Rep. Ross Hunter

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McCleary Phase II

August 24, 2015 at 8:06 am - Rep. Ross Hunter  

The Legislature has made significant progress toward fully funding basic education. In the last three years, we’ve reduced K-3 class sizes, funded all-day kindergarten, and provided kids adequate materials and supplies for their classrooms. But there’s one critical and final component we must deal with – teacher compensation and local levies. The chart below should start to explain the problem.

Average Salaries for TeachersThis chart shows how teacher salaries have been constructed since 1996. The gray portion at the top is the part provided by local levies, not by the state.

Teacher salaries aren’t the only cost. School districts also pay classified staff and administrators, and the split between state and local funding is even greater for these categories than it is for teachers.

There are lots of reasons for this. Some make sense given how the system works and some are the result of the legislature skipping cost of living (COLA) increases during the recent recession. When the Legislature doesn’t fund COLAs, but the local district wants to fund them (in order to actually be able to hire competent teachers) they use money raised in local levies to do so. If it was just extra, above and beyond what is needed to actually be able to hire, this would be expensive, but not a constitutional problem. However, every study that we’ve done shows that they’re paying just about what the market needs them to pay to be able to hire and retain competent employees. The court ruled this unconstitutional because it’s the State’s responsibility to adequately fund basic education, and we’re shirking that duty by foisting part of the cost on local districts.

How Big Is the Problem?

Compensation by School DistrictTo figure out the gray area in the above chart you have to figure out which teachers are doing “basic education” and which are providing “extras.” For example, the basic ed model (adopted in HB 2261 and HB 2276 in 2009 and 2010) assumes a six period day. The Bellevue School District has seven, providing more options to students. This requires more teachers. Then you need to know how much of their time is spent on basic education. Many teachers do extra stuff, like coaching or advising a club.

Most estimates of the problem assume that 90% of actual average statewide district compensation payments to employees that are part of the basic education staffing model go towards the State’s definition of “basic education.” The remainder is a local enhancement. This produces about a $3.5 billion total biennial cost that should be borne by the State. The details of this are mind-numbing, but the conclusion is pretty broadly accepted.

How Do We Figure Out How Much To Send To Each District?

The simple solution would be to figure out the average teacher salary, figure out how many teachers a given school needs based on its population and send the district that much money. Of course it’s more fun than that to figure out.

First, costs are higher in some districts than others. You can see this in the chart to the right. It shows a vertical bar for the salary of an average teacher in each district in 2012-13. The dark color is that state portion and the lighter color is the part from the local levy. The districts are arranged so that the total average salary goes up from left to right.

There is a huge difference between the districts on the left and the ones on the right. Mostly the higher paid districts are in urban areas and the lower paid ones are in rural areas.  Most proposals we’ve seen so far have some kind of localization factor applied to the base amount we give to each district to account for this difference. Figuring out a localization system isn’t rocket science, but it’s politically very challenging as some districts will get paid more than others. This is reality in the market, and a rational system has to account for it.

Goals for this system

  1. The localization factor should reflect labor market differences including cost of living and the relative attractiveness of the districts to potential workers.
  2. There should be minimal differences between adjacent districts, so you have to have lots of districts. If you do it by county you get big differences between adjacent districts that won’t work in practice.
  3. The data source for the localization should be broadly available and not arbitrary/political. This has to be perceived as fair by everybody concerned and not subject to

Today we have a very complicated system where we figure out exactly which teachers every district has hired and send them an amount of money that’s adjusted based on the actual experience and education levels of teachers. This turns out to not make much difference except for a handful of very small districts. The averages tend to balance out. Should we keep using this complex system, or should we just send the money to the district and let them work out how to allocate it? This seems fairer as well, as there is no reason one district should be able to hire much more experienced teachers than another district can.

Figuring out how much money goes to districts for classified employees (bus drivers, IT specialists, payroll clerks, etc.) and administrators (principals, superintendents, etc.) presents much the same problems and has to be added to the problem.

Local Levies?

