The Paramount Duty Series

McCleary, Fulfilling Our Paramount Duty, and the Myth that New Taxes Are Needed

Welcome to The Paramount Duty Series, a three-part examination of what led to the McCleary decision, its key holdings, a look at the dramatic K-12 funding increases in recent budgets, and what still remains to be done.

There have been many half-truths, untruths, and misunderstandings expounded in recent months, and the purpose of this series is to provide readers with a clearer understanding of the issues.

Think of this as a Treatise on McCleary:

  • Part I: 30 Years of Shirking the Paramount Duty & Understanding the Holding that Followed
  • Part 2: Turning the tide – state spending radically reprioritized under Majority Coalition Caucus
  • Part III: What’s left? Bringing fairness to K-12 funding via levy reform, debunking the myth that new taxes are needed, and the vital importance of education policy reforms.

I: The 30 year failing: Education as a declining priority through 2013

“It is the paramount duty of the state to make ample provision for the education of all children residing within its borders[.]”

– Art. 9, Sec. 1 of the Washington State Constitution

Despite being ascribed preeminent importance in Washington’s Constitution, education was a decidedly declining state budget priority over the last generation as non-education spending dominated budget growth from 1983 to 2013.

Budget Growth

This 30-year trend diverted billions away from education and into non-“paramount duty” areas of the budget.1

Meanwhile, as the state de-prioritized education, the burden increasingly fell to local taxpayers to pick up the slack – as shown in the following chart.

Local Levies

To summarize, over the 30 years in question:

  • The “paramount duty” became a declining priority in the state budget, and
  • The burden for financing schools shifted increasingly to local district taxpayers.

Into this fray comes McCleary vs. State.

II: The 30-year failing comes home to roost – the McCleary holding:

  1. Unconstitutional reliance on local levies to finance K-12, and
  2. Skepticism Legislature would fund its “promising reform” of basic education

In the McCleary suit, the state was alleged to be in violation of Article 9, section 1 of the state constitution.   The trial court (King County Superior Court) found against the state, and in January 2012 the Washington Supreme Court affirmed the decision.2 The court’s ruling hinged on two findings:

  • One, substantial evidence at trial that local levies were being used to fund “basic education” obligations that were properly the state’s, notably in the areas of pupil transportation, materials & supplies, and certain district salaries, particularly for administrators and support staff.
  • Two, the court noted that between the time of the Superior Court trial and the case being reviewed by the Supreme Court the Legislature had enacted a new, more expansive and costly definition of “basic education” designed to make new investments in class size reduction and all-day kindergarten, plus pay for districts’ actual transportation and material & supply costs (HB 2261, 2009 & HB 2776, 2010). The court deemed this a “promising reform”3 of basic education but was skeptical – based on the 2011 Legislature’s inaction – the program would in fact be funded by the Legislature’s self-imposed 2018 deadline.

Key excerpts from the opinion:

On the unconstitutional reliance on local levies for “Basic Education”:

  • “[W]e rejected local levies as ‘dependable and regular’ not only because they are subject to the whim of the electorate, but also because they are too variable insofar as levies depend on the assessed valuation of taxable real property at the local level. This latter justification implicates both the equity and the adequacy of the K-12 funding system. Districts with high property values are able to raise more levy dollars than districts with low property values, thus affecting the equity of a statewide system. Conversely, property poor districts, even if they maximize their local levy capacity, will often fall short of funding a constitutionally adequate education. All local level funding, whether levy or otherwise, suffers from this same infirmity.4 (emphasis added)
  • “The shortfall in state funding forced school districts to increasingly rely on local levies to meet the actual cost of the basic education program.”5
    • The opinion notes the evidence at trial highlighted three major areas of underfunding: transportation, materials & supplies, and staff salaries.
  • “Reliance on levy funding to finance basic education was unconstitutional 30 years ago . . . and it is unconstitutional now.”7

On skepticism the Legislature would fund its “promising reform” of basic education:

