BUDGET DEVELOPMENT II Board of Directors’ Meeting

April 14, 2015

Finance and Business Services

Overview

Objectives

• Reinforce how legislative outcomes can create the perfect storm

• Understand the implications of the House and Senate budgets

• Review budget development timeline

Strategic Target

• 4.1.a – Student learning measures are used intentionally and systematically to drive long-term financial, staffing, and facilities planning

Board Goal

• S.3.a – Determine and audit operating budget program priorities in support of strategic priorities

2

PRESENTATION TO SENATE COMMITTEE ON WAYS AND MEANS Compensation and Levy

March 18, 2015

3

Key points – summary

Snohomish County districts face a perfect storm • Puget Sound market drives high salaries

• Snohomish County does not have grandfathered levies

To avoid the storm the state must invest in compensation first

• Reduction in local levy must follow other investments

When investing, the state must separate the two distinct forms of compensation

• Number of funded FTE and allocation per FTE

• Local costs of COLA (I-732)

Everett – levy and compensation

Percentage of Everett levy spent on salaries

• Nearly 85 cents of every levy dollar in Everett pays for salaries and benefits not funded by state

5

2013-14 Levy Expenditures

Everett – levy and compensation

Many districts don’t have levy capacity to pay “local match” for more K-3 and FDK positions

6

24.7%

8.3%

67.0%

Everett’s local levy investment in salaries and benefits by group

OSPI Pivot Table January 2015

Apportionment

Governor's

Budget Increase

Salary For State Allocated Units (3% COLA) 60,544,776 1,692,164

Fringe Benefit Rates 11,529,853 1,643,554

Elementary Family Engagement Coordinators 107,636 101,694

Middle School Guidance Counselor 538,671 103,215

Materials, Supplies, and Operating Costs (Not incl. CTE or Skill Centers) 15,065,410 6,350,902

Everett - Governor’s budget proposal

Governor’s adds $6.35 million of final SHB 2776 MSOC

Final MSOC is quickly offset by 2015-16 cost impacts • $2,200,000 – Historical increase in local labor commitments

• $1,650,000 – Levy authority for PPI drop from 4.91% to 3.0%

• $ 870,000 – Local cost to fund retirement rates

• $ 560,000 – Local cost of 3% COLA

• $ 150,000 – Utilities

Remaining MSOC of $920,000 to offset similar 2016-17 local costs including local match for full-day K

7

Everett – I-1351 + McCleary

Local match for added certificated instructional staff

• According to OSPI, McCleary and I-1351 add 317 more teachers, counselors, psychologists, nurses, and social workers in Everett

• Current levy has little ability to fund local match

• Reductions in ghost funding, PPI, or CAP exacerbates problem

8

Everett - local impact of levy cliff

Everett School District 2018 Levy Authority will drop by $11.7 M

Perfect storm – levy and compensation

Snohomish county school districts face the perfect storm

• Competitive Puget Sound market drives higher salaries

• 89 of the 295 school districts can collect more levy dollars

• Most large Puget Sound districts can collect more levy dollars to offset high local salary costs

• Snohomish County districts are currently capped at 28 percent

• King County districts with less than 29 percent levies face similar challenge

10

Perfect storm – levy and compensation

11

Instructional salaries demonstrate funding gap • All top salary districts are at risk • More state compensation does not lower local commitments • Do not cut levies until state assumes local BEA compensation

$20.6 Million

$43.9 Million

Sa

lar

y V

alu

es

Le

vy

Au

tho

rit

y P

er

ce

nta

ge

Top TRI Districts and Levy Authority Comparison

Levy Authority Average Base PayAverage Grandfather Pay Average Additional Pay (TRI)Average State Base Pay

$0

$10

$20

$30

$40

$50

$60

2014 2015 2016 2017 2018

Mil

lio

ns

Perfect storm – Everett levy projection

State must address local salary commitments prior to reduction in local levy to avoid the perfect storm

12

Current 28 percent levy 2018 24 percent levy Salary commitments

Current law cuts levy from 28 percent to 24 percent in 2018

Compensation first

WASBO/WASA Local Funding Group

• Broad district representation

• Staff from OSPI and ESDs

• Met from May – October 2014

• Initial focus – develop a systematic methodology to lower local levy authority by 2018

Unavoidable conclusion

• The State, school districts, and labor partners must develop a mechanism to transfer local salary obligations for basic education to the state prior to the scheduled 2018 sunset of ghost funding and 28% levy cap

Closing thoughts

Transition requires intentional separation of the two distinct forms of compensation

• Local funding replacement dollar – increases in allocation units and the funding per unit

• COLA (28A.400.205) – subject to the 2002 ruling “all means all”

SHB 2776 excludes compensation – but without addressing local funding of salaries, we cannot fully implement SHB 2776

Local levy structures continue to have great disparity

• Vice Chair Dammeier well framed the challenge at the February 11, 2015, work session on local levies following the presentation by Ms. Noahr through his comments on the levy allocation formula

“The examples you have shown in the four school districts seem to highlight it is not generally uniform in the application to districts. It hits districts in very different ways and with dramatically different impacts.”