If the state is paying the full cost of hiring employees, why do we still have levies? The example I gave above of Bellevue wanting to have seven periods is a real one. Districts want to do things that make sense for their students and their taxpayers. There is broad disagreement about what the levy system will look like after the transformation, but we all share at least one problem – what are the rules for the use of local levies by districts?

The goal is to prevent the use of local dollars to pay for compensation for basic education employees, which we define as employees in the staffing model. Districts should be able to hire additional employees, but there should be some mechanism to ensure that local funds are not used for basic ed. This will be complicated and will affect how districts and unions bargain compensation. There are wildly different proposals in this area.

How much time do we have to figure this out?

What is the timing of the implementation? In their August 2015 McCleary order the Supreme Court was very clear that the payroll problem (as they describe it) needs to be solved by the 2017-18 school year.

The deadline for legislative action is dependent on the tax solution used, as some tax sources have practical constraints about lead time. For example, property tax changes happen on January 1 of a calendar year, and there is significant lead time needed before this for taxing districts to set rates. Local bargaining typically takes place in the spring, so significant changes to either bargaining rules or salary structure would be difficult to manage in a short timeframe.

This requires all tax changes to be made prior to 1/1/17. Most of the things we’re talking about need three to six months of lead time before then, so the practical constraint is July 1, 2016. This does not lead itself to a phased-in solution. Doing a phase-in is computationally very, very difficult to figure out in advance.

So how does all of this get paid for?

Depending on the decision about total cost, about $3.5 billion per biennium needs to be raised to fund the new system. This has to get paid for, though there are ways to do it so that the impact on state taxpayers is significantly lessened. In most cases the payroll need is currently being met by local taxpayers. About 5 years ago I proposed a solution that “swapped” local levy revenue for state revenue that produced a solution that was close to revenue-neutral statewide. Time has crept by and there is no longer enough property tax available to make this solution work, but it can be a key element of whatever we choose to do. The end solution will have about $3.5 billion raised at the state level and significant reductions, but not quite $3.5 billion, in local levies. This produces something that is close to revenue neutral statewide, but with increases in urban areas and decreases in rural areas.

The key question is “what revenue sources should be used, and in what mix?” The state property tax is called the “Common School Levy” for a reason – it’s constitutionally dedicated to funding public schools. While staying below the constitutional limit of $10 per $1000 of home value and without significant disruption to local governments who also use the property tax the Legislature could increase the state rate from about $2.00 to about $3.11. This produces about $2.7 billion. You still need around a billion dollars and have to use some other source.

We’d like the McCleary solution to be durable over time, so the I-747 (1%) growth limit would need to be repealed to make this a sustainable source. Otherwise you recreate the problem in a few years when the revenue grows more slowly than the cost of providing public education.

Large increases in the state property tax cause large increases in per household property tax bills in urban areas reducing the interest of urban legislators to have the whole solution be property tax. There are other options that could be used in a variety of mixes.

  1. Capital Gains
  2. Carbon fee or tax
  3. Closing existing tax preferences
  4. Other new tax

The big question here will be how much property tax swap is done, how much other tax sources are used in the mix, and how close to revenue-neutral the complete solution is statewide. This will be very politically contentious, and will probably take quite some time to work out.

Related Problems

These do not need to be solved to comply with the constitutional problem posed by McCleary. They are related however, and in some cases a practical system cannot be created without solving them.

What is the structure of the levy system after implementation?

What determines how much a district can raise? Many options have been proposed here, including per-student amounts, limits based on property values, etc. There is broad agreement that districts will be able to continue to raise levies, and that we will fix the current system which has a lot of arbitrary and capricious rates left over from the last time a solution like this was attempted 30-40 years ago.

If we have a levy system, the state needs to provide some help to districts that don’t have lots of commercial property to tax. We call this help levy equalization. Currently over 220 of the 295 districts receive equalization, which seems too high. This system has grown at about twice the rate of the amount of levies collected by the richer districts, which also seems not sustainable and looking for a solution.

How are the costs of benefits calculated?

