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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
15
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