Closing thoughts – levy disparity

How do high salaries and low levy cap impact staffing • Similar average salary per CIS member • Similar grandfather levy

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District Ave Levy Salary

per CIS staff

Member

Everett Match of Levy %

on Salary

State Defined

2014 Levy Cap

Everett Match of Grand –

father Levy %

Net Levy funds to

available for

programs

Teachers Above /

(Below) staffing formula

Admins Above /

(Below) staffing formula

Classifieds Above /

(Below) staffing formula

Everett* $21,462 $0 28.00%* $0 $0 0.1 (12.3) 22.9

Mukilteo $20,993 ($480K) 28.00% $0 ($480K) (19.9) (18.9) (17.9)

Seattle $18,838 $5.47M 36.97% $16.57M $22.04M 62.5 (0.1) 100.4

Marysville $17,921 $3.64M 28.oo% $0 $3.64M (3.2) (6.8) 20.0

Bellevue $15,225 $2.28M 34.66% $12.30M $14.58M 85.1 (15.6) 59.3

Northshore** $15,000 $4.13M 28.90% $1.66M $5.79M 21.6 (19.8) 3.3

University Place** $8,224 $10.36M 32.29% $7.93M $18.29M 13.8 1.8 (0.1)

Central Valley** $5,052 $18,11M 28.00% $0 $18.11M 51.6 (1.4) 14.5

Colfax** $3,264 $17.72M 28.00% $0 $17.72M 0.4 0.2 (0.5)

Pateros** $1,892 $15.15M 31.50% $6.47M $21.62M (0.4) 0.1 29.7

*Everett Levy authority is increased by $875,672 due to grandfather CIS salary pass through OSPI 2014 Data **Actual collections below cap – Northshore 28.61%, University Place 28.18%, Central Valley 25.87%, Colfax 24.5%, Pateros 20.79%

HOUSE AND SENATE BUDGET OVERVIEW Governor’s Budget

16

House and Senate budgets

Budget complies with SHB 2776 phase-in plan • SHB 2776 does not fully implement ESHB 2261, McCleary, nor I-1351

17

School Year 2010-

11

2011-

12

2012-

13

2013-

14

2014-

15

2015-

16

2016-

17

2017-

18

1

Full-Day Kindergarten Must be fully funded statewide by

2017-18

Phase-in based on FRPL

219

Schools

More

funding

can begin

More

funding

must

begin

Continues

to ramp up

Continues

to ramp up

Continues

to ramp up

Continues

to ramp up

Fully

Funded

2

K-3 Class Size

Reduction Must be fully funded statewide by

2017-18

Phase-in based on FRPL

$0

More

funding

can begin

More

funding

must

begin

Continues

to ramp up

Continues

to ramp up

Continues

to ramp up

Continues

to ramp up

Fully

Funded

3

Materials, Supplies,

Operation Costs (MSOC)

Must be fully funded by 2015-16

$ per student basis

More

funding

can begin

More

funding

must

begin

Continues

to ramp up

Continues

to ramp up

Funded at

new level

Funded at

new level

Funded at

new level

4

Basic Transportation Must be fully funded by 2014-15

% of formula funded basis

More

funding

can begin

More

funding

must

begin

Continues

to ramp up

Fully

Funded

Fully

Funded

Fully

Funded

Fully

Funded

Source: OSPI, 5/10

All flexible revenues are fully funded

Governor's

Budget (Variance

From Current)

House Budget

(Variance From

Current)

Senate Budget

(Variance From

Current)

Salary For State Allocated Units 1,645,726 1,645,726 987,436

Fringe Benefit Rates For State Allocated Units - DRS, FICA, L&I, etc. 1,598,877 1,598,877 1,583,597

Health Benefits For State Allocated Units - 1,066,390 -

Full Day Kindergarten (Projected Increases In Funding Only) - 1,761,851 1,731,738

K-3 Class Size* - 2,345,099 1,247,564

K-3 High Poverty Class Size* - 134,507 173,906

Elementary Family Engagement Coordinators* 95,599 201,032 -

Middle School Guidance Counselor* 100,922 65,043 -

High School Guidance Counselor* - 77,416 -

Materials, Supplies, and Operating Costs (Not incl. CTE or Skill Centers) 6,186,507 6,188,472 6,188,472

Alternative Learning Experience Programs - Running Start 219,154 236,185 189,164

Dropout Reengagement (Open Doors / 1418) 7,981 8,601 6,889

Special Education 1,510,114 1,969,970 1,474,447

Vocational Education Programs 279,085 348,406 214,630

11,643,964 17,647,575 13,797,841

Learning Assistance Program - Salary and Benefits 176,600 235,390 136,377

Learning Assistance Program - Additional Hours of Instruction 323,606 - -

Transitional Bilingual - Salary and Benefits 134,662 179,490 103,991

Transitional Bilingual - Additional Hours of Instruction - 99,428 -

Highly Capable - Salary and Benefits 8,894 11,855 6,869

Highly Capable - Additional Hours of Instruction and Increase Eligibility - - 158,980

643,762 526,163 406,217 12,287,727 18,173,738 14,204,058

Legend

3% or 1.8% COLA and associated fringe benefit pass through for state funded positions requiring local match

New funding tied to expanded programs with offsetting state and local staffing costs

New MSOC funding to support underfunded basic education expenditures as defined in SHB 2261

New funding focused on high poverty schools

New funding dedicated to categorical programs

House and Senate budgets

State prescribes how most new resources are used

18

Grand Total Categorical Program Total

Basic Education Total

OSPI Pivot Table

House and Senate budgets

19

Key similarities House Senate

Fully fund MSOC Yes Yes

Added funding FDK Yes Yes

Added funding for K-3 class size reduction in schools of poverty Yes Yes

Salary compensation required by McCleary beyond COLA No No

Key differences House Senate

2015-16 COLA 3.0 % 1.8 %

2016-17 COLA 1.8 % 1.2 %

K-3 investment in class size reduction for ALL schools 2.35 M 1.25 M

Health benefits for certificated state allocated units 1.07 M 0.0 M

2015-16 levy inflator 4.9 % 8.4 %

2016-17 levy inflator 4.9 % 1.4 %

New MSOC funding to be excluded from levy base No Yes

BUDGET DEVELOPMENT PROGRESS Work of the Fiscal Advisory Council

20

Budget development progress

21

Integrated processes drive budget priorities

Budget development progress

22

THANK YOU