The state is required to adequately provide for both salary and benefits. There seems to be reasonable agreement to tie the total to the PEBB rate (the rate the state pays for benefits for other state employees,) at least for healthcare. A question related to this is “do we create a state-run healthcare system for school employees?” If so, what are the bargaining rules around it? There is some thought that this would be cheaper and provide better healthcare, but again, there are large disagreements about this.

Auditing?

What changes to reporting are required to ensure compliance with basic education compensation rules? Do we do audits?

Should we make other changes while we have the patient opened up?

  • Career and Technical Education (CTE) changes to MSOC? Possible to convert to an excess cost model like special ed. This would be simpler.
  • Small school factor. The new resources are changing the impact of the small school factor. Does it need to be changed?
  • Do we retain a state-mandated salary grid? If YES, what changes do we make to it? Are they just for new teachers, or do they apply to existing teachers as well? Is there a standard grid for classified employees? We do not currently have one. If NO, do we impose rules around local compensation bargaining beyond those required to ensure compliance with the “no local money for basic ed” rule?

Conclusion

This set of problems can be resolved. There are lots of parts that Republicans and Democrats disagree on. There are lots of parts that urban and rural legislators disagree about. There are just a lot of parts.

The changes will be wrenching, but in the end we’ll have a system that is fairer to all districts, pays teachers and staff adequately, allows local levies to be used for enhancements, not for making up compensation costs that the state doesn’t fund adequately, and the tax system will be more fair. This seems like a good outcome.

All sides will need to compromise to get a solution that makes sense and will last for the next 20-30 years.

Constitutional Crisis? Not so much.

August 21, 2015 at 12:57 pm - Rep. Ross Hunter  

19 members of the Republican caucus in the Washington State Senate released an open letter today complaining about a “constitutional crisis” between the Legislature and the Supreme Court over the McCleary decision and the court’s recent order. While the order is politically and practically inconvenient, I don’t see any better way to get the state to comply with our paramount duty – to amply provide for the education of all children residing within our borders.

In dealing with the McCleary case the Supreme Court has taken measured steps to get the Legislature to comply with the paramount duty clause of the constitution. In every circumstance they have chosen the least intrusive measure they could have. Many members of the Republican caucus in the Senate seem to be upset about this and want to eliminate the court’s ability to enforce the constitution.

If Republicans want to change the system to avoid this kind of conflict they can either remove the ability to have the court enforce the basic tenets of the constitution, or they can remove the paramount duty clause. I don’t support either, and neither will the voters.

Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time. Sir Winston Churchill, Hansard, November 11, 1947

The constitution says that the state must make “ample provision” for the education of all students. The Supreme Court is the part of government that gets to interpret what the words in the constitution mean. This is true nationally, and also true in the states. They’ve specified a meaning to the word “ample” that is not crazy – in fact, it’s exactly what the Legislature said it means in HB 2261 and HB 2776. Since the Doran decisions in the early 80s we’ve believed that once spending was determined to be part of “basic education” we couldn’t reduce it for budgetary reasons. In McCleary the court is essentially enforcing that decision.

For 30 years we have allowed a larger and larger fraction of educator salaries to be paid by local levies. That works great in my district, but not so well in Yakima. This is contributing to the extreme regressive nature of Washington’s tax system. The constitution is also pretty clear that it’s the state’s responsibility to pay these salaries. I don’t see a way to interpret the constitution to allow requiring local taxpayers to bear a substantial fraction of the cost of “basic education,” something that is clearly the state’s responsibility. The court isn’t telling the Legislature HOW to solve the problem – they’re just saying that we have to solve it. In fact, they went out of their way to say that the Legislature isn’t required to change property taxes or the levy system in order to comply.

I see this order having three concrete changes to previous orders:

  1. The court set a hard deadline for resolving the personnel cost issue – the 2017-18 school year.
  2. They raised the question about funding classroom construction. We have not spent a lot of time thinking about this and are clearly going to have to take a run at understanding the need and changes in the formula. In the short run we have to ensure that there are enough classrooms for the class sizes we are funding in the budget.
  3. They imposed a nominal fine until we comply. In the scope of the K12 budget this is a very small number. I’ve commented in the press that I think it’s the opening ante from the court to show they are serious. Note that they didn’t change any distribution formulas or anything like that – they just sequestered some money inside the Treasury.

