Guest Opinion: The McCleary Basic Education “Fix”

–by Carol Sutton and Tom Baldwin —

Sometimes, the noblest of intentions can have devastating consequences. The case in point is HB 2242, the supposed fix to the McCleary Decision that was intended to (1) fully fund public K12 education in Washington, and (2) reduce dependence on local property taxes for public school funding. While HB 2242 may have achieved its goals for many school districts across the State, for Orcas Island School District (OISD), the new legislation promises debilitating cuts rather than the promised increases.

To help navigate the anticipated budget shortfall, OISD has formed a Budget Advisory Committee (BAC) comprised of 2-3 members from each of several groups. Diane Boerstler and Greg White represent the School Board; Eric Webb (Superintendent), Keith Whitaker (Chief Financial Officer) and Sara Morgan (Human Resources) the administration; Elyn Andersson (certificated employees) and Brian Wright (classified employees) represent the employees’ unions; and Carol Sutton and Tom Baldwin, the public.

The charge to the BAC was “…to improve transparency in the budgeting process and the annual budget”. We have met 3 times for a total of 6 hours. While much uncertainty remains, it is time to begin dialogue with our friends and neighbors on Orcas Island about the difficulties that will arise if the State does not take corrective action.

Funding of public education in Washington is complicated, and is based on a “prototypical model” which endeavors to place all schools and communities on a level playing field. Unfortunately, OISD is vastly different from most, so the prototypical model does not work for us. This will become apparent below.

We will focus only on the General Fund which covers all operating costs. General Fund dollars can be used to support other funds, but dollars in other accounts, such as the Capital Fund which receives funding from the sale of bonds, can be used only for the purpose of that account (construction in the case of the Capital Fund). Revenue for the General Fund comes from State apportionment funds, the Maintenance & Operations (M&O) levy (property taxes) federal and other grants, and donations. The annual General Fund budget is approximately $10 million.

Under current law, the levy that contributes to the General Fund provides $2.1 million and is calculated based on a millage rate of approximately $0.98 per $1,000 assessed value. HB 2242 reduces the levy cap in 2019 to $1,057,500, requiring a millage rate of approximately $0.48, depending on changes in assessed value.

The result for the General Fund budget is somewhat complicated because the school year budget consists of two calendar year budgets. That is, the 2018-19 school year is composed partially of calendar year 2018 funding and of calendar year 2019 funding. For the 2018-19 school year, the General Fund Budget will be reduced by approximately $600,000, while for the 2019-20 school year, the General Fund budget will see a reduction of over $1 million. This is because HB 2242 was designed to reduce dependence on local property tax levies to pay the cost of K12 education.

How are these dollars resulting from the reduction in the levy to be replaced? In part, this is accomplished by changes in teacher salary allocations. Currently, the state allocates $36,521 per teacher. Then, based on what is called the staff mix factor (based on educational and experience levels of the teachers), that number is multiplied by 1.58 for Orcas Island, because we have well-educated and highly experienced teachers. The result ($36,521 x 1.58) yields $57,703 for the allocated salary for each teacher generated by the “prototypical model”, mentioned above. Based on that model, OISD should have 24 teachers, but in fact the district employs 28 teachers to cover the basic education for our resident students. The difference has in the past been covered by the M&O levy. HB 2242 requires that education and experience no longer be considered in determining teacher salaries.

Rather, salaries are to be determined by local property values. You might think, since San Juan County has the highest property values in the state, that Orcas Island would come out pretty well in that calculation, but rather than consider San Juan County as a single district, HB 2242 lumps us together with the Skagit Valley and surrounding areas, which brings the average property values down significantly, resulting in a greatly reduced correction factor. Even though salaries under HB 2242 are increased to $59,334, the correction factor is decreased to 1.12, resulting in a new salary of $66,454, or an increase of $8,751 for each of the 24 allocated teacher positions, or an increase in funding of approximately $210,000, only about 1/5 of what is needed to replace the HB 2242-mandated reduction in funding from the M&O levy. In addition, HB 2242 allows increases in a number of fringe benefit categories including COLA, retirement, unemployment insurance, etc., increases NOT covered by the state.

Put in terms of per-student funding, the current (January) apportionment report shows the average Basic Education Allocation per resident Orcas Island student to be about $7,500. The increase afforded by the salary increases to take effect in the 2018-19 school year would increase that to roughly $8,050 per student. However, the levy reduction will result in a decrease of $1,600 per student in 2018-19. The per student decrease could become $2,700 per student (depending on various uncertain considerations) in the 2019-20 academic year, resulting in a reduction in per-student funding to only $5,350, a 30% reduction. And this is from a new law that was supposed to INCREASE funding for K12 education. It is clear that somehow the state has missed the mark with regard to education funding for the Orcas Island School District.

But back to the point. What has happened is that the state has reduced the M&O levy, voted on and approved by residents of Orcas Island, in order to satisfy the McCleary decision to reduce dependence on local property taxes to pay the cost of public education. Then, the State increased the property taxes that we pay directly to the State. Some of that increase will come back to the OISD, but not enough to make up for the decrease in the M&O levy, and it is that difference that causes the problem. To be sure, the levy that is being reduced is not the bond issue that was approved in November 2017. That bond was to fund the Capital Fund budget, and as noted above, those dollars can be used only for construction.

As we work our way through the various options, we will again be reaching out to you, our friends and neighbors, seeking your input regarding the best way forward. Stay tuned.