We live in a time of radically changing economic systems in our country. The expansion and commercialization of fracking technology has fundamentally altered the supply and thus the price of global oil, coal, natural gas and other traditional fuel sources.
Today, Washington is at the forefront of this broader systems change because we are located at the export gateway to the Pacific and Asia. States where fracking is now commonplace are dependent upon Washington to export their low-priced commodities, even though Washington has traditionally been more of a refinery state (with five major facilities operational). Other states know that the commodities of coal, oil, lumber and other natural resources have long been central to our state’s success, and they will continue to be for years to come. At a broad level exporting commodities has a role in our economy so long as it done with care, objective analysis about the true costs and externalities and intentional environmental consideration.
The vital step ahead is to be intentional and educated about the proposals on the table to export coal and oil from our state. One of my goals is to ensure that we are quantifying the externalities of costs associated with these policies, and not subsidizing environmental and economic harm.
My broader goal is to raise the level of rigor in analyzing these proposals through the lens of a modern, 21st Century community. What type of state do we want for our children? Is an economy of heavy commodity exports such as coal and oil the highest and best use of our infrastructure resources?
The distressing inability of the media, public, activists and even proponents to easily track the process of permitting and consideration of these proposals suggests we need a much more user-friendly approach to educating the public. The state has categorically failed, in my view, to make the broader process understandable for most people.
Given the complexity, I thought it might be useful to provide a base-line update on the proposals under consideration in Washington.
Gateway Pacific Terminal at Cherry Point
The first and most expansive coal export proposal in the Northwest, SSA Marine–a respected Seattle company–first applied for permits in 2011. After a lengthy scoping phase, the lead agencies made the unusual decision to split the environmental review process – Whatcom County and Ecology would prepare an Environmental Impact Statement (EIS) together, and the U.S. Army Corps of Engineering would prepare its own EIS. The scope of the state and local EIS, expected to reach completion in 2016, was quite broad, considering impacts from increased rail traffic through the entire state as well as GHG emissions from downstream use of coal. This came about after more than 100,000 citizens commented in public hearings about the importance of a comprehensive review. The Army Corps review, conversely, was to be quite narrow, looking only at impacts within Whatcom County resulting from construction and day-to-day operations of the facility. It’s easy to see why this division has occurred.
While the agencies were developing EIS documents, the Lummi Nation sent a letter to the Army Corps asserting that their treaty fishing rights would be structurally compromised by the proposed project and requesting that the environmental review be terminated. Though the federal agency has yet to respond, litigation seems imminent if the Army Corps issues a permit in spite of the Lummi’s concerns. The Lummi recently bolstered their legal team in preparation for a fight, if necessary. They are not alone in believing that their case seems strong.
In addition, the Army Corps review is also delayed by the updated plan submitted by SSA Marine in March 2015 – involving less use of wetland area – from 2016 to 2017.
Once both draft EISs are published, there will be a public comment period prior to the issuance of final EISs. In the event that the agencies issue the necessary permits (complicated by a sentiment that a majority of Whatcom County Council appears to be uncomfortable with the plans), a lease for the aquatic land would have to be granted by the state Department of Natural Resources. If this occurs and litigation is avoided, construction could begin as early as late 2017.
Longview Millennium Bulk Terminal
This project was also proposed in 2011, when the principal proponent was Ambre Energy. Since then, Ambre has sold its interest in North American coal ventures to a venture capital firm. The project went through an extensive scoping process in 2013 in which 215,000 comments were received, and like the Gateway project, state and local agencies will conduct a broad review while the federal Army Corps will focus its review on the project area and the immediate vicinity. Draft EISs were expected to be complete by September 2015, but are now delayed until November and will likely be pushed back into early 2016. When draft environmental review documents are released, there will be a public comment period, follow by the issuance of a final EIS.
If permits are issued by the lead agencies, project proponents will still need to secure aquatic leases from DNR. Local environmental groups, represented by Earthjustice, are poised to challenge the project on legal groups in the event that it is allowed to move forward after the EIS process.