  • “[F]ull implementation and funding for ESHB 2261 (and HB 2776) will remedy the deficiencies in the prior funding system.”8
  • Court calls reforms comprehensive, but says recent budget cuts “confirm that too much deference may set the stage for another major lawsuit challenging the legislature’s failure to adhere to its own implementation schedule.”9
  • “Timely implementation (of 2776) remains uncertain.”10
    • The court then notes, at length, the inaction of the Legislature in 2011 to make progress toward that legislation’s ultimate funding requirements.11
  • “This court cannot idly stand by as the legislature makes unfulfilled promises for reform.”12

Part II Turning the Tide – State Spending Radically Re-Prioritized

The Majority Coalition Caucus (MCC) took the reins of the Senate in 2013, determined to turn the tide of the previous 30 years and reprioritize education. The results are as follows.

I: Per pupil state spending up by 33% in 4 years

Per Pupil State Spending

II: State spending on K-12 increased by an unprecedented $4.5 billion

Education Spending Increases

Message to Court:

That “promising reform program” that would “remedy the deficiencies in the prior funding system” has been fully funded.

In 2012, the court – while endorsing the Legislature’s revised, expansive definition of basic education as a constitutional cure – was skeptical that the mandates of that program would come to fruition, as shown through very choice words (“timely implementation remains uncertain . . . court cannot idly stand by . . . unfulfilled promises.”)

In 2015, the Legislature enacted a budget that fully funds the statutory components of that reform program. Distressingly, the court in its most recent August 2015 order appeared to misunderstand the extent of the Legislature’s actions.13 And, to be clear, the Legislature has gone beyond that initial program to enhance basic education in other ways.

State funding improvements since McCleary ruling

Fully funding Districts’ Actual Transportation Costs

  • This infirmity was remedied in 2013-15, resulting in over $250 million a biennia of additional state support.14

Fully funding Districts’ Material & Supplies Costs

  • The state raised its funding from $546 per pupil in 2011-12 to $1,237 per pupil in 2016-17 (second year of present budget). This represents an increase in state dollars of over $1.4 billion a biennia.15

Fully funding Voluntary All-Day Kindergarten in Every District in State

  • Increased funding from 22% of schools in 2011 budget to 100% of schools in 2016-17, an influx of over $400 million a biennia.16

Reducing Kindergarten through Grade 3 Class Size to 17 by 2017-18 school year

  • In 2012, K-3 class size averaged 25 students.
  • The enacted budget funds K-3 class sizes of 17 in high-poverty districts and accommodates in the balanced budget projection an additional $750 million investment next biennia to fund such class sizes statewide by the statutory 2017-18 deadline. Districts are eligible for funding only if they actually lower class sizes.17

The four items above comprise the required elements of the “promising reform” of basic education the court was skeptical would be funded by 2018. But, even that doesn’t reflect the totality of the state’s reforms, as these additional investments were also made since the McCleary decision:

  • Nearly Doubled Funding for Program Supporting High Poverty Students18
    • High poverty students are the most at-risk and least likely to graduate. The 2013-15 budget nearly doubled state funding for the Learning Assistance Program targeted at low-income students, resulting in a $200 million funding increase since McCleary.
    • Additionally, to improve outcomes the Legislature targeted expenditures on programs research found to be “evidence-based.”
  • Reform Bilingual Education Funding
    • Aligned incentives for districts, resulting in an over 50% increase in the rate of bilingual students fully participating in standard coursework, particularly in early grades.19
  • Salary & Health Benefit Increase for All K-12 Staff
    • Over $400 million in enacted budget for K-12 staff salary and health benefit increases.20

Part III What’s left? Fairness via levy reform, debunking the new taxes myth, and the importance of education policy reforms

I: What’s left? Bringing fairness to K-12 funding via levy reform

The quality of a child’s education should not depend on their ZIP Code.

That is a fundamental principle that unites all of us in the Legislature, and while we cannot ultimately control the quality of a child’s education, we in the Legislature must ensure the funding system in place is equitable, regardless of where a child lives in our state.

