office of superintendent of public instruction public schools: depth, breadth, and causes of a...

Office of Superintendent of Public Instruction

Public Schools: Depth, Breadth, and Causes of a Looming Finance Crisis

1. What are the causes and amounts of school district finance shortfalls?

2. In recent years, how have districts faired financially?3. What do the next two years hold for district financial

health?4. What are the next steps?


State, Local, and Federal Funds Total $9.3 Billion

2


Constitutional Compact

•State’s Paramount Duty is to provide a general, uniform, and amply funded public school system

•30 years ago, state defined basic education as a series of staffing commitments to schools and non-salary allocations

•Later added programs for struggling students•Simple series of formulas

▫If students show up, so does the state funding•Districts can raise local levy funds to enhance

the state’s definition of basic education

3


Of $6.5 Billion in State funds, $4.6 Billion is Driven Through a Single Simple Formula

Learning Assistance

(E)

(B) Staff Ratios

(A) Salaries & Benefits

(C) Operating Costs (NERC)

=

State GeneralApportionment

Busing (G)

SpecialEducation

(D)Bilingual

(F)

District Enrollment

4

I-728

Gifted


A. Salaries, health benefitsB. Staffing ratiosC. Non-salary costsD. Special educationE. LAP/BilingualF. Transportation

5


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

6


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

7


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

8

8,448*

$68,200

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


Supplemental Salary Increases

6.3% average increases driven by multiple factors:

•National Board Certification increasing•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

9


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

10

2007-08 Building Blocks ofK-12 Staff Average Salaries


Local Funds Pay COLA on 4 Levels

1. COLA on average salary paid for “local staff units” ($44 million)

2. COLA on all supplemental salaries, all staff ($20 million)

3. COLA on unequalized portion of Classified and Administrative salaries, all staff ($10 million)

4. COLA on difference between the state maximum allocation and the salary districts actually pay, all staff ($5 million)

$58,340

$36,593

Local Funds COLA Effect (4.1% in 2009-10)

$79 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

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A: Salaries and Benefits• Salaries increase at 4-7% per year• COLA at 2-4% per year; supplemental salaries

at 6% per year• Health benefits increase 14% per year• Pensions, significant recent growth• More progress to be made to equalize salary

allocations, $400 million/year plus• COLAs compound differential funding levels• Levy/I-728/Federal revenue will grow 4.7%Result in compensation growth faster than

levy revenue; districts must reduce staff in response

12


Structural Disconnect Continues in 2009-10 School Year

Cost of 2009-10 I-732 COLA on Local Funds (COLA projected at 4.1%)

$81 per student

Other Compensation (Health/Pensions) $36 per student

1% COLA above I-732 COLA for all Teachers in a District

$28 - $35 per student

Typical Local Funds Growth (2007 to 2008) $75-200 per student

13


Certificated Instructional Staff Ratios (B)

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

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

Students per 1 FTE Staff 6 periods + 1 hr planning

CertificatedInstruction Staff

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

=

1:24.71:29.01:29.0

1:1,250

1:2,659

1:786

1:462

15

CurrentTeachersGrades K-5

Grades 6-8Grades 9-12

Instructional Coaches

Librarians

Nurses

Guidance Counselors & Pupil Support


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

(B)

16

$9,476per CIS

(2006-07 SY)

$468per student

=

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

=

17


In 16 Years, State Funding for All Non-Salary Operating Costs (NERC) Increased by $30 M After Covering Utilities &

Insurance Increases

18


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

Insurance (C)

19


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

18-yr Cycle

8-yr Cycle

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Special Education (D)

• Districts spend $167 million more on special education services than they receive in state funding▫ Not all of the gap is defined as a state responsibility

• The funding gap is driven by the shortfalls in funding for staffing ratios, salaries and NERC▫SE is funded at 93% of General Apportionment

per Student▫When salaries are underfunded, SE receives

93% of an inadequate amount to hire staff• For every $100 million in new General

Apportionment resources, $10 is generated for SE and closes the funding gap

21

Office of Superintendent of Public Instruction 22

LAP Funds Have Increased Substantially (E)


Buying Power for Struggling Students Remains Constant (E)


Buying Power of State Transitional Bilingual Program is Constant (E)

24


District Costs Exceed State Revenue (F)

25

Statewide (Expenditures minus Revenues) in Millions


A. Prior 8 years, factors that mitigated the state funding shortfalls

B. Recent experience and impact on district reserves


In Last 8 years, Several Factors Mitigated State Funding Shortfalls

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

27

Appendix slides quantify these statements.


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

Pension Contributions; $364 Million for Local Funds

28


Ending Fund Balance Dropping

29


Largest Change for Smallest School Districts


Some Large Districts have Less than 2% EFB

31


Summary for 2008-09 School Year

•Statewide average Ending Fund Balances drop

•Roughly 600 staff positions eliminated statewide (equivalent to 1 school district serving 4,000 students)

•7 districts on Binding Conditions (1 may exit)•Evaluating the need for Binding Conditions

for an additional 6 districts•$2 Billion operating value for districts with

2% or less EFB▫20% of students in districts w/ very little

cushion32


Outlook for the 2009-10 School Year

• Ending Fund Balances are low, so little cushion going into the 2009-10 year

• Local funds’ compensation costs will increase about $115 million; districts will have about $130 million increase in local funds▫Assumes very low increases for supplemental

salaries• $15 million increase must cover all OTHER cost

increases on a $2.7 billion base▫Utilities/insurance projected at $17 million

• 4,000 teachers paid on I-728; $46 million in reserves (specific to I-728)▫$46 million will pay for 680 teachers for 1 year

34


Outlook for the 2010-11 School Year

•Ending Fund Balances will be lower•About $130 million in additional revenue•About $20 million in additional

compensation costs▫I-732 COLA drives zero increase because

economists are projecting deflation of -.5%▫Clearly much better financial outlook but at

cost to employees

35


Are There Cost Neutral Ways to Assist Districts?

• Must be a conversation about how to make progress to meet Constitutional funding requirements

• Without new funding, face unprecedented decisions:▫COLA results in lay-offs unless also fund district

foundation resources▫No new mandates or requirements▫Evaluate waivers to 180-day requirement▫Evaluate suspension of I-728 spending categories▫Evaluate K-12 ratio requirements▫Legislation to make route to consolidation more clear▫Do not negatively impact levy base

37


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?

39


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

40


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

41


Last Thoughts

•State is completing an analysis of what is an adequate funding level for public schools▫Basic Education Finance Task Force (Legislative entity)▫Recommendations due 12/1 (slightly late)▫Anticipate recommendations for comprehensive

overhaul•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

programs42


Budget Context• $5.8 Billion projected

deficit for biennium (November)▫ Through 6/30/2011▫ Eliminate all of Higher

Education, still $2 B to cut

• COLA is 4.1% in 2009-10; 0% in 2010-11▫ $360 M cost included in

deficit projection▫ Drives an additional $158

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)

43


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/

44


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

46

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

XXXXXXXXXXXXXXXX


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

47


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

48


Districts are Already Maximizing Levy Authority

49

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