Tesoro-Savage Terminal in Vancouver
This proposal would be the largest crude-by-rail facility in the country, receiving 360,000 barrels (4 complete unit trains) per day. Unlike the coal export projects, oil export facility permits are largely reviewed by Energy Facility Site Evaluation Council (EFSEC), which makes recommendations to the Governor who can then greenlight or nix the project. Prior to EFSEC review, however, project proponents secured a lease for the facility site from the Port of Vancouver, under controversial circumstances that angered opponents.
EFSEC review is required to be completed within 12 months, though in practice that has never happened. Still, now that 2 years have elapsed since the project was originally proposed, proponents are getting frustrated with the delays and the lack of any definite timeline. EFSEC has stated that draft review documents could be released for public comment as early as November 2015.
Westway/Imperium Terminal Expansion
This project involves the conversion and expansion of existing facilities to handle crude oil delivered by rail. Grays Harbor County and Ecology are the SEPA lead agencies, and they issued draft EISs for the project on August 31, 2015. The public comment period for these documents will run through October 29th, 2015. A final EIS could be issued as early as spring 2016, and the first phase of the project could be completed by early 2017.
This existing facility proposes to convert and expand to handle 22,000 barrels of crude oil per day. The project was proposed one day before Vancouver issued a moratorium on crude oil facilities. The city announced that it would require a full EIS process in April 2015. The scoping period ended in May, and agencies are working on a draft EIS with no timeline announced.
Public officials statewide have a responsibility to be better informed about these projects and to help educate our community about the economic, social, environmental and political implications on all sides.
I’m trying to do my small part.
Your partner in service,
I applaud Gov. Jay Inslee’s decision to appoint my treasured friend and budget-writing colleague Rep. Ross Hunter as director of the Department of Early Learning.
Hunter, chair of the House Appropriations Committee, will resign his seat representing the 48th Legislative District to assume the new role.
There are few people in public life today with more resolve, ability and conviction to transform the lives of young children through high quality early learning programs. Washington is leading this education revolution in large part because of Ross’ unrelenting work over the past decade to invest in real kids living real lives. Ross and Rep. Ruth Kagi have been at the forefront of educating fellow legislators and our state that highly targeted investments in early learning provide a financial and moral return on investment that is simply unmatched. Now, after 13 years as a legislator, Ross will harness that passion for improving the lives of young children in the central hands-on management and leadership role in the executive branch.
In his service as a state representative, Ross has helped transform our approach to public education from early learning through K-12 and higher education, finance, budgeting, health care and much more. He has been a premier thought leader on how to modernize our out-dated system of funding schools. He will be missed as an indefatigable and respected member of the Legislature but his service to the seven million people of Washington continues without missing a beat.
Your partner in service,
My friend and education funding champion Rep. Ross Hunter posted a thoughtful response to 19 senators’ assault on the state Supreme Court for their recent implementation of a $100,000 per day fine for the Legislature’s ongoing failure to meet the paramount duty of education funding.
It’s a worthwhile read.
The missing link in this journey is the public.
Here you go: Constitutional Crisis? Not so much..
Your partner in service,
The legalization of recreational marijuana led by Washington and Colorado is on the march nationally. Our experience is being watched in cities, states and nations around the world and has global implications.
When the people of Washington legalized recreational marijuana they did so under the hope and expectation of a well regulated and appropriately taxed system. They were, it seems to me, simply tired of a failed war on drugs that did not increase public safety, severely punished relatively modest recreational drug use and did so at a staggering cost to taxpayers. It was simply time for a new approach.
The troubling part of the experiment that I initially anticipated but did not fully grasp is a reckless, uncontrollable political addiction to marijuana taxes.
I have been unrelentingly critical of the 2015 Senate budget that is predicated on an extraordinary level of marijuana revenues. Unfortunately, thanks in part to a quirk of timing, the non partisan Economic & Revenue Forecast Council is projecting marijuana tax collections that are astronomical and, in my view, based on faulty assumptions. This, in effect, implies that the state Senate’s heavy reliance on marijuana taxes is reasonable.
But it is not. It’s a mistake we will most likely regret for years. My concern as Finance chair is that we have created a broad public expectation that marijuana revenues are manna from Heaven without implication or consequence. It is the ultimate “tax the guy behind the tree” temptation that too many elected officials already cannot resist.
Washington has the most unfair and economically inefficient tax system in the nation. Adding marijuana revenues as a shaky new pillar is unwise, risky and a poor substitute for meaningful tax improvements.
