S-2240

AN ACT Relating to increasing finances for education; amending RCW 28A.150.260, 82.04.4281, 82.04.4292, and 82.04.4293; adding a new section to chapter 82.04 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature adopted the present method of funding basic education in 1977. Under this method, the legislature has funded districts based upon a state-wide average. The increasing complexity of the modern world, and its ever changing job markets, require and demand constant improvement to the education system. Improvements must be made; average is no longer sufficient if Washington wishes to provide excellence in education.

The legislature finds that smaller classes directly improve students' educational success. Washington's ratio of teachers to students is currently among the worst in the country. Though modest strides have been made in increasing the ratio of faculty to students, especially in grades kindergarten through three, ratios must continue to increase. It is the intent of the legislature to increase the number of teachers per one thousand students in grades kindergarten through twelve in the next school year. Washington will be seen as an example by other states still fighting the class size battle. The legislature also finds that the block grant program has been immensely successful. The legislature intends that the increased costs of this increase in the number of teachers shall be defrayed by the limitation in this act of the business and occupation tax exemption for interest and dividend income.

Sec. 2. RCW 28A.150.260 and 1990 c 33 s 108 are each amended to read as follows:

The basic education allocation for each annual average full-time equivalent student shall be determined in accordance with the following procedures:

(1) The governor shall and the superintendent of public instruction may recommend to the legislature a formula based on a ratio of students to staff for the distribution of a basic education allocation for each annual average full-time equivalent student enrolled in a common school. The distribution formula shall have the primary objective of equalizing educational opportunities and shall provide appropriate recognition of the following costs among the various districts within the state:

(a) Certificated instructional staff and their related costs;

(b) Certificated administrative staff and their related costs;

(d) Nonsalary costs;

(e) Extraordinary costs of remote and necessary schools and small high schools, including costs of additional certificated and classified staff; and

(f) The attendance of students pursuant to RCW 28A.335.160 and 28A.225.250 who do not reside within the servicing school district.

(2)(a) This formula for distribution of basic education funds shall be reviewed biennially by the superintendent and governor. The recommended formula shall be subject to approval, amendment or rejection by the legislature. The formula shall be for allocation purposes only. While the legislature intends that the allocations for additional instructional staff be used to increase the ratio of such staff to students, nothing in this section shall require districts to reduce the number of administrative staff below existing levels.

(b) The formula adopted by the legislature for the 1987-88 school year shall reflect the following ratios at a minimum: (i) Forty-eight certificated instructional staff to one thousand annual average full-time equivalent students enrolled in grades kindergarten through three; (ii) forty-six certificated instructional staff to one thousand annual average full-time equivalent students enrolled in grades four through twelve; (iii) four certificated administrative staff to one thousand annual average full-time equivalent students enrolled in grades kindergarten through twelve; and (iv) sixteen and sixty-seven one-hundredths classified personnel to one thousand annual average full-time equivalent students enrolled in grades kindergarten through twelve.

(c) Commencing with the 1988-89 school year, the formula adopted by the legislature shall reflect the following ratios at a minimum: (i) Forty-nine certificated instructional staff to one thousand annual average full-time equivalent students enrolled in grades kindergarten through three; (ii) forty-six certificated instructional staff to one thousand annual average full-time equivalent students in grades four through twelve; (iii) four certificated administrative staff to one thousand annual average full-time equivalent students in grades kindergarten through twelve; and (iv) sixteen and sixty-seven one-hundredths classified personnel to one thousand annual average full-time equivalent students enrolled in grades kindergarten through twelve.

(d) Commencing with the 1991-92 school year, the formula adopted by the legislature shall reflect the following ratios at a minimum: (i) Fifty-three and one-half certificated instructional staff to one thousand annual average full-time equivalent students enrolled in grades kindergarten through three; (ii) forty-nine certificated instructional staff to one thousand annual average full-time equivalent students enrolled in grades four through twelve; (iii) four certificated administrative staff to one thousand annual average full-time equivalent students in grades kindergarten through twelve; and (iv) sixteen and sixty-seven one-hundredths classified personnel to one thousand annual average full-time equivalent students enrolled in grades kindergarten through twelve.

(e) In the event the legislature rejects the distribution formula recommended by the governor, without adopting a new distribution formula, the distribution formula for the previous school year shall remain in effect: PROVIDED, That the distribution formula developed pursuant to this section shall be for state apportionment and equalization purposes only and shall not be construed as mandating specific operational functions of local school districts other than those program requirements identified in RCW 28A.150.220 and 28A.150.100. The enrollment of any district shall be the annual average number of full-time equivalent students and part-time students as provided in RCW 28A.150.350, enrolled on the first school day of each month and shall exclude full-time equivalent handicapped students recognized for the purposes of allocation of state funds for programs under RCW 28A.155.010 through 28A.155.100. The definition of full-time equivalent student shall be determined by rules and regulations of the superintendent of public instruction: PROVIDED, That the definition shall be included as part of the superintendent's biennial budget request: PROVIDED, FURTHER, That any revision of the present definition shall not take effect until approved by the house appropriations committee and the senate ways and means committee: PROVIDED, FURTHER, That the office of financial management shall make a monthly review of the superintendent's reported full-time equivalent students in the common schools in conjunction with RCW 43.62.050.

(3)(a) Certificated instructional staff shall include those persons employed by a school district who are nonsupervisory employees within the meaning of RCW 41.59.020(8): PROVIDED, That in exceptional cases, people of unusual competence but without certification may teach students so long as a certificated person exercises general supervision: PROVIDED, FURTHER, That the hiring of such noncertificated people shall not occur during a labor dispute and such noncertificated people shall not be hired to replace certificated employees during a labor dispute.