They also seem to have a misunderstanding of the class size changes we made. We can work this out with them.

In previous cases the court has declined to make changes to Legislative discretion, even when what we were doing was goofy. In the Federal Way case they declined to eliminate grandfathering of educator salary levels, even when the state made no argument that what we were doing had any rational basis. It’s actually completely arbitrary and capricious.

There are three branches of government in Washington, and we often have conflicts. We put lots and lots of strings onto spending rules so that the executive branch doesn’t do stuff we don’t want. We assume that the executive branch will comply, even though they don’t like it.  In this case the Legislature is not complying with reasonable interpretations of the constitution, and the Supreme Court is taking steps to ensure that we do. At each point the court has taken small steps, and usually the smallest step possible.

Conflict between courts and legislatures over school funding is not unique to Washington. It has played out in similar ways across the country over the past two decades, and I expect it to continue to do so.  Other states do not have the strong language our constitution does about school funding, so our court looks even more measured. In many states the courts have shut down parts of government by holding budgets unconstitutional with less egregious violations than we are committing.

Statement from Rep. Ross Hunter in response to today’s order from the Washington State Supreme Court

August 13, 2015 at 5:28 pm - Rep. Ross Hunter  

8/13/15

The following is a statement from House Appropriations Committee Chair Ross Hunter (D-Medina) in response to today’s order from the Washington State Supreme Court:

“The Supreme Court released a new order in the McCleary case this morning, holding the state in contempt and fining it $100,000 per day (to pay for basic education) until it resolves the remaining issues, including both the unconstitutional dependence on local levies to pay for basic education personnel costs and the cost of construction of new classroom space. They also expressed concern about the pace of the phase-in of class size reductions.

“It’s important to know that the phase-in plan in the budget we passed this year completely pays for the class size reductions called for in the McCleary order. The court recognized the work done by the Legislature in funding class size reductions, but seems to be concerned about the phase-in of lower class sizes.  There is some confusion in how the cost of this investment is described in various documents, and we will work with the court to clarify this. The attached chart shows the level of funded class size and those recommended by the task force the court refers to.

“House Democrats proposed a joint process to resolve the personnel cost issue with the Senate and Governor’s office and passed legislation (HB 2239) putting the process in place on June 26th. The Republicans in the Senate refused to take up the bill or offer any alternative.

“I share the court’s concern about finalizing the plan sooner rather than later. Governor Inslee has called a meeting of all four caucus leaders for Monday to create a public process to resolve these issues expeditiously.”

Hunter Class Size Chart

Source: House Office of Program Research

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Meeting on K-12 Compensation and Levy Reform

May 20, 2015 at 4:27 pm - Rep. Ross Hunter  

As I mentioned in my last blog post and newsletter, I think it’s necessary to discuss the details about levy reform in detail and in public.

Tomorrow, we are hosting a work session on K-12 levy and compensation reform. This session will be a chance for staff to present data on levy issues and for Legislators to discuss, in full public view, this information. While there will be no formal public testimony accepted during the session, we will welcome follow-up feedback from attendees.

Based on the work session and subsequent public feedback, I hope that we will be able to come to joint conclusions that reflect a larger consensus. Bipartisan support of a solution to this issue will be crucial for moving anything forward, and this won’t be achieved without the input and understanding of the public as well.

Thursday, May 21
10:30 a.m.
House Hearing Room C
Washington State Capitol, Olympia

To learn more about these issues, check out my blog here and here for some lengthy discussions on the topic.

To watch the work session live from your computer, visit TVW’s website.

School Levy and Compensation Reform

May 11, 2015 at 8:24 am - Rep. Ross Hunter  

teacher compensation differences between districts

Click the chart to get a cool interactive version on the Seattle Times website.

