Office of Superintendent of Public Instruction

Washington’s Financial Condition: Layperson’s View

1. What is the financial outlook and Governor’s proposed solutions?

2. What federal funding will be available to help the state?3. What are the implications for K-12 funding?

Office of Superintendent of Public Instruction

National and State Economic Downturn• National economy has been in recession since

12/2007• Washington lagged the downturn, and may lead

improvement…• But state revenues collections will be impacted

more severely b/c this is a consumer lead recession▫ Consumer sentiment is lower than in previous

recessions▫ Taxable automotive and construction activity has

dropped off sharply▫ Other lay-off’s since October are significant: WaMu,

Boeing, Microsoft

• Washington State Economic and Revenue Forecast Council: www.erfc.wa.gov

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Office of Superintendent of Public Instruction

Budget Outlook• November forecast: $6.1 Billion projected deficit

for 2009-2011 Biennium▫ Includes revenue downturn this fiscal year▫ Through 6/30/2011

• New preliminary forecast on February 19th

▫ Speculation that Council will announce $8.5 - $9 Billion deficit through 6/30/2011

▫ Official forecast on March 19th

• 2011-13 Biennium▫ November forecast: economy would improve quickly▫ February/March forecast: guessing this will be revised

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Office of Superintendent of Public Instruction

Including the shortfall for this biennium, the Governor’s budget addressed a budget problem of over $6 billion

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($6,120)Source: Senate Ways and Means Committee Staff

Office of Superintendent of Public Instruction

58% of the Budget is Protected and Unavailable for Reduction

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Basic Education38%

Debt Service/Pensions/Other

8%

Medical Assistance12%Other K-12

3%

Natural Resources1%

Higher Education10%

Other Education.5%

General Government2.5%

Other Human Services25%

Near-General State Funds; 2009-11 Biennium Maintenance Level

Office of Superintendent of Public Instruction

Protected Sectors Drives Large Reductions in Others

If Deficit Level is:

Deficit as % of Entire NGF* Budget

Deficit as % of Budget Available for Reduction

$6.1 Billion 17% 39%

$8.5 Billion 23% 55%

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*Near General Fund-State

• Fortunately, policymakers have some options that mitigate the need for pure percentage reductions at this level▫ Some resource changes as proposed by Governor▫ Pension method change▫ Federal funding

Office of Superintendent of Public Instruction

The Governor’s budget solves slightly under 2/3rd of the budget problem by reductions and not funding salary increases…with the remaining solution coming from various resources changes

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Source: Senate Ways and Means Committee Staff

Office of Superintendent of Public Instruction

The reductions in the Governor’s proposed 2009-11 budget are spread across state government, but some of the largest reductions occur in human services, K-12, and higher education

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* This reflects estimated net reductions accounting for any policy level increases included in the Governor’s proposed 2009-11 budget. There was also reductions made in her proposed 2009 supplemental budget for the current biennium.

Source: Senate Ways and Means Committee Staff

Office of Superintendent of Public Instruction

Schools are 41% of the Budget; Take 16% of the Governor’s Proposed Reduction

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* Reflects net near general fund policy change after accounting for reductions and increases, but excludes impacts of compensation-related adjustments and assumed federal funding increases. Source: Senate Ways and Means Committee Staff

Office of Superintendent of Public Instruction

Federal Stimulus Funding Over 2 Years•Governor’s proposed budget assumed $1.1

Billion•Still refining new estimate for Washington:

•Not all available to solve state budget deficit!!!

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Anticipated 2 Year Funding Based on Conference Negotiations

$835.6 Fiscal Stabilization (K-20 Portion)

$175.2 Title I

$231.9 IDEA (Spec Ed)

$8.6 Ed Technology

$0.0 Line-Item School Construction

$3,431.5 All Other

$4,682.8 Total for Washington

Office of Superintendent of Public Instruction

K-12 Context• COLA is 4.1% in 2009-

10; 0% in 2010-11▫ New update in March▫ $360 M cost included in

deficit projection▫ Drives an additional $158

M in local funds needed

• State cannot cut “basic education”

• Non-basic items include (biennial cost):▫ K-4 enhancement ($388 M)▫ 2 LID ($75 M)▫ Levy equalization ($456 M)▫ I-728 ($908 M)▫ Gifted education ($20 M)▫ Health Benefits inflation

($96 M if 7% inflation)

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Office of Superintendent of Public Instruction

Governor Proposed K-12 Budget•No COLA for 2009-11 Biennium

▫$360 M savings in K-12; $620 M savings in state government total

•I-728 reduced 22%▫$198 M cut from $908 M program

•Levy Equalization reduced 33%▫$147 M cut from $456 M program

•$48 M in programmatic cuts (e.g., Reading Corps)

•$40 M; eliminate Math/Science Professional Development

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Office of Superintendent of Public Instruction

Possibilities: Caution!!!•Budget reductions by state are very

probable▫LEA probably not as deep as proposed by

Governor•Likely no, or low COLA funded by state

▫Local funds value of $158 million or $80/student/year

•Health care inflation funded•Health care purchase-shift debate•Pension contribution adjustment•More federal funds•Budget delay will make May notices

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