(b) Certificated administrative staff shall include all those persons who are chief executive officers, chief administrative officers, confidential employees, supervisors, principals, or assistant principals within the meaning of RCW 41.59.020(4).

(4) Each annual average full-time equivalent certificated classroom teacher's direct classroom contact hours shall average at least twenty-five hours per week. Direct classroom contact hours shall be exclusive of time required to be spent for preparation, conferences, or any other nonclassroom instruction duties. Up to two hundred minutes per week may be deducted from the twenty-five contact hour requirement, at the discretion of the school district board of directors, to accommodate authorized teacher/parent-guardian conferences, recess, passing time between classes, and informal instructional activity. Implementing rules to be adopted by the state board of education pursuant to RCW 28A.150.220(6) shall provide that compliance with the direct contact hour requirement shall be based upon teachers' normally assigned weekly instructional schedules, as assigned by the district administration. Additional record-keeping by classroom teachers as a means of accounting for contact hours shall not be required. However, upon request from the board of directors of any school district, the provisions relating to direct classroom contact hours for individual teachers in that district may be waived by the state board of education if the waiver is necessary to implement a locally approved plan for educational excellence and the waiver is limited to those individual teachers approved in the local plan for educational excellence. The state board of education shall develop criteria to evaluate the need for the waiver. Granting of the waiver shall depend upon verification that: (a) The students' classroom instructional time will not be reduced; and (b) the teacher's expertise is critical to the success of the local plan for excellence.

NEW SECTION. Sec. 3. A new section is added to Title 28A RCW to read as follows:

(1) The block grant program is hereby created for the purpose of local education enhancements. Funds to finance this program are to be derived from the intangibles tax imposed in RCW 82.04.4281, 82.04.4292, 82.04.4293, and section 7 of this act.

(2) A school district may be eligible to receive an allocation from the block grant program if the school district's board of directors has:

(a) Assessed the needs of the schools within the district;

(b) Prioritized the identified needs; and

(3) School districts receiving moneys pursuant to this section shall expend such moneys to meet educational needs identified by the district within the following program areas:

(a) Prevention and intervention services in the elementary grades;

(b) Reduction of class size;

(d) Student‑at‑risk programs, including dropout prevention and retrieval, and substance abuse awareness and prevention;

(e) Staff development and in‑service programs;

(f) Student logical reasoning and analytical skill development;

(g) Programs for highly capable students;

(h) Programs involving students in community services;

(i) Senior citizen volunteer programs; and

(j) Other purposes that enhance a school district's basic education program.

Program enhancements funded pursuant to this section do not fall within the definition of basic education for purposes of Article IX of the state Constitution and the state's funding duty thereunder, nor shall such funding as now or hereafter appropriated and allocated constitute levy reduction funds for purposes of RCW 84.52.0531.

(4)(a) Allocations to eligible school districts shall be calculated on the basis of average annual full-time equivalent enrollment, at an annual rate of up to thirty-five dollars and twenty-six cents per pupil. This per pupil rate shall be adjusted annually for inflation. For school districts enrolling not more than one hundred average annual full-time equivalent students, and for small school plants within any school district designated as remote and necessary schools, the allocations shall be determined as follows:

(i) Enrollment of not more than sixty average annual full-time equivalent students in grades kindergarten through six shall generate funding based on sixty full-time equivalent students;

(ii) Enrollment of not more than twenty average annual full-time equivalent students in grades seven and eight shall generate funding based on twenty full-time equivalent students; and

(iii) Enrollment of sixty or fewer average annual full-time equivalent students in grades nine through twelve shall generate funding based on sixty full-time equivalent students.

(b) Allocations shall be distributed on a school year basis pursuant to RCW 28A.510.250.

Sec. 4. RCW 82.04.4281 and 1980 c 37 s 2 are each amended to read as follows:

(1) In computing tax there may be deducted from the measure of tax amounts derived by persons((~~, other than those engaging in banking, loan, security, or other financial businesses,~~)) from investments or the use of money as such, ((~~and also~~)) except:

(a) Amounts derived by persons engaging in banking, loan, security, or other financial businesses.

(b) Amounts derived by any person as interest income, dividend income, gains realized from trading in stocks, bonds, or other evidences of indebtedness, or gains realized from sales of real property. This subsection (1)(b) shall apply only to any person engaged in any business activity whose value of products, gross proceeds of sales, or gross income of the business under this subsection (1)(b) is greater than eight thousand dollars per month.

(2) In computing tax there may be deducted from the measure of tax amounts derived as dividends by a parent from its subsidiary corporations.

Sec. 5. RCW 82.04.4292 and 1980 c 37 s 12 are each amended to read as follows:

In computing tax there may be deducted from the measure of tax ((~~by those engaged in banking, loan, security or other financial businesses,~~)) amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties.

Sec. 6. RCW 82.04.4293 and 1980 c 37 s 13 are each amended to read as follows:

In computing tax there may be deducted from the measure of tax ((~~by those engaged in banking, loan, security or other financial businesses,~~)) amounts derived from interest paid on all obligations of the state of Washington, its political subdivisions, and municipal corporations organized pursuant to the laws thereof.

NEW SECTION. Sec. 7. A new section is added to chapter 82.04 RCW to read as follows:

This chapter shall not apply to income accrued by an employee benefit plan. For purposes of this section, "employee benefit plan" means any plan, trust, or custodial arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec. 1001 et seq., or that is described in sections 125, 401, 403, 408, 457, 501(c)(9), 501(c)(17) through (23) of the Internal Revenue Code of 1986, as amended, or similar plan maintained by state or local governments, or plans, trusts, or custodial arrangements established to self-insure benefits required by federal, state, or local law.