But it’s not just financially reckless it’s philosophically irresponsible. It is hardly an expected move from conservatives, especially given the Republican Party’s formal opposition to I-502. Regardless of the past, marijuana revenues are too new, too uncertain and too unpredictable to be a responsible basis of an education budget.
While it’s always uncomfortable to be in a position of questioning the technical accuracy of our state’s respected forecast infrastructure, their new revenue estimates are, in my view, based on a deeply flawed policy and financial assumptions that are unlikely to be realized. The consequences of basing a two-year operating budget on these assumptions means we are likely to face another major shortfall once again when the next budget is due in 2017.
First, the state is projecting a total of $1.12 billion in marijuana revenues from 2015 through 2019, with $374 million expected in the next two years. Think about that: We are anticipating raising approximately the same amount in new marijuana taxes within a few years that we currently collect in traditional cigarette taxes. Washington’s combined effective tax rate under the Senate plan is 47% for recreational and medical with no distinction between the two. Since legalization in July of 2014, the state has collected a total of just under $50 million in total marijuana revenues.
Colorado by comparison—a state with an existing regulated medical marijuana market structure in contrast to our unregulated system– is projecting a total of $179.8 million over the next two years. Washington’s estimates are 65% higher than Colorado’s forecast. Our tax rate is 51% higher than Colorado’s. Colorado effectively taxes medical marijuana at 6.5% while Washington taxes medical marijuana, under the Senate plan and projections, at 37%.
Regardless of tax rates, here’s the bottom line of total consumption: Washington forecasters are anticipating our 7 million residents will consume a total of 6.2 million ounces per year. Colorado forecasters are anticipating that their 5 million residents will consume 1.4 million ounces in that same year. As I understand it, both state forecasters used the same core data and operating assumptions, metrics and customized studies provided by the respected Rand Corporation.
Here’s the difference: Colorado legislators conservatively slashed the projections in half, delayed recognizing any revenue on their books for a year, and even then revised their estimates down substantially after actual revenue collections came in at less than 40% of projections in order to avoid the uncertainty. Legislators rejected the initial estimates as too large. Our Senate is pushing to do the opposite with the same basic data: Recognize and book every penny of the initial estimates without questioning the common sense of it all.
Second, our state forecast does not take into consideration the legalization of marijuana in Oregon, a development that will take effect soon and is unpredictable at best. Under the Senate plan the difference between the tax rate in Oregon and Washington will be 37% given that Oregon’s tax is a mere 10% while ours is an effective rate of 47%. The likelihood of Washingtonians along the border area finding ways to shop for recreational marijuana in Oregon does not seem trivial.
Third, the forecast assumes widespread availability of recreational marijuana to meet demand from at least 50% of the current medical marijuana market, yet dozens of cities and counties in Washington have instituted recreational bans and moratoria. Right now, there are an estimated 99 medical dispensaries in the city of Seattle alone, but only 138 I-502 retail stores operating across the entire state. The bans and moratoria make the prospect of achieving the long term projected sales of 52% of all marijuana activities seem remote. How can legal marijuana reasonably expect to compete with the illegal market when availability is severely limited throughout the state?
Fourth, the reluctance of the Senate to share meaningful revenues with local governments–which face real impacts on the ground and under the current system receive no revenue share from Olympia–may further damage successful revenue collections and the willingness of cities and counties to invest in their own prevention, enforcement and public safety programs.
In partnership with many colleagues and stakeholders, I have attempted to improve the structure through House Bill 2136 an omnibus regulation and taxation framework.
But no bill can regulate elected officials’ inability to avoid the easy political temptation of marijuana tax revenues. I have strenuously objected to overly optimistic revenue projections from day one. The wave been difficult to stop.
As a parent of four children I am wildly unenthusiastic about the extensive availability of marijuana among our youth. We have rapidly socialized marijuana without prevention investments and programmatic support and we are seeing negative impacts in high schools across the state. While I don’t necessarily regret Initiative 502 passing given the importance of a new approach in our country, I very much regret the ineffective and unwieldy policy implementation that has been a disservice to the people of our state in both the recreational and medical markets.
