Bill Keim: Untapped wealth could unlock McCleary case

The state House and Senate have both passed legislation designed to address the McCleary decision. Now we must wait as members from both chambers try to hammer out the big differences between their plans in a special session. Whatever they submit for Gov. Jay Inslee’s signature, the state’s high court will ultimately determine whether the plan meets the constitutional standards it has laid out in multiple rulings and court orders.

State Supreme Court decisions in 1978 and 2012 found that our funding system hasn’t met the standard established in Article IX, Section 1 of our state Constitution:

“It is the paramount duty of the state to make ample provision for the education of all children residing within its borders, without distinction or preference on account of race, color, caste, or sex.”

In the McCleary decision, the court found that total school funding isn’t ample and that there has been an over-reliance on local levies to fund what should be the state’s responsibility.

Part of what makes the Legislature’s task so difficult is two decades’ growth in the use of local levies to backfill inadequate state funding. In 2016, local levies totaled nearly $2.4 billion, most of which funded basic education services that are the state’s responsibility.

One of the largest areas of such local funding is educator salaries. In 1987, the state paid over 99 percent of salary costs, but by 2012, that state contribution had shrunk to 77 percent. While some of those local salary expenditures are for enhancements like extracurricular programs, the bulk of it has been for basic education.

The Senate’s plan is to basically convert those local levies into state property taxes, which helps address the funding-source part of the problem, but does little to amply fund the system. A 2017 report published by Education Law Center at Rutgers University points to one aspect of our funding problem. According to its data, even with these local contributions, Washington ranks 48th in the nation in wage competitiveness. Students across the state are paying the price for that problem as devastating teacher shortages undermine the quality of their education.

While the House provides significantly more funding than the Senate, both plans are hampered by resource limitations based on perceptions of what our citizens are able or willing to pay. Another element of the Rutgers report sheds some light on that issue. Its funding-effort index calculates each state’s education spending as a percentage of its gross state product. In that measure, Washington ranked 46th in the nation.

Clearly, we have untapped capacity. To get to the midpoint among the states would require an increase of $2.6 billion per year. That represents $5.2 billion per biennium, which is more than double the 2017-19 new funding provided by the House and nearly six times what the Senate plan would add.

The problem with Washington’s taxes isn’t that they are too high, it’s that high earners aren’t paying their fair share. According to the 2015 report by the Institute on Taxation and Economic Policy, Washington has the most regressive tax system in the nation. As a national average, the top 1 percent of wage earners paid 5.4 percent of their income in taxes, compared with 10.9 percent among the lowest 20 percent. In Washington, the top 1 percent pay 2.4 percent while the bottom 20 percent pay 16.8 percent.

Inslee’s revenue package sought to address that inequity while raising the revenue needed to amply fund schools. The House plan followed the same pattern, but scaled back the total amount when facing the challenge of securing the necessary votes to pass its budget. Senate Republicans insist that McCleary can be solved within existing revenue. Their funding plan is based on a levy swap that converts local levies into a state property tax without adding much new revenue.

It can be argued that neither plan provides ample funding, but the House plan is clearly much closer to that bar. Even after the legislative negotiations come up with the amount and source of funding, many other issues must be addressed as part of a McCleary plan to avoid similar problems in the future. One of the most important provisions is to prohibit any additional local funding of teachers’ basic education salaries.

There also needs to be a thoughtful transition period in which we unravel existing practices while providing sufficient capacity for school districts to meet their contractual obligations without bankrupting the district. That’s a big lift for legislators, but current and future generations of students are counting on them to get it right.