Sadly, that is not the case at present – and it must be remedied.

Inequity in K-12 Funding

The court’s opinion in McCleary directly identified this constitutional infirmity:

“Districts with high property values are able to raise more levy dollars than districts with low property values, thus affecting the equity of a statewide system. Conversely, property poor districts, even if they maximize their local levy capacity, will often fall short of funding a constitutionally adequate education. All local funding, whether levy or otherwise, suffers from this same infirmity.”21

Thus, while the Legislature has made great strides in assuming at the state level the true costs of core services and enhancing key components, the fundamental inequity remains. When one part of the state can raise $290 per pupil at a tax burden exceeding that of a district raising $3,500 per pupil, or a voter in Aberdeen has a tax rate triple of that in Mercer Island to raise only half as much per student, there is a problem.

The salary issue

Reforming levies also goes hand-in-hand with addressing the final part of the court’s 2012 decision, namely that too large a portion of salaries were funded via local levies:

“Testimony revealed that the State allocation for salaries and benefits fell far short of the actual cost of recruiting and retaining competent teachers, administrators, and staff. On average, the state allocation for instructional staff was approximately $8,000 less than what districts actually paid. The shortfall for administrators was even more drastic, representing on average approximately $40,000 less than actual expenditures, which left local districts to subsidize classified staff and administrative salaries by roughly $366 million per year.”

—   McCleary vs. State, No. 84362-7 (2012), pp. 64-65.

What is the extent of the local funding of K-12 salaries?

Districts report their expenditures annually to the Office of the Superintendent of Public Instruction. For the 2014-15 school year, districts reported:

Salaries

So, on average, the state funds:

  • 54% of a Principal or Superintendent’s salary
  • 72% of a Janitor, Bus Driver or Paraeducator’s salary, and
  • 84% of a Teacher’s salary

All told, just shy of $1 billion annually in local levies is spent on basic education employee salaries, per district reports.

Does all of this funding need to be assumed by the state?

No. The McCleary decision expressly held that “[s]ome of the difference between actual salaries and state allocations represented permissible incentive pay that went toward non-basic education related tasks.”23

This is particularly true in teacher compensation, where unions negotiate additional “time, responsibilities, and incentives” for staff, including teacher training days, in-service days, and mentoring bonuses.

The constitutional imperative is simply that adequate funds are provided to “recruit and retain” K-12 staff with state appropriations.

What have been the recommendations in this area?

In December 2012, the Joint Task Force on Education Funding, which the Supreme Court has repeatedly cited in recent edicts, recommended that the state increase its allocations for administrative and classified salaries by $682 million in the 2017-19 biennia.24 Three prior proposals made during the committee’s deliberations ranged from $496 million to $750 million a biennia to address this issue.

The JTFEF did not recommend increased state funding for certificated or teachers’ salaries.25

Big picture: state needs to absorb some of local levy expenditures

Administrator Salaries – The state’s allocation of under $60,000 a year for administrators is insufficient to “recruit & retain” a principal or superintendent, as evidenced by the fact that all districts pay substantially in excess of this amount. Local taxpayers pay almost $200 million a year to remedy this state infirmity

Classified (non-teacher) Salaries – Less egregious, but still constitutionally inadequate, is the state allocation of just over $32,000 a year for the integral basic education support staff comprised of paraeducators, janitors, and bus drivers. Locals pay on average almost 30% higher than what the state provides, costing local taxpayers over $250 million a year.

Certificated/Teacher Salaries — This is the gray area where the interplay of local bargaining, additional “time, responsibilities, and incentives,” and possibly inadequate state reimbursements have resulted in a total salary average of $63,000 a year, or 16% higher than the state’s $53,000 allocation. What portion of that is permissible local district compensation for duties beyond providing a basic education and what portion, if any, is constitutionally necessary to “recruit and retain” teachers?