The public was promised a well regulated and appropriately taxed system. We have neither. Now, the Senate is pushing the Legislature to book the political and tax benefits of legalization without recognizing the true financial costs to the community. We are even fighting to protect pennies on the dollar of investments into prevention.
Most of all, as chair of the tax-writing Finance Committee and a budget writer, I regret that instead of meaningful tax policy–creating a modern tax system with low rates, broadly applied with few exemptions–we are conveniently retreating to a dangerous over reliance on marijuana tax revenues to prop up our state budget and meet our fiduciary obligations to fund public education.
I find it ironic that on the issue of marijuana taxation it is Democrats–who generally supported I-502– who are more cautious and fiscally conservative and Republicans–who generally opposed I-502– who are acting more like big spending addicts.
The world is watching.
Your partner in service,
The most effective state tax system would be low rates, broadly applied with few carve outs and exemptions. As Finance chair that continues to be the policy framework through which I evaluate legislation, issues and ideas. Unfortunately, as we all know, Washington has the categorical opposite on every front.
With a reliance on sales tax and a gross business tax created 83 years ago as a temporary measure, we rely upon the whims of consumer spending to fund public education and other vital services. Add to the mix 650 tax preferences for virtually every major industry and you are left with a economically inefficient patchwork of unfairness.
While big picture tax reform is elusive, we can improve the clunky system we have today, broaden the base and make it more fair and efficient.
A prime example is on line sales taxes.
Every year we lose hundreds of millions in uncollected revenue on consumer purchases that remain untaxed due to the unwillingness of Congress to pass the Marketplace Fairness Act, a bill that would update our nation’s tax code to essentially include–get ready for it–the Internet. It says that ‘a sales is a sale’ regardless of where it’s purchased or the vendor selling it.
Chances are a large percentage of your shopping these days is done online, at home or the office, on your computer, tablet or phone.
For many of those transactions you pay a sales tax at the same rate you would at any brick-and-mortar store in Walla Walla or Bellingham or Seattle. But because of a U.S. Supreme Court ruling from 1992 — when the Internet was hardly a whisper to most people — transactions with some online retail giants go untaxed.
That hurts Washington to the tune of hundreds of millions in lost revenue, and it hurts local companies in the state that do pay their taxes. The politics are ugly as companies jockey and lobby to protect their interests.
The responsible answer is to level the playing field and make sales taxes apply to all equally.
And, whether you like or hate our reliance on the sales tax, we can all agree that if we have to do it we should at least do it right. This is one of the reasons I serve on the Streamlined Sales Tax Governing Board, a national group of states and industries working together to coordinate complex sales tax policy.
And that’s why this year, I’ve introduced the Washington State Marketplace Fairness Act to establish nexus with online retailers, level the playing field for traditional brick-and-mortar businesses and collect critical revenue from existing sales.
Few realize that for every item you buy online that you don’t pay sales tax on, you technically are responsible for paying an equivalent use tax to the state of Washington. But every year, only 1 percent of residents who owe use taxes put it in an envelope and send it to the Department of Revenue for obvious reasons.
We could simplify the system and make it more fair simply by collecting our regular sales tax for all online sales. A sale is a sale.
So what’s the problem?
In 1992, the U.S. Supreme Court ruled in Quill Corp. v. North Dakota that a state may collect sales and use taxes from a retailer only if the retailer has a physical presence such as a formal office or distributor in the state. This decision set a clunky precedent that online retailers could sell to customers in a state that collects sales taxes without charging sales tax.
But this year in an even rarer precedent, Justice Anthony Kennedy — who concurred with the 1992 decision — invited the states to petition the Supreme Court to overrule Quill and allow states to collect sales and use taxes from online retailers regardless of whether they have a building, office, distributor or physical presence in that individual state. To do that, we have to take a stand as a sales tax state and push the boundaries of the Court’s pre-Internet decision, and to do that we have to expand how we define nexus in state law.
Under our proposal, nexus would allow our state to collect sales and use taxes from online sales based on a retailer’s economic connection to Washington state, not just geographical offices. It would say, in effect, that a sale is a sale. This proposal establishes new standards for nexus for out-of-state retail businesses by using a five-tiered approach which considers the seller, in-state affiliates, a retailers’ physical