Two recent articles in the Seattle Times point out one of the remaining key elements of resolving the McCleary “problem”, and it’s a BIG element. Most estimates have the size of the problem at about $3,000,000,000 to $3,500,000,000 ($3 – $3.5 billion) a biennium.

  • Wildly varying teacher salaries part of state budget debate This article describes the overall problem and was the cover story in the Sunday paper. It’s a good summary. The chart to the left is from this story.
  • State in ‘weird place’ trying to alter reliance on school levies. This article talks about the politics involved, but doesn’t bring up all the weirdness with school funding formulas, in particular “levy equalization” paid to well over 200 districts (of 295) because their property values are lower than the core central Puget Sound districts. It also doesn’t address the “small school factor” that results in some very small school districts getting $50,000 per student.

I wrote a long piece on this issue last month. We have to make significant progress on the problem to comply with the supreme court. There are two endpoints of the discussion at this point:

  1. Bruce Dammeier (R-Puyallup) introduced a bill (SB 6109) that does many, many things. Too many things. I have many complaints about it, but it is a serious piece of work.
    1. Defines a new compensation model for teachers and shifts all teachers to it. The model makes changes in teacher compensation that will have winners and losers. It’s hard to pass a bill that results in some teachers losing salary.
    2. Creates a regional compensation adjustment based on metropolitan statistical areas. These are very large and poorly shaped to respond to our economy. It’s not a crazy choice, but it’s one where I prefer we do something different. There is much disagreement on the need for this, with rural districts concerned that they will have a harder time hiring teachers. As you can see from the chart above, the pay is already significantly different.
    3. Limits the amount of money districts can spend on anything related to earning graduation credits to the money from the state. This would prevent districts like Bellevue from offering a 7-period day, or districts from using levy money to fund summer school. I’d have a hard time supporting this provision.
    4. Shifts all school employees to a state-run healthcare system and removes it as a subject of bargaining. I think we could save some money and provide better healthcare for school employees overall with this approach, but there are many, many issues to be worked out so that there are not big losers in how its implemented.
    5. Repeals I-732 (teacher COLAs) and replaces it with a different (lesser) inflation factor.
    6. Makes significant changes to how school levy limits are calculated that would have the impact of allowing Bellevue and Seattle to raise gobs of money above what they’re doing now, but not spend it on anything academic. I have huge problems with how he does this specific change.
  2. Pat Sullivan, Kristine Lytton, Reuven Sullivan and I introduced HB 2239 that is the complete opposite end of the spectrum. It sets up a series of deadlines for the legislature to work out all these issues. The deadlines result in changes (perhaps identical to the ones Bruce envisions, but I doubt it) by the 2018-19 school year.

Both bills wind up with the state paying ALL of a teacher’s salary, instead of local taxpayers picking up the tab for large chunks of it. There is a lot of concern in the Legislature that some districts wind up paying more of the cost of this than others, which is true. The proposals to pay for it include:

  • Revenue-neutral (mostly) levy swap, raising the state property tax and lowering local property taxes by similar amounts. This tends to raise taxes in urban (wealthier) areas and lower them in rural (poorer) areas.
  • Capital gains (Senate Democratic proposal) has an even more exaggerated shift with increases in urban areas and decreases in rural areas. This could be mostly revenue-neutral as well.
  • Carbon Tax (an option in HB 2239) would have some kind of shift, but it’s hard to be specific about it without a lot more research. Also could be revenue-neutral.

If we used sales tax to pay for it, King County would pay half the cost, but get only one third the value – he have half the state’s economy and only a third of the population. This isn’t crazy – in a state with the most regressive tax system in the nation any tax move we do should be in the direction of greater fairness.

My guess is that in order to solve this problem we have to solve all of the other problems at the same time. Absent new revenue to pay for the additions to K-12 (all-day kindergarten, lower class sizes in K-3, etc.) it will be hard to convince legislators and voters in King County that they should pay for tax cuts in more rural parts of the state.

