Post-Session Notes, Operating Budget Comments

Rep. Kagi and I working on the Early Start bill on the floor of the House. My Sound Transit water bottle is in the foreground.

Thank  you again for letting me represent you in Olympia. It’s an honor and a privilege, though I feel much less privileged when the session runs into July. We finished our work Friday morning June 10th, passing a transportation spending bill and bills that allow the state to take out bonds based on the revenue. We also passed a small bill changing high school graduation requirements, the centerpiece of a disagreement in the Senate over initiative 1351 (class size reduction.) The graduation bill delays the imposition of the science standards for two years, allowing 2000 kids who met all the graduation requirements other than passing the biology end of course exam to graduate. It does NOT make a number of other changes I took issue with when they came up earlier in session.

In the last week of June we passed the 2015-17 operating budget, my particular responsibility in the Legislature. It’s reasonably straightforward and didn’t need to take us until the end of June to resolve, but the Republican Senate was unwilling to compromise on their all-gimmicks, no revenue strategy until the very end. In the last few days we came to an agreement that is a true compromise – the House conceded to the use of more financial shortcuts than we would have preferred and the Republican Senate agreed to close $350 million of tax loopholes. I didn’t get everything I wanted, and there are some elements of the deal that are distasteful. I think the same is true for the Senate Republicans. Had we gone past June 30th the state would have gone into a partial shutdown, including laying off doctors and nurses, shutting childcare facilities for 50,000 kids (which would cause 30,000 low-income single moms to lose their jobs or depend on sketchy care), and other bad things.

I’m glad to live and work in “this” Washington, a place where we can discuss issues rationally and come to compromises, unlike the “other” Washington where they seem to have great difficulty in doing so. I do wish it took less time.

The Operating Budget

I started the session saying that we had 4 priorities, and I feel we accomplished all of them:

Meet our constitutional obligation for funding K-12 education. We put $1.3 billion into K-12 for new McCleary funding, and we gave a much-needed cost of living adjustment to teachers and other educators.

Comply with court orders in mental health and foster care. This turned out to be more expensive than I had thought, requiring almost $100 million in new mental health funding to comply with additional federal court orders and provide a reasonable level of care for some of our state’s most vulnerable residents.

Make some elemental repairs in our safety net. It was high time to restore some of the cuts made during the recession. Of particular concern was our ability to respond to allegations of child abuse and to keep up with inflation in the Temporary Aid to Needy Families (TANF) program. We were able to make some progress in these areas, but much less than the House originally proposed.

Invest in the bookends around K-12: early learning and higher education. We passed (and funded) an historic investment in early learning, made significant reductions in higher education tuition, while protecting the State Need Grant, and created hundreds of new slots in high-demand (and highly expensive) fields at the UW and WSU. In addition, we made the investments necessary to allow the new medical school at WSU to get off the ground without damaging the existing program at the UW.

The big elephant in the room was Initiative 1351. This initiative has about $5 billion in predicted costs over the next four years, and will cost about $6 billion a biennium once it is fully implemented. About 1/3 of the spending goes to reducing class sizes in grades 4-12, and the other 2/3 is spent on non-instructional staff. As I said during the initiative’s campaign there isn’t a rational financial model that pays for this expense, and there would be educational investments with much higher projected returns in improving outcomes for children that I would invest in first if I had the choice.

Changing initiatives in the first two years requires a 2/3 vote in the Legislature. Clearing the 2/3 hurdle is quite difficult and has resulted in us delaying the initiative for four years. This will allow us time to consider the investment and make a plan to implement the parts of it that make sense

There are lots of details in the budget that are important to people – here’s a summary of the most commonly requested components:

K12 Education. Almost all of our K12 investments are directly tied to meeting our constitutional obligation to fund schools under the McCleary decision.

  • All day Kindergarten for all kids in Washington by the 2016-17 school year. Many school districts offering this today charge tuition – they won’t need to (or be able to) once this is completely phased in. There are good rates of return here. (Washington State Institute for Public Policy study here)
  • Lower class sizes in Kindergarten through third grade. Class sizes will be 17 in regular classrooms, and 15 in classrooms with a high percentage of low-income children. This is also a high rate of return investment. (WSIPP study here)
  • Adequate funding for maintenance, supplies, and operating costs (MSOC).  It’s hard to tie this to direct outcomes for kids, but if you don’t pay for the costs of repairing the roof or heating the building no learning can occur.

Early Learning. We passed a pivotal bill this year (the “Early Start Act”) and added $159 million in funding for it. Early Start codifies a growing body of work around ensuring that the 50,000+ kids in state-funded childcare are in facilities that meet reasonable standards of quality. I’ve written about this before, and will do so again. Other comments on the legislation: Thrive Washington, Gov. Inslee’s comments, KPLU, Children’s Alliance, Education Week, and finally Arne Duncan, president Obama’s Secretary of Education. His comments:

“High-quality preschool is incredibly important to giving kids a strong start in school and in life. I want to congratulate Gov. Jay Inslee, educators and other leaders in Washington State on the Early Start Act, which will improve early learning opportunities for over 48,000 children, building on the successes of the state’s Race to the Top-Early Learning Challenge grant. It’s a huge step toward a vision for a comprehensive early learning system that will make Washington a leader in doing the right thing for our youngest children.