The Joint Task Force on Education Finance determined the state didn’t have to pick up any of the local compensation in this area. However, local levies have historically supplemented state salaries by about 10% in teacher compensation, suggesting that the 16% figure contains at least a part of what should be the state’s responsibility.

Careful consideration of this issue is critical, however, because if the right standard isn’t adopted it can quickly lead to an untenable outcome of chasing one’s tail (state appropriates a salary increase, unions collectively bargain for that amount plus a higher amount funded by local levies, then OSPI reports an average salary in excess of what state provides, leading to a legal claim the state salary is inadequate).26

This potentially becomes a “gotcha” where local bargaining decisions simply ratchet up the state’s constitutional responsibility. There must be balance and careful consideration; one option is to recognize that the cost-of-living is higher in metropolitan Puget Sound and provide a state funded geographic pay bump for teachers in those areas.

II: Debunking the new taxes myth

Are new taxes on Washington citizens needed to fulfill this obligation?

No. Salaries are adequate to recruit and retain; they just need to come from the state, not local levies.

There is a “myth” that new taxes are needed to resolve the issue. Some have opined that billions in new taxes are needed and it is time for an income tax in the state.27 This represents either an unfortunate misunderstanding of the issue or a disregard of the truth meant to mislead and take political advantage of the situation.

The bottom line is there is adequate and ample money already going into the K-12 system for salaries, as demonstrated by supply and retention data. Each year there are more people entering the profession statewide than available openings.28

And none are leaving the K-12 field in any large degree. The K-12 teacher attrition rate is 8%, counting people retiring or being terminated due to inadequate performance. That figure is lower than the turnover rate for state employees and half the rate of public employee turnover nationally.

Staff Turnover

Keep in mind: By the end of the present budget cycle, due to significant state funding increases, the appropriation for K-12 per pupil (state, local, and federal) will be almost $13,000.29   Put another way, more than a quarter of a million dollars per year in funding for every 20 students in the state.

Classroom funding

The question then is not adequacy of salaries, but source of the salaries. In short, K-12 staff are being paid on average appropriate salaries, but they are coming inequitably from local levies – rather than the state – as a result of the Legislature over the prior 30 years shifting more and more of the financing of the state’s paramount duty onto local levies. This inequity is what needs to be resolved.

The solution?

Levy reform, which will restore equity and result in a tax reduction for the vast majority of the state

Return to the principle that we are one state and that the obligation of financing and providing revenues for our children’s education needs to be equitably borne across the state, not subject to the whims of one’s ZIP code.

Put simply, state basic education should be financed across the state with a uniform, adequate, and equitable state property tax levy, while a corresponding decrease in local levies should be achieved.

This will reverse the very disparate impact, both for schools and taxpayers that has resulted from the last 30 years of growing reliance on local levies.

  • For the vast majority of the state (appx. 75% of districts), the result will be a property tax reduction.

The benefits of this solution are significant including more ample state funding (rather than local); more dependable funding for school districts (state funding will be constitutionally-protected, not funded on a temporary basis like local levies); and the aforementioned benefit of being more equitable.

II: The vital importance of education policy reforms

“Fundamental reforms are needed for Washington to meets its constitutional obligation to its students. Pouring more money into an outmoded system will not succeed.”

McCleary vs. State, No. 84362-7 (2012), p. 69

The definition of basic education is not etched in constitutional stone, but is to be reviewed as the needs of students and demands of society evolve.30

While the focus in the last several years has understandably been on increasing the state’s appropriations for K-12, an equally vital role and opportunity presents itself to reform other aspects of Washington’s K-12 system.