In my last post I said I didn’t know what the next step was. I’ve come to a conclusion and will be running a series of meetings to explore all these questions in detail, in public. Private meetings to work out proposals are very difficult, as you never have the full spectrum of interests in the room. If you do come to an agreement (which has not happened in the last three years we’ve been working on the problem) you still have to convince everyone else that your solution is rational. This will not be a quick process, but while we are in Olympia for special session we have time and can perhaps shorten the 2-year schedule envisioned in HB 2239.

The final bill we adopt this session, and we will need to adopt one, will be somewhere between the two.

 

 

 

 

 

School District Compensation and Levy Reform

May 6, 2015 at 8:08 am - Rep. Ross Hunter  

Last week the Appropriations committee held a hearing on the second half of the McCleary decision; the requirement that the state fund adequate compensation, not local taxpayers. The hearing took over 3 hours and is super-interesting. You can watch it on TVW here.

This sounds terrifyingly dull, but it wasn’t. Anytime you talk about property taxes and use numbers like three and a half billion dollars you get people’s attention. We had a briefing on three Senate bills and a proposal by yours truly that isn’t drafted as a bill. The bills wind up being 70 pages long and we are not close enough to having agreement to spend the effort drafting legislation – I’d rather agree on policy first and then draft a bill. The drafting is a lot of work for staff that are all working on budget right now. I’m not a fan of random work.

  • Bruce Dammeier introduced a bill (SB 6109) that does many, many things. It’s AN implementation of a levy swap, but has a lot of restrictions in it that make it unattractive to urban districts. Bruce implements a regional compensation model.
  • Christine Rolfes has a bill (SB 6104) that does many of the same things, but also funds initiative 1351. It’s profoundly expensive and depends on the capital gains tax to pay for part of it. Christine does not do regional comp.
  • Jim Hargrove (SB 6103) uses property tax to shift some payments for compensation to the state, making major changes to property tax.
  • My proposal is very focused on dealing with the compensation problem, without making a lot of changes to how teachers are paid, restrictions on use of levies, etc.

Information on all of them is available here.

The House bill we had a hearing on (HB 2239) makes no actual changes in law, other than a judicially enforceable schedule of making the decisions that need to be made. The schedule would lead to the new financing system being in place for the 2018-19 school year, just in time to comply with McCleary. The decisions could be made more quickly, but it would be difficult to get the buy-in if we do.

I’m not sure what our next step should be at this point. We need to have some public hearings to determine the financial parameters of the actual problem. I will attempt to schedule some meetings. We may choose to use a smaller room and have them be option for all the members of Appropriations to attend, or some other way to have a more interactive hearing. More to come.

Budget Update and Thoughts on Teacher Compensation and Levy Reform

April 21, 2015 at 4:12 pm - Rep. Ross Hunter  

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.

House and Senate Budget Differences on K12

April 20, 2015 at 11:27 am - Rep. Ross Hunter  

I’ll be posting a handful of high-level summaries of budget differences with the Senate over the next few days. As usual, K12 is my first post in this sequence.

House Democrats are investing $3.2 billion more in K-12 education with this budget over the amount we spent in the last biennium, a 21% increase. People have asked me what the difference is between the House and Senate budgets for K-12 spending. This chart has the highlights.

K12 Funding Differences

There are lots of other places I have concerns, like the Senate requirement that districts reduce their levies if they accept the constitutionally required operating cost money, even though the Senate budget doesn’t address the costs those local levies pay for.

For more thoughts on education funding, click here.

House and Senate Budget Differences on K12

April 17, 2015 at 4:04 pm - Rep. Ross Hunter  

I’ll be posting a handful of high-level summaries of budget differences with the Senate over the next few days. As usual, K12 is my first post in this sequence.

House Democrats are investing $3.2 billion more in K-12 education with this budget over the amount we spent in the last biennium, a 21% increase. People have asked me what the difference is between the House and Senate budgets for K-12 spending. This chart has the highlights.

K-12 Differences between House and Senate

There are lots of other places I have concerns, like the Senate requirement that districts reduce their levies if they accept the constitutionally required operating cost money, even though the Senate budget doesn’t address the costs those local levies pay for.

For more thoughts on education funding, click here.