Higher Education. We made investments in higher education in two ways – we lowered tuition at all of our institutions (but mostly in the four-year system), made some targeted investments increasing capacity in computer science and engineering, and funded a new medical school at WSU, including the residencies that are necessary to keep the newly minted doctors here in Washington. The original Senate Republican proposal funded the new medical school largely by taking money from the UW’s program in Spokane, which seemed counter-productive to me.

The tuition reduction partially recovers us from the recession, and should put tuition at or below the “60% of peer institution” threshold we’ve been trying to stay under. Unlike the original Senate Republican proposal this isn’t paid for by underfunding the higher education system. Cutting the system to pay for tuition reductions perversely adds student costs, as they will often have to take an additional quarter or year to finish their major. Paid for, this is a reasonable idea.

There is some remaining concern about the Guaranteed Education Tuition (GET) program, and the program administrators are scrambling to come up with a response. I would not recommend buying GET units right now until what they decide to do gets worked out. Here’s their immediate communication. If you own GET units I suggest you pay careful attention to the options they present to avoid a significant reduction in the value of your investment.

I am particularly excited about the computer science investments. We grow the UW’s computer science program about as much as it can reasonably be expanded while maintaining the quality. Every single graduate of this program gets a high paying job, and about 80% of them stay in the area. I think about this as an investment in the local economy. Washington is one of the few states where “computer programmer” is the most common job description, and a lack of talent is the most commonly heard concern I get from high tech execs.

In addition, Bellevue College is now enabled to offer a bachelor’s degree in computer science. This is a compelling part of the college’s growth towards becoming more of a four year school and I look forward to the program starting, but probably not in September of this year.

The new WSU medical school is an interesting creature. There was a lot of support for a new school in Spokane, as we face a large shortfall of doctors in Washington to handle both the growth in population and those newly insured under the Affordable Care Act. However, the binding constraint on having new docs in Washington is the number of residency slots, not the number of newly minted med school graduates. There is a national shortage of residency slots due some bizarre federal decisions in the mid-1990s. We funded well over 100 new slots in both our urban teaching hospitals, and perhaps more importantly, in rural areas that face severe shortages of physicians.

Mental Health. We had two court decisions last year that pointed out obvious deficiencies in our system for handling the mentally ill. One decision is on the “civil” side, the other on the “forensic” side.

On the civil side, people often wind up in hospitals if they are having obvious mental issues. Law enforcement, parents, or others will check someone in. The state is required to evaluate them to see if they meet the requirements for civil commitment. Basically, they have to be an immediate danger to themselves or others. Because we essentially lock these folks up in the hospital until they are evaluated we have some basic responsibilities to do the evaluation in a timely way, and we were failing miserably. The legal standard is that evaluations have to happen in seven days, and if the person is found incompetent we have a similar amount of time to find them a placement in the mental health system. Patients were instead languishing for sometimes weeks or months in emergency rooms or strapped to gurneys in hospital hallways, often with no treatment whatsoever.

On the forensic side we had a similar situation. A person would be arrested for a crime and thrown in jail, but clearly need a mental health evaluation. This sometimes took months. Months in a jail cell with no treatment does not help your state of mind in any case, and particularly if you start out in a compromised place. A federal judge came down with a 7-day standard that we have to meet. If they are found incompetent to stand trial they have to have a space in a mental hospital – an even more scarce resource than the community mental health beds we can use for civil commitments.

The response in both cases is similar – we need to build a bunch of new beds in both community and state mental hospitals to ensure that we have adequate space, hire more evaluators and allow the counties to hire their own if we are not meeting timeliness criteria. All of this is profoundly expensive, and something we cut badly during the recession. There was little disagreement between the two chambers on the eventual resources needed, but they weren’t funded in the original Senate Republican budget.

What’s different between where the House and Senate started?

This is a super-interesting question I get asked a lot. The original House proposal called for a significant revenue increase and the Senate Republican proposal called for a tax reduction, plus the use of hundreds of millions in transfers from other funds and the use of non-sustainable mechanisms. Both budgets largely overlapped on the spending side, with some significant differences in mental health, human services, early learning, and higher education.

Since the House and Senate rolled out their original budget proposals a lot of change has occurred. We got between $500 and $700 million of good economic news – revenue is up and the forecast for the amount of required services has gone down. The final budget includes some of the new revenue the House called for and some of the one-time gimmicks the Senate Republicans wanted.

The main differences in spending in the original proposals were in higher education and human services. The Senate proposed a tuition reduction (coupled with cuts to the UW and WSU to partially pay for it) and significantly lower investments in early learning and mental health. The House proposed an increase in scholarships instead of a tuition reduction – it would have been more targeted to people who could use it most and was supported by most outside groups looking at the issue. The final budget has the tuition reduction the Senate Republicans wanted and the early learning and teacher compensation the House Democrats wanted.

The final product does not fund some key asks of the House Democrats, particularly the amount of money we send to school districts to cover health care expenses. My personal belief is that we are hundreds of millions short here and that the Court will believe that it’s unconstitutional. Fully funding this requirement was unachievable in a budget that could be funded with the amount of revenue the Republicans were willing to raise.

Overall I’d say that the budget winds up being a middle of the road outcome with the new economic news taking out most (but not all) of the new revenue the House wanted and most (but not all) of the gimmicks and cuts to other services the Senate wanted . I intend to keep fighting for a budget that is truly sustainable, where we don’t have to cut toxic cleanups to fund the ecology department, or cut money from local law enforcement to fund public education, something the Senate budget leads us inexorably towards.

About the Author

Ross

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.