most estimates have the total cost of fixing this problem at about $3 billion to $3.5 billion per biennium. Where does this money come from? It’s important to recognize that in almost all cases teachers are currently being paid the right amount, but the money is coming from a constitutionally invalid source – unreliable local levies.
    • A variety of us have proposed a (mostly) revenue-neutral property tax swap to do this – raise the state levy and lower local levies. This raises taxes in Seattle and Bellevue and lowers them everywhere else. School districts would receive the same amount of money in most cases. I think this is the most likely idea, as any tax you propose to use in a swap would have the same impact on Seattle and Bellevue because that’s where the economy is.
    • The Senate Democrats propose using a capital gains tax to do this. I don’t think there’s enough money there to do it, but we should look at the idea. This would have the same regional imbalance. (Both proposals are progressive, and that makes this state uneasy for some reason.)
    • The bill I introduced raises the possibility of using a carbon mechanism to do it. This is a reasonable alternative and worth consideration.
  • Many of the schools in our area would like to enhance the program of basic education. Bellevue has a 7-period day, for example. This is paid for with levy money. How do you figure out the amount of levies districts can raise in the future? All the proposals are wildly different on this point.
    • Are there limits to how much can be raised? We would prefer not, but many people in more rural areas are concerned that they are unable to raise the same level of funds and that their children will be at a disadvantage as a result.
    • What can levies be spent on?
  • The state currently provides money to districts that have difficulty raising local property taxes. The formula has a growth rate of 8% a year, which is insane and not sustainable because it grows twice as fast as most revenue sources we have. This formula will have to be changed. Today it distributes about $800 million to districts biennially. Changes will be politically difficult.
  • If we are going to depend more on the state property tax, and if education costs grow with inflation, are we going to change the growth rate of the tax to match the growth rate of the cists it’s paying for? Right now the growth of the state property tax is limited to 1% plu new construction due to initiative 747.
    • Fixing this might be difficult politically, but seems necessary to prevent the same problem from recurring 10 years from now.
  • How do you phase this whole thing in? This turns out to be really, really hard.
    • Property taxes are collected on calendar years, starting in January and need much lead time to set the rates for.
    • State budgets are done on fiscal years, running from July through June.
    • School budgets are done by school years, running from September through August.

I’ve left lots of stuff out of this list so people will read the post. Any proposal has to deal with almost all of these questions.

The Supreme Court requires that we have a plan with annual benchmarks that they can measure and enforce. The court wisely chooses to not make the decisions above – they are trying to push the Legislature to do so. If we force the court to make the decision bad things will happen – bad things that affect large pots of money.

The proposal that Reps. Sullivan, Lytton, and Carlyle and I have put out makes some decisions in the 2016 session and others in 2017. The changes would take effect in 2018. I would prefer to have stronger language that specifies the size of the problem more clearly and outlines the eventual solution more than the bill does currently, but it seems more useful to introduce a framework than a complete bill. We can strengthen it as we go through the negotiation process.

About the Author

I am the Director of the Department of Early Learning for Washington State. I formerly represented the 48th Legislative District in the State House of Representatives, chairing the Appropriations committee and spent many a year at Microsoft.

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