School District Holds Public Hearing on State Education Budget

— by Margie Doyle —

Orcas Island School District Business Manager Keith Whitaker presented his initial analysis of the recent State Budget and its provisions for funding “Basic Education” in compliance with the McLeary Decision, in a written report at the Board’s Special Meeting on Tuesday, July 11. He responded to questions from the board and the public to amplify his understanding of the impacts of the education budget.

Whitaker said, “The budget was approved 30 minutes before deadline, and everyone is still analyzing it. The best news is there wasn’t an immediate disaster.” He presented the impacts for the district in his written report:

“We are still waiting for OSPI to process the changes in the state budget and generate the revised F-203 application that will give us the official version of what revenue we will receive. I will go over the changes that I already know will affect us.

“The local M&O levy has been capped and will have an impact on our revenue beginning in the 2018-19 school year. The legislature chose to limit local levies to the lesser of $1.50 per 1000 in mil rate, or $,2500 per student FTE. It is the latter that will be the limiting factor for us. Levies are calculated using prior year average enrollment and, rounding our enrollment to 780, that generates approximately $1.95M, or about $150,000 less than the existing levy authority. In 2018 the difference between the approved levy and the new levy amount will be approximately $275,000.”

Losing levy capacity makes budgeting for Orcas School District’s Alternative Learning Education (ALE) program, OASIS, even more tight, Whitaker said. “Tying levy capacity to student FTE makes ALE enrollment even more valuable. Currently OASIS provides around $600 per FTE of support to the regular program. With the levy change, each OASIS  FTE now represents $3,100 of support to the regular program.

“The changes in the levy lid will increase our dependence on OASIS to provide funding to our other schools and will make it more difficult and expensive to reduce that enrollment.

“This [levy cap] rule is not a gradual adjustment, but an immediate (2018-19 School Year) and permanent change,” Whitaker stated in his written report to the board.

“The increase in salaries was lower than expected, at 2.3 percent, but was paired with no change in the prototypical formula that might have generated more staff units. We are still allocated (and funded for) only 75 percent of the certificated staff we need, and less than half the classified staff that are required to run the district.

“The legislature also decided to stick with the Salary Allocation Module (SAM) for one more year.
This leaves us in the unfortunate position of having more new spending required on salaries than the new revenue will cover. Over the course of the next three school years, this loss could increase to as much as $300,000, even without local increases,” Whitaker wrote.

At the meeting, Whitaker explained, “2017-18 will be the last year of the current salary module, From that point forward, [the formula] will go totally to an average salary amount required. We will end up paying a beginning teacher a minimum of $40,000; with five year’s experience, the minimum goes to $44,000.” OISD currently meets or exceeds those minimum figures.

“Another major impact is the elimination of the staff mix factor, which is being replaced by a regionalization factor. This does not work in OISD’s favor, as the staff mix factor, which has averaged over 1.50 in our district, serves as a direct multiplier of apportionment. For a base salary of $50,000, we have been apportioned $75,000.

“The regionalization factor will work the same way, but ours was set at only 12 percent, meaning that the same $50,000 base salary will only generate $56,000 in funding. The responsibility for closing this gap has been left to the individual districts and their negotiations with staff, with the abandonment of the state salary matrix in 2018-19.”

Whitaker said, “The issue for everyone is that the responsibility for deciding what we pay out has shifted to individual districts. OSPI will average how much each district is allocated, and then leave it to the individual districts to divide it up.

“Long term concern about the ability to pass local levies – for example, new capital projects or technology levies – due to the sharp increase in the State’s education property tax, raises the spectre of further reductions to General Fund capacity, as those costs have to be reabsorbed.

“As I said, we will need to wait for OSPI to generate their application to estimate the exact impacts of these changes in the funding mechanism, but it is clear that the legislature’s version of Basic Education translates into, “less than we are used to”.”

Following Whitaker’s presentation, members of the board expressed their dissatisfaction with how state legislators have defined “basic education.” The “regionalization factor” also confounded the board. OISD Board President Janet Brownell asked, “Who determines the 12 percent?”

Whitaker replied that a compensation working group, appointed by legislature and OSPI, was responsible for deciding how to apply the formula, based on the relative cost of housing and land values in the district vs. the state average — “the regionalization factor.” Brownell and Board member Greg White asked how to appeal the decision, and Whitaker advised them to bring it up with State Senator Kevin Ranker and Secretary of State Cyrus Habib when they meet with Orcas residents on Wednesday, July 12.

Whitaker said that he estimates the district is “now looking at about $200,000 out of the [general] fund balance for 2017-18, which luckily we can afford; we’re relatively comfortable. There would still be a 6.3 percent fund balance if we had to use that $200,000 to balance the budget.”

“The problem is in 2018-19 and how to relate the funding to the salary matrix — how to pay going forward.”

Board member Tony Ghazel questioned how additional staff beyond the amount prescribed in the new formula would be funded. “If our culture says, ‘We want 50 staff members’ and the state says ‘You’re only allowed 40,’ what can be done?”

Whitaker responded that, as it is now, 25 percent of the district’s total teaching staff is not funded by state money. “The bigger issue isn’t whether we can pay for it out of the levy, but that we’re not going to have enough levy money to pay it anyway.”

The new education budget also requires separate accounting and reporting for basic education funding vs. enrichment course funding; for apportionment vs. levy funding; and if there is a maintenance and operations levy, the district has to get approval for how the levy is intended to be used. And all budgets must be audited by the state auditor, according to state codes for these new distinctions.

Brownell asked about the impact to the budget “if OASIS falls apart,” and Whitaker responded that the budget would drop to $6.5M from $10M.

The Orcas Island School District budget for 2017-18 as currently discussed is based on the Minimum Education Plan that the Board previously approved.

Whitaker said he would notify the board as soon as he gets the F-203 application that tells us how much money we receive according to their assumptions. Everybody knows how desperately the school districts have been waiting for this [budget] information. We never know exactly how OSPI is going to factor in the numbers.”