Budget and Taxes

McCleary changes coming soon

It’s clear that there will be changes to the McCleary bill from 2017, ESHB 2242, approved this session.  The only question is how many will get through.  At Monday’s hearing of the Senate Education committee they heard four bills: SB 6362, 6397, 6394, 6483.  And this is just on the Senate side.  More are expected to be heard on the House side soon.

Of the bills, PSE testified in support of 6397 because it clearly described how to calculate average salaries (this will help us determine how much of a salary increase we can negotiate next year) and it came close to clearly moving forward the salary allocation one year as required by the Washington Supreme Court.  Both of these issues were our goals for this session.  I said “they came close” because the words in the bill don’t match their intentions.  That should be easy to fix in future versions of this bill.

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Capital Budget Finally Done

After failing to pass a Capital Budget last year in the 2017 legislative session for the first time, last night the legislature stayed up late last night and finally passed the Budget.  As a result, school and university building projects can restart again.  That takes care of one of our Capital Budget issues.  The next one, simple majority passage of bonds (bonds must pass in order for school districts to fund their share of construction costs), will be discussed next week when the Senate State Government committee considers Senator Mark Mullet’s bill to reduce the approval rate for bonds to 55% rather than 60%.

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Day 1 starts with hopes of early conclusion

With democratic control of the House and Senate, leaders of both chambers are expressing hopes that they will not only finish on time (March 8) but will finish early.  Since the last several years have seen one if not up to three extra special sessions, everyone hopes they are right.

Yesterday, I testified in support of Governor Inslee’s supplemental budget.  I supported his effort to comply with the Washington Supreme Court’s demand that the State start funding their substantial increase to basic education salaries starting September 1, 2018, not September 1, 2019.  Further, I highlighted his addition of $13 million to implement the new SEBB (School Employee Benefit Board) insurance plans for K 12.

Additionally, I highlighted two areas that PSE will be advocating for this legislative session:

—Add $500,000 each year of the two year budget to update general paraeducator training modules and develop special education and transitional bilingual paraeducator professional development training modules.

—Clarify what the legislature meant last year when they passed EHB 2242 with the direction that we can negotiate “district average salary for classified employees” up to the amount of the school district’s state allocation for those salaries.  How this is calculated is critical to determining how much we have available to negotiate “market based wages”.    For instance, will the average salary be calculated for all classified employees or just basic education employees?  If its all classified employee, in most circumstances, we should be able to negotiate higher salary increases.

 

 

 

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Governor Inslee Budget Fixes K12 Compensation Problem

Governor Inslee just released his supplemental budget requests.  Though there are a variety of K12 and higher education budget changes he recommends, the most significant was his proposal to move forward by one year the State’s funding for K 12 salaries; a direct response to the Washington State Supreme Court’s recent McCleary order.  The cost of this change ($759 million dollars) will be paid for by reducing the $1 billion rainy day fund (and possibly a carbon tax).  If the legislature goes along with Inslee’s proposal, the State will have completed all of the steps required by the Supreme Court to fully fund basic education.

Other significant changes he has proposed:

  1. $17.2 million for high school and beyond programs for 7th and 8th graders, including $3.8 million to hire more middle school counselors;
  2. $12.8 million to increase Opportunity Scholarships;
  3. $5.2 million retiree remittance adjustment ($68.67 increased to $69.57);
  4. K 12 2018-19 insurance funding increased from $840 per FTE to $845.18;
  5. $20 million increase to special education funding;
  6. Increase from $8 million to $21 million the funding necessary to implement SEBB (School Employee Benefit Board).

What is the likely effect if the legislature increases funding for classified employee salaries in the 2018-19 school year instead of the 2019-20 school year?  The 36.5% increase (from $34,180 to $46,647) starting September 1, 2018, sounds great but remember this is an allocation increase that is limited by other laws (primarily EHB 2242 passed in the 2017 legislative session).  That law limited our access to the increased funding for classified employee salary allocations over the 2018-19 and 2019-20 school year.  If the legislature agrees to raise the allocation as proposed by Governor Inslee, this law will also have to be changed in the 2018 legislative session.  PSE will be advocating to increase the allocation as proposed by the Governor and change the law to do no harm to classified employees ability to get reasonable cost of living adjustments and market based salaries.

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McCleary solution approved

Governor Inslee now gets his chance to approve the hard fought McCleary solution after the House and Senate easily approved HB 2242.  House vote: 67=26.  Senate vote: 32-17.

 

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Budget all done

In quick order the House and Senate have both approved the 2017-19 operating budget.  House vote: 70-23.  Senate vote: 39-10.  Governor Inslee is expected to sign the bill long before the deadline of midnight tonight.

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3rd special session starts

In 2 hours, Governor Inslee will start the 3rd special session.  With only 9 days left before the current budget expires (and therefore all funding for state funded programs), budget negotiators have as much pressure on them as possible to reach an agreement.  Strategically, they will need to announce the agreement by the 26th, no later than the 27th, in order to get everybody to town, brief them on the agreement and to get the staff to prepare the paperwork so they have all the information necessary for the final votes.  Will they make it in time?  My guess, and it is only a guess, is they won’t.

Will there be a government shutdown?  My guess, and it is only a guess, is there won’t be a government shutdown because they will pass a one or two month extension of current state funding.

Sitting on the sidelines impatiently watching this is the Supreme Court demanding that they reach a conclusion to fully fund K 12 education. Will they add another sanction to the $100,000 per day fine to get the legislators to take their order seriously?

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K 12 compensation tied to McCleary

When the Supreme Court entered its last order, they made compensation a major issue that the legislature needed to address.  This wasn’t new to anyone since it has been clear for decades that local levies, not the State, have been paying for “competitive salaries”.  What “competitive” means is that the State provides school districts a “base salary” but school districts have to rely upon local levies to add additional compensation to make salaries “competitive”.

This is true for all three of the major classification of employees: teachers, principals, classified employees.  And the amount of money coming from local levies for “competitive” salaries is a very large number: $1.2 billion per year.  The classified employee share of the total amount is $244 million.  Because the Court wants the State to fully fund or have at least a plan to fund this by 2018, legislators (and Governor Inslee) have offered 3 different solutions.  Solutions form House Democrats and Governor Inslee are similar while the Senate is significantly different.

Governor Inslee

While there were significant salary increases for teachers and administrators, there were also significant increases for classified employees.

—- September 1, 2017…raise state funding for classified salaries (inclusive of the 2.4% Initiative 732 salary increase) from the current $33,412 to $39,457 (a 18.1% increase)

—- September 1, 2018…raise state funding for classified salaries (inclusive of the 2.8% Initiative 732 salary increase) from $39,457 to $52,908 (a 34% increase).

—- Professional development would be provided to paraeducators amounting to 20 hours in 2017 and 40 hours in 2018.

House Democrats

While there were significant salary increases for teachers and administrators, there were also significant increases for classified employees.

—- September 1, 2017…raise state funding for classified salaries (inclusive of the 2.3% Initiative 732 salary increase) from the current $33,412 to $40,060.66 (a 19.9% increase)

—- September 1, 2018…raise state funding for classified salaries (inclusive of the 2.7% Initiative 732 salary increase) from $40,060.66 to $46,888.93 (a 17% increase).

—- Professional development would be provided to all state funded FTEs amounting to 1 day 2017 and 2 days in 2018.

Senate Republicans

Along with many other changes to K 12 funding, the Senate only proposed a 2.3% Initiative 732 salary increase effective September 1, 2017.

Future salary increases would be governed by future local negotiations.  The State would provide school districts an annual increase (based upon the US IPD (implicit price deflator – usually 1-1.5% below the Seattle CPI (consumer price index).  This increase is then subject to negotiations to determine who gets how much of the increased funding.  And to make it more complicated, school districts cannot provide salary funding exceeding 80% of their State funding.  Not an attractive environment competing with teachers and others for smaller funding increases.

 

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State and higher education employee contracts

There are 27 contracts that unions have negotiated with their employers (including Governor Inslee).  Those contracts have to be approved (and funded) by the legislature before they can be implemented.  Governor Inslee’s budget funded them.  The House democrat’s budget funded them.  Senate republican’s budget only funded 2 of the contracts.  The remaining 25 contracts were not approved by Senate republicans instead they approved a $500 salary increase per year for each year of the budget.

Why is there a difference?  According to Senate budget chair John Braun, Senate republican’s chose to prioritize state funding so they could fully fund K 12 education.  Fully funding the contracts costs nearly $500 million.  The Senate budget proposal only costs $78 million.

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Budget breakdown continues

The stage is set but the actors are not playing their roles.  House democrats and Senate republicans have approved their separate budgets, now the only thing to do is negotiate the differences.  Normally, with 11 days left before the end of session, Budget negotiators meet and trade issues based upon the relative importance of the issue to their party.  This winnowing process results in a final budget.  That’s not happening this year because the Senate has refused to meet until after the House has approved the tax increases necessary to fund the House’s budget (roughly $3 billion in new taxes).  As of today, House democrats have refused to vote on the tax increases necessary to fund their budget.

So there is the first reason for the breakdown.  And if you think that is a big problem the next one is even bigger: the Budgets they have approved are as different as “apples to zucchinis”.  Normally, budgets are different, but the differences are so big it is difficult to imagine how they are going to cobble together an agreement.  The popular expectation here in Olympia is that the only thing that is going to force them to agreement is the June 30 deadline (after that date, the government doesn’t have any money to operate).

Over the next several blog entries, I am going to break apart the major issues, one issue at a time, that are the heart of the “apples to zucchini” budgets.

 

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