Budget Negotiations to Start Monday

April 13, 2015 at 8:54 am - Rep. Ross Hunter  

_MG_0217We’re now entering the budget negotiation phase of the session. The Senate and House are in pretty significantly different places. The top level difference is only about a billion dollars, but the underlying differences are much greater than that. We need to come to agreement by Wednesday the 22nd to be able to get the mechanical part of the process completed if we’re to finish on the 26th, the 105th and final day of the regular session.

On Thursday the budget negotiation teams met with the Governor. This meeting happens every year and it’s an opportunity for the Governor to lay out what he expects in a budget. He has a lot of leverage over the process as he can veto individual parts of the budget he doesn’t like or, if he really doesn’t like the product can veto the entire thing, sending us back to work. This doesn’t happen very often, but is definitely part of the process. There are ALWAYS vetoes of individual line items in the budget.

The Senate Republicans were somewhat disgruntled by Governor Inslee’s comments, though I thought they were pretty reasonable. He laid out a pretty simple list of things he wants:

  • Fund at least $1.3 billion in K12 McCleary funding. Both budgets comply with HB 2776, though I am concerned about aspects of how the Senate delays implementation of class size increases, pushing a lot of increases off to the next biennium.
  • Fully fund the collective bargaining agreements. The House does this, the Senate does not. We are a few hundred million apart.
  • Fully fund Initiative 732 increases for school employees, including the extra that gets them to the same level of increase that state employees get. The House does this, the Senate does not.

He also laid out a set of things he doesn’t want to see. These also seem reasonable to me:

  • “Lean” cuts, or other unspecified cuts. These are often described as “across-the-board” or “efficiency” assumptions. Mostly they are BS – assumptions that magic will occur and money will be saved without any impact on services. When the magic assumption doesn’t come true there isn’t enough money to do the work the agency is supposed to do, and it looks like the Governor is badly managing the system or making cuts, not like the budget was inadequate.
  • No dependence on bond funding for the operating budget. This is buying groceries on your home mortgage.
  • No tax cuts until all these requirements are met.

Seattle Times: GOP bristles at Inslee stand on taxes, state pay

Here’s the talking points the Governor used in the meeting.

My comments in the Times article:

“He was calm. He was reasonable. He made a limited set of points,” said Rep. Ross Hunter, D-Medina, who chairs the House Appropriations Committee. “He’s got to actually administer the system after we leave town. He wants a budget that won’t cause crazy disasters to happen on his watch.”

We sit down to see how we can create a framework on Monday. We would have met last week, but Sen. Hill had food poisoning and missed Thursday and Friday.  This sounds awful at this time of the year. (Anytime actually, but the negotiations are pretty intense and time consuming.)

The first thing the Legislature did this year was pass HB 1105, an early supplemental budget that fixed some of the legal problems we have on mental health, and some of the staffing problems directly caused by “lean” cuts in the Children’s Administration.

My conclusion: the Senate Republicans are upset that if these requirements are met it’s hard to imagine how one would write a budget that doesn’t require new revenue. This has been where I’ve been for a long time. Other people have more recently come to the same conclusion, including the Seattle Times editorial board.

If some new revenue is needed — and that appears to be the case — the Legislature should vet a capital-gains tax proposal offered by the House Democrats. It is more conservative than Gov. Jay Inslee’s proposal, hitting relatively few wealthy households, while accounting for the volatility of capital gains with a dedicated fund that would fill in go-go years and could be drawn down in slowdowns.
Seattle Times Editorial: How to get closer to solving state’s budget mess

We’ll see where all this goes – we have much work to do to come to agreement. My closing comment in the Times article on the budget was that I hoped we would finish early as I’m not fond of living in Olympia.

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About Ross
I’m proud to represent Bellevue, Redmond, Kirkland, Medina, Clyde Hill, Hunts Point, and Yarrow Point in the Washington State House of Representatives.
I am chairman of the Appropriations Committee, responsible for crafting biennial budgets, and am past chair the Washington State Economic and Revenue Forecast Council.