Transcript Document

WASA 2014
Superintendent Workshop
The McCleary Decision:
Implications
for State Revenue
May 6, 2014
Dr. Bill Keim
WASA Executive Director
WASA 2013–14 Goals
GOAL 2—INVEST IN THE PARAMOUNT DUTY
Hold the Legislature accountable for delivering on the state’s
“paramount duty” to provide ample funding for all K–12 children,
consistent with the Supreme Court’s McCleary ruling and defined by HB
2261.
Actions:
• Monitor and communicate the Legislature’s progress toward achieving
ample funding of K–12 education as required by the McCleary decision.
• Educate and enlist the local community, business leaders, and
policymakers to advocate for legislative progress toward full
implementation of HB 2261 and the ample funding of K–12 education,
as affirmed by the Washington State Supreme Court in the McCleary
decision.
OSPI Plan to Fully Fund Basic Education
by 2018
ESHB 2261 and SHB 2776 breaks down costs into eight categories. In 2014–
15, funding for student transportation is fully funded. For each year until
2018, the state funding levels for the other seven categories are as follows:
Expenditure category
School year
2015–16
2016–17
2017–18
$197,705,030
$431,971,930
$728,715,188
Later grades class sizes
152,377,454
345,212,696
527,356,311
Materials, Supplies & Oper. Costs
399,311,789
405,245,793
411,381,872
School/district support staff
360,415,667
718,885,504
1,078,501,720
Program hours
103,173,518
242,540,664
472,358,338
Professional development
105,901,790
237,026,250
398,792,466
Compensation
2,169,173,799
2,585,447,107
3,076,062,912
GRAND TOTAL
$3,488,059,048
$4,966,329,944
$6,693,168,806
Early elementary class sizes
New Revenue Considerations
Can we cut other
programs to free up
the funding needed
for McCleary?
Can We CUT Our Way to $6.7 Billion?
• Every area of the state budget has already been
scrutinized and cut during the recent economic
downturn.
• Reductions in one area (e.g., social services)
would likely cause increased costs in other
areas (e.g., public safety).
• Due to legal obligations, there is a limit to how
much some areas can be cut.
• The scale of the problem is well beyond the kind
of minor adjustments that further cuts could
achieve.
Can We Cut Our Way Into That Funding?
2013–15 Biennial State Budget —$32.8 Billion Total General Fund
Source: A Citizen’s Guide to the
State Budget 2014
Legislative Evaluation & Accountability
Program Committee
Can We Cut Our Way Into That Funding?
2013–15 Biennial State Budget —$32.8 Billion Total General Fund
McCleary Add
$13.4 Billion per
Biennium
New Revenue Considerations
Can we fund McCleary
by earmarking
revenue growth to
that purpose?
Can We GROW Our Way to $6.7 Billion?
• SB 5881 would have earmarked 67% of all revenue
growth to education for 10 years.
• Problems with SB 5881:
• Increased revenue is for Early Learning, K–12, and
Higher Ed with distribution to three areas unclear.
• McCleary decision requires implementation by 2017–
18 NOT 2024–25.
• Earmarking 67% of growth to one part of the state
budget would slowly starve the other parts.
• Even if ALL new revenue went to K–12, it would
require an unrealistic growth to add $6.7 billion/year.
New Revenue Considerations
Aren’t we already
over-taxed in
Washington?
Washington Ranks Low in Tax Collections
State and local tax collections per $1,000 personal income
Fiscal Year 2011
Bureau of Economic Analysis and Census Bureau
U.S. Department of Commerce
U.S. Average = $108.31
Washington = $98.95
Revenue Collections are at Historically Low
Levels When Compared to Overall Economy
General Fund-State revenue as percentage of Washington personal income
› In 1990, GF-S revenue equaled about 7% of total
personal income.
Projected
› If the same were true today, we would have about
$15 billion in additional revenue for current biennium.
Washington State Economic and Revenue Forecast Council, September 2013
Growth in Personal Income vs. Growth in Sales
Subject to Sales Tax, Washington, 1979–2013
350,000,000
$327,105,000
300,000,000
In $1,000
250,000,000
200,000,000
150,000,000
$113,173,000
100,000,000
$39,513,569
50,000,000
0
$22,309,000
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
WA personal income
Source: 3 Steps to Funding Washington’s Education System
Economic Opportunity Institute.
Taxable retail sales
New Revenue Considerations
Should we fund
McCleary by just
increasing existing
tax sources?
Washington Has Highest Taxes on the Poor
Top 10 States
State
% Income in Taxes Poorest 20%
Washington
17.3%
Florida
13.5%
Illinois
13.0%
Arizona
12.5%
Texas
12.2%
Hawaii
12.2%
Arkansas
12.1%
Ohio
12.0%
Connecticut
12.0%
Indiana
11.9%
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Washington Has Most Regressive Tax System
Top 10 States
State
Poorest 20% to Top Middle 60% to Top
1%
1%
Washington
599%
327%
Florida
514%
297%
South Dakota
534%
332%
Tennessee
356%
230%
Texas
365%
228%
Illinois
264%
197%
Arizona
224%
151%
Nevada
451%
309%
Pennsylvania
227%
180%
Alabama
213%
179%
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Percent of Income Paid in State & Local Taxes,
Washington State and U.S. Average, 2010
16.9%
12.4%
11.1%
10.0%
10.7%
9.4%
9.2%
8.7%
7.5% 7.7%
7.2%
5.6%
5.4%
3.3%
LOWEST 20%
$11,500
2ND 20%
$28,600
MIDDLE 20%
$49,600
4TH 20%
NEXT 15%
$76,800
$123,900
Washington
US Avg.
Source: 3 Steps to Funding Washington’s Education System
Economic Opportunity Institute, based on non-elderly citizens.
NEXT 4%
$249,600
TOP 1%
$1,131,500
Detailed State Tax System Tables
Washington’s Regressive Structure
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Detailed State Tax System Tables
Oregon is Much More Equitable
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Detailed State Tax System Tables
Idaho is More Equitable
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Detailed State Tax System Tables
California is More Equitable
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Detailed State Tax System Tables
Massachusetts is More Equitable
Source: Who Pays
The Institute on Taxation and Economic Policy, based on non-elderly citizens.
Let’s Discuss This Information
At your table please discuss and record
your thoughts on the following topics:
• Did any of this information surprise you?
• Do you think it is pertinent to the resolution of
the McCleary decision?
• Do you think this information is well
understood by our citizens?
• What role do you think WASA should play in
sharing this information?
• What role can local district leaders play in
sharing this information?