Improving educational attainment must always be the goal. There are several areas ripe for close study, examination, and reform, including:

  • State Salary Grid – Rewarding the Right Things?
    • Research tells us that a quality teacher is the most important factor in student learning. Yet research also shows that the state salary grid – which increases pay based solely on a teacher’s years of service and college credits beyond a Bachelor’s degree – has a nearly non-existent relationship to teacher quality.31 That salary grid is used by every school district in determining teacher compensation. Is it time to reform the salary grid to ensure quality instruction is rewarded, rather than merely seniority?
  • Attendance Matters – The Best Cost-Benefit to Improved Outcomes?
    • Research shows “attendance matters” and children who miss school have lower test scores and graduation rates.32 Does the state’s funding formula align incentives for school districts to ensure high attendance?
  • Bilingual Student Instruction – Further Improvements Imperative?
    • Bilingual education students have amongst the lowest graduation rates in the state and are the fastest growing segment of the student population.33 While some recent reforms have been enacted and are yielding positive outcomes, can more be done? One area to look at is more than half of instruction provided to bilingual students comes from non-teachers.
  • Ensuring an Excellent Teacher in Every Classroom?  
    • Are we sufficiently identifying, and rewarding, excellence in the classroom? Likewise, when educators are not excellent, or even adequate, are the tools available at the local level to remedy the situation?
  • Local Decision-Making, State Accountability – Are There Areas of State Overreach?
    • Fundamentally, a child’s education should be the product of local parents, educators, and administrators making decisions on how to best deliver education in that community.
    • Likewise, the state’s role should be primarily to hold districts accountable to results, not intervene excessively in attempting to dictate how those results should be achieved.
    • Are there areas where the state should provide more flexibility to local schools and, conversely, are there areas where the state needs to strengthen accountability for outcomes?
  • Parents Want Options – Districts Should Provide Them
    • Parental involvement is critical to student success. Yet too many parents and their children are frustrated by the lack of schooling options our system provides. While affluent parents can move to a better school district, those without means are forced to accept the school the district assigns them, whether or not it is a good fit for their child. While some districts offer more options (many of which have lengthy waitlists), our state education dollars should encourage every district to develop more high-quality K-12 school options to meet the needs of students. The best way to involve parents in our schools is to allow them to make an intentional and deliberate choice about their child’s education. Options could include more apprenticeships, more STEM-based learning centers and additional themed-schools.

These are just a sampling of the sort of discussions that all legislators, thought leaders, and policy-makers, regardless of party affiliation, need to engage in to provide the best possible education for our children.

Ensuring every student is ready for college, career and life must always be the goal.

The Window’s Reflection

If you’ve made it this far, Congratulations – a “Windows Into the Budget” diploma awaits you, contingent upon correctly answering these questions:

  • What two factors over the last 30 years led to the McCleary decision?
  • How much money has the Legislature infused into K-12 in the last two budgets?
  • What is the fundamental inequity that remains in K-12 financing and must be addressed?
  • Does resolution of this inequity require a new tax on Washington citizens?
  • Are educational policy reforms a key part of improving educational outcomes?

Footnotes:

  1. $4.29 billion more would have been available for education in 2011-13, if education had maintained its share of the budget that it had in 1981-83.
  2. McCleary v. State, 173 Wn.2d 477 (2012)   http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=843627MAJ
  3. Id, p.3 of opinion at link.
  4. Id., p. 56
  5. Id., p. 67
  6. Id., pp. 62-65
  7. Id., p. 68
  8. Id, p. 73. See also p. 3 (“The legislature recently enacted a promising reform package under ESHB 2261, 61st Leg., Reg. Sess. (Wash. 2009), which if fully funded, will remedy deficiencies in the K-12 funding system.”)
  9. Id., p. 74
  10. Id., p. 75
  11. Id., p. 74-76
  12. Id., p. 76
  13. Supreme Court Order, Aug. 13, 2015 See p. 5 (“With a deadline of 2018 for compliance, the State is not on course to meet class-size reduction goals by then.”) http://www.courts.wa.gov/content/publicUpload/Supreme%20Court%20News/843627_081315McClearyorder.pdf This is just factually wrong.   The class size reduction is a maintenance level budget item baked into the state’s four year balanced budget and the increased spending required by 2018 is accommodated in that balanced budget projection.   A similar factual error was made in the court’s 2014 order ( http://www.courts.wa.gov/content/publicUpload/Supreme%20Court%20News/20140109_843627_McClearyOrder.pdf) which asserted the state had not fully funded transportation, per HB 2776, in the 2013-15 biennia.   The court relied on outdated fiscal reports in making that erroneous finding.
  14. State expenditures on K-12 transportation was $594 million in 2011-13, increasing to $927 million in 2015-17, translating to a $333 million funding increase in four years.   Over $250 million of that represents a policy enhancement from the state, separate from carryforward costs.
  15. Senate W&M fiscal analysis.
  16. 2011-13 Legislative Budget Notes (full day kindergarten to 22% of kindergartners in 2012-13), p. 272. 2015-17 Senate Ways & Means Agency Detail, p. 179 (“All-day Kindergarten is fully implemented at 100 percent of Kindergarten enrollment in the 2016-17 school year.”)
  17. See footnote #13.   RCW 43.88.055 requires the state budget be projected to be balanced over four years, including all maintenance level funding for the subsequent biennia.   The class size requirement for K-3 is considered maintenance level funding in 2017-19 and as such had to be required in the balanced budget projection.   The projection shows an increase from $268 million per year on K-3 class size in SY 16-17 to full funding of $524 million per year in SY 17-18.     http://www.erfc.wa.gov/budget/documents/bo_20150721.pdf
  18. State funding of Learning Assistance Program increased from $252 million in 2011-13 to $450 million in 2015-17.
  19. OFM report on exit rates of bilingual students.
  20. W&M fiscal analysis, includes health benefits.
  21. McCleary v. State, 173 Wn.2d 477 (2012)   http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=843627MAJ, p. 56.
  22. OSPI 275 report:   http://www.k12.wa.us/safs/PUB/PER/1415/ps.asp.   State salary funded levels for SY 14-15 from Office of Financial Management (9/1/2015).
  23. McCleary vs. State, id., p. 65.
  24. Joint Task Force on Education Funding Final Report (Dec. 2012), p. 3 of Adopted Spending Plan.   http://leg.wa.gov/JointCommittees/Archive/EFTF/Documents/JTFEF%20Final%20Report%20-%20combined%20(2).pdf
  25. Id.
  26. See, for instance, Everett’s recent contract negotiations which, in addition to the 5% salary increase provided in the state budget, negotiated another 4.75% salary increase.   A perfectly legitimate local decision, but one that raises the specter down the line of that differential being claimed to show the state is not adequately funding salaries.
  27. Rep. Jim Moeller (“How are we going to address that unless we want to go to an income tax or a capital gains tax?”)   http://www.columbian.com/news/2015/aug/13/local-educators-see-court-sanctions-call-to-action/
  28. “Programs produce about 2,500 teachers per year.   On average, Washington’s public schools hire about 1,800 beginning teachers per year.” Professional Educator Standards Board Annual Report. Outlook\3AWPJRLA\Production – PESB Annual Report (00000002).htm
  29. $9,024 per pupil state funding in SY 16-17.   Add in most recent SY 14-15 district budgeted amounts for local levies ($2,132 per pupil), federal funds ($972 per pupil), and other revenues ($524 per pupil) for a total of $12,652 in projected expenditure for SY 16-17. In reality, the figures will likely be higher as the other three non-state categories will not remain stagnant.
  30. McCleary vs. State, p. 3
  31. Washington State Institute for Public Policy (May 2012) – “Teacher Compensation and Training Policies: Impacts on Student Outcomes”

http://www.wsipp.wa.gov/ReportFile/1104/Wsipp_Teacher-Compensation-and-Training-Policies-Impacts-on-Student-Outcomes_Full-Report.pdf

  1. http://www.attendanceworks.org/wordpress/wp-content/uploads/2014/09/Absenses-Add-Up_September-3rd-2014.pdf
  2. Per OSPI, 53.7% of limited English students graduated.   Bilingual enrollment is growing at a 7% rate in recent years, compared to less than 1% growth in the overall K-12 population.