State Funding Formulas for Pupil Transportation.  The state's statutory program of basic education includes transportation to and from school for eligible students, including transportation of students for special education services and between schools and learning centers.

To provide transportation allocations to school districts, the Office of the Superintendent of Public Instruction (OSPI) uses the Student Transportation Allocation Reporting System (STARS), which is a regression formula that uses prior year expenditures, student passenger counts, and district characteristics to calculate the expected costs of to and from transportation.  The STARS formula result is then compared to the district's allowable transportation expenditures from the prior year.  The school district receives the lesser of the two calculated amounts, plus any compensation adjustments provided in the operating budget.

Pupil Transportation Service Contracts. School districts may contract with private nongovernmental entities for pupil transportation services provided that the district engages in an open competitive process for the services at least once every five years. 

School Employee Benefits. To provide health care and related benefits for all eligible public school employees and represented employees of educational service districts (ESDs), the Legislature created the nine-member School Employees' Benefits Board (SEBB).  The program is administered by the Health Care Authority (HCA).  Under the SEBB, collective bargaining for school employee health benefits is consolidated to a single agreement.  State prototypical school funding formulas include funding for health benefits under the SEBB for state-funded staff units.  The current Health Benefits Rate that applies to each SEBB-eligible school employee is $1,100 per employee per month in the 2023-24 school year.
 
For retirement, classified school employees are provided pension benefits through the School Employees' Retirement System (SERS), administered by the Department of Retirement Systems.  For the 2023-24 school year, the employer contribution rate is 10.73 percent excluding administrative fees, and the employee contribution rate is 7.76 percent.

Contractor Benefits. A school district may only enter into, renew, or extend a pupil transportation services contract with a private nongovernmental entity if that entity provides the following to, or on behalf of, its employees who choose to opt in for coverage:

• an employer health benefits contribution equal to the employer payment dollar amount in effect for the first year of the contract for health care benefit rates?cockle rates, published annually by HCA, for the SEBB program for school employees; and
• an amount equivalent to the salaries of the employees of the private nongovernmental entity multiplied by the employer normal cost contribution rate determined under the entry age cost method for the SERS, as published in the most recent actuarial valuation report from the Office of the State Actuary for the first year of the contract. 

Employees are defined as in-state employees of the private nongovernmental entity working sufficient compensated hours performing services pursuant to the contract with the school district to meet the eligibility requirements for the SEBB program if the employees were directly employed by a school district.

All pupil transportation service contracts entered into or modified after the bill's effective date must include a detailed explanation of any contract cost increase by year, expenditure type, and amount, including any increases in cost that result from providing the required benefits.

State Reimbursement of Costs. Subject to amounts appropriated, OSPI must provide supplemental transportation allocations to reimburse school districts for increases in costs directly attributable to the new contractor benefit requirements.  The reimbursement must be based on the total contract cost increase, less the portion of the increase not attributable to benefits required under the bill, less the increase in allocations based on the actual cost increase through the transportation funding formula.

Beginning September 1, 2024, school districts that contract for pupil transportation services must report:

• a breakdown of the total contract increase to show the required dollar equivalency for health care and retirement benefits;
• a breakdown from the contractor showing the cost of healthcare and pension benefits before and after the implementation of benefits required in the bill; and
• the amounts received under state transportation formulas before and after the implementation of SEBB to determine funding already being included.

OSPI may suspend these reporting requirements on or after September 1, 2027, for school districts that do not request supplemental transportation allocations.