Title: An act relating to cost-of-living adjustments in basic education salary allocations for certificated instructional staff.

Brief Description: Requiring a statewide cost-of-living index for basic education salary allocations.

Brief Summary of Bill

• The state's teacher salary allocation model will include a cost-of-living index.

Majority Report: Do pass. Signed by 9 members: Representatives Quall, Chair; McDermott, Vice Chair; Talcott, Ranking Minority Member; Tom, Assistant Ranking Minority Member; Anderson, Haigh, Hunter, Rockefeller and Santos.

Minority Report: Do not pass. Signed by 2 members: Representatives Cox and McMahan.

Three school funding court cases, also called the Doran decisions, have shaped the way the state defines and funds basic education. The first and second Doran decisions both included, as a principle, the importance of salary costs in meeting the state's basic education obligation. The court stated, "The most significant factors to be considered in determining the funding used are the staff ratios and the related salary costs." In addition, the state must fund "salaries necessary to assure local school districts the ability to hire and retain competent staff."

The state meets this obligation through formulas that include, for teachers and educational staff associates, a salary allocation model. The model is limited to two factors, experience and education. The salary allocation model is used to determine the amount of funding the state will provide for salaries. With two exceptions, the actual distribution of salary monies at the local level is determined by each district's school board. The exceptions: by law, districts may not pay a teacher less than the amount provided for a beginning teacher with a baccalaureate degree, nor may they pay a person with a master's degree less than the amount provided for a teacher with a master's degree and no years of experience.

The 2000 Legislature directed the Office of Financial Management (OFM) to conduct a review of K-12 regional cost issues. The OFM's report submitted in response indicated: (1) state funding formulas for salaries of school district staff do not currently recognize regional differences in the cost-of-living; (2) housing costs account for most of the differences in the cost-of-living among regions in Washington; and (3) about two-thirds of teacher households in Washington are homeowner households.

Based on data from the Economic Research Institute (ERI) the OFM estimated that differences in annual homeowner costs range from approximately $8,000 in Klickitat County to more than $42,000 in King County. The median annual teacher homeowner cost for the 1998-1999 school year was $16,000.

The OFM review also analyzed available measures of cost-of-living, examined methods for simulating a cost-of-living adjustment by district, and discussed housing allowance implementation issues and other options.

The Legislative Evaluation and Accountability Program (LEAP), in consultation with the State Forecast Council, will establish and maintain a set of economic indicators for use in adjusting the state's salary allocation model. The indicators, which will be used to create a cost-of-living index for the salary model, will include the median cost of housing.

By July 1, 2004, the LEAP will provide the cost-of-living index to an advisory committee for its review. The six member committee, which is appointed by the Governor, will include representation from the Superintendent of Public Instruction (SPI), the Office of Financial Management (OFM), Employment Security, and three representatives of the private sector. The committee's review and recommendations on the index must be provided to LEAP by October 1, 2004.

The index will recognize cost-of-living differences among the nine educational service districts (ESDs).

By January 15, 2005, the director of the LEAP will present the index to the Governor and the chair and ranking members of the House and Senate Fiscal and Education Committees. The index will be deemed approved unless it is rejected by resolution of both houses of the Legislature. The index will then be used to adjust the state salary allocation model, using the cost-of-living index developed for the ESD in which the school district is located.

Twice a year, the LEAP will report to policymakers on changes to the economic indicators that underpin the cost-of-living index. Upon further consultation with the SPI and OFM, the LEAP will identify the changes in the cost-of-living index for each ESD every two years. In addition, every two years, the LEAP will recommend any needed changes to the manner in which the index is calculated and applied. Changes to the index cannot cause a teacher's base salary to be lower than the teacher's base salary was the previous year.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.

Testimony For: The cost-of-living differs across the state. For example, one dollar in Spokane will go farther than the same dollar in Issaquah. The state's salary allocation model doesn't recognize the loss of purchasing power that teachers in high cost-of-living areas experience. Passage of this legislation will help to correct that problem by building a cost-of-living component into the salary model. It will help equalize the purchasing power of teachers’ salaries across the state. The index created by the legislation is adaptable and may shift funding over time to cover the higher costs-of-living in different areas of the state.

(With concerns) The bill is based on a good concept and that concept should be considered in a comprehensive finance study of the state's public schools. The legislation would take the money driven by Initiative 732 and redistribute it, with more of it given to teachers in high cost areas than in low cost areas. The redistribution is a problem and needs to be reexamined; if the Legislature intends to implement this policy, it should use additional funds for that purpose. A housing allowance paid out of local funds may be a better approach to solving the cost-of-living difference among districts.

(With concerns) Megan Atkinson, Office of Superintendent of Public Instruction; Randy Parr, Washington Education Association; Barbara Mertens, Washington Association of School Administrators; and Carol Taylor Cann, Washington State Parent Teacher Association.