A school funding impasse is brewing
The Washington Legislature's efforts to find an extra $2 billion per biennia to fix the state's schools will run smack into the requirement for a two-thirds majority on votes to raise taxes .
Almost always, the House and Senate Republicans — who control more than one-third of the votes in each chamber — block Democrat efforts to raise taxes.
Both sides strongly hinted Wednesday that this impasse will likely surface again in January when the Legislature tries to deal with a Washington Supreme Court ruling that the state is not adequately meeting its constitutional obligation to sufficiently fund basic education. A legislative task force met in Federal Way to eventually recommend how the full Legislature should meet that obligation. The task force will meet again Nov. 20 to present specific proposals with plans to make recommendations in December. Meanwhile, the state Supreme Court is now mulling whether the two-thirds-majority requirement is constitutional.
Task force members include the ranking Democrat and Republican of the House Ways and Means Committee — Rep. Ross Hunter, D-Medina, and Rep. Gary Alexander, R-Olympia.
Hunter doubted the votes exist to find the extra $2 billion solely through budget cuts. Alexander doubted the votes exist to approve a tax hike to help find the extra $2 billion. Both plan to submit all-budget-cuts scenarios on Nov. 20 to show what they would look like. Hunter also plans to look at tax-hike scenarios. Alexander wants to look at ways to boost the economy so the state can collect more money for education.
A major problem is that the overall shortfall is much bigger than $2 billion for education every two years.
First, the Legislature is already facing a roughly $1 billion shortfall in the upcoming January session outside of the Supreme Court's education requirements.The House and Senate financial staffs calculated that the Supreme Court's ruling will require an extra $2.1 billion in cuts and new revenue in 2013-2015, $2.8 billion for 2015-2017, and $2.1 billion for 2017-2019. And those numbers assume absolutely no growth between now and 2019 in all of the state non-education programs.
The bottom line: In January, the Legislature will probably start working on the 2013-2015 budget with a $3.1 billion shortfall.
Most task force members believe that they cannot tackle solely the education budget shortfalls without also considering the overall red ink — noting that education and non-education budgets will be seeking money from the same sources. "You can't look at education in a vacuum," Bob Cooper, lobbyist for the National Association of Social Workers, told the task force.
The task force will look at where the overall budget can be cut to provide more money to education.
The 2013-2015 state operating budget is predicted to be roughly $33.3 billion with no growth in non-education programs, compared to $31.2 billion — including $13.65 billion for K-12 edcuation — in 2011-2013.
The Senate and House finance staffs identified numerous potential cuts in education programs not covered by the Supreme Court ruling, higher education, corrections, health and human services. Most of those individual cuts would save tiny amounts when compared to a $3.1 billion shortfall.
One big potential cut could be $605 million by eliminating the state's education levy equalization program, an idea has never gained traction in the Legislatures. The program helps districts with lower property tax revenues; those districts are often in struggling communities. Other potential areas to cut are up to $1.04 billion for four-year universities in 2013-2015, up to $1.178 billion for community colleges and technical schools, and up to $665 million for financial aid to students in higher education. Such cuts to higher education would have to buck families already facing skyrocketing tuition costs and a business community fretting about Washington students being shut out of state schools.
"You can cut maybe a couple hundred million dollars out of our base budget," Hunter speculated.
Meanwhile, the House and Senate financial staffs mentioned that tax exemptions could be examined for closure. While popular in the abstract, this measure rarely survives when actually scrutinized and debated in the Legislature. The state has more than 600 tax exemptions. A special committee has reviewed 135 in the past 10 years to see if they should be allowed to expire. It recommended only 18 be terminated. The Legislature actually ended seven. Only 28 exemptions are costing the state $100 million or more.
The five largest current tax exemptions are on sales taxes for medical, legal, financial, and other personal serivces, whose elimination would have raised $3.2 billion in 2011-2013; exemptions on business and occupation taxes on employees, translating to $2.9 billion; exemptions on sales taxes on food, translating to $2 billion; exemptions on vehicle and special fuels, translating to $1.65 billion; and exemptions on real estate excise taxes, translating to $1.36 billion.
Also, the House and Senate financial staffs showed the task force a long list of potential tax hikes and new taxes — with the caveat that none were specifically recommended Wednesday. That list included:
- A 5 percent capital gains tax. This was introduced in the 2012 legislative session and went nowhere. The preliminary estimate is this tax could raise $700 million to $800 million a year.
- An income tax, usually considered the kiss of death to any politician who proposes one. A 2010 initiative to put an income tax on people earning more than $200,000 was overwhelmingly defeated at the polls.
- Increasing the sale tax, which is currently 6.5 percent. A sales tax rate of 6.6 percent would raise an extra $123 million in 2014. A sales tax rate of 6.7 percent would raise $245 million in 2014. A sales tax rate of 6.8 percent would raise $368 million in 2014.
- Increasing the business & occupation (B&O) tax rates. There are numerous different B&O tax rates, but the state's weighted average B&O tax rate is 0.65 percent. Increasing that to 0.7 percent would raise an extra $252 million in 2014. An average B&O tax rate of 0.75 percent would raise $504 million in 2014. And an average B&O tax rate of 0.8 percent would raise $757 million in 2014.
So what are these extra funds and budget cuts — if they materialize — supposed to do to meet the Supreme Court's requirements? In 2010-2011, Washington with a population of roughly 6.83 million had 1.04 million students in public schools, 72,690 in private schools, and 15,187 being home-schooled. Meanwhile, there are about 232,000 students in higher education.
Here is a rundown of the state's goals driven by the Supreme Court's McCleary decision:
- Reducing the Teacher to student ratios in grades K-3, an age in which experts say fundamental learning needs to take place to produce results rippling into the higher grades. Right now the the ratio is 25.23 students per teacher in those grades. The 2011-13 budget calls for reducing that ratio to 1-to-24.1. The McCleary ruling orders that ratio to be reduced to 17 students in grades K-3 by 2017-2018.
- Poverty-level schools get priority in that class-size reduction, with "poverty" defined as more than 50 percent of a school's students participate in the free or reduced-price lunch program.
- Washington's current minimum number of credits to graduate high school will be gradually increased from 20 to 24. Right now, school districts have different numbers of credits to graduate, with the state average being 22. Increased costs will be tied to what extra courses are added.
- The amount of instruction in grades 7-12 is supposed to reach 1,080 hours a year per student no sooner than 2014-2015. Now, Washington Office Financial Management believes the state average is roughly 1,000 instructional hours per student per school year.
Actually, that 1,000-hour figure is fuzzy. The Office of the Superintendent of Public Instruction tried to survey all 295 school districts last year, but got responses only from 106. Of those 106, the average middle school student was instructed 1,074 hours a year, while the average high school student was instructed 1,076 hours annually.'ê¨'ê¨ At this time, the education funding task force is operating under the assumption that increasing from 1,000 hours per student annually to 1,080 hours per student annually would be an 8 percent increase in costs. School districts are not currently required to report an official hours-per-year-per-student figure to the state.'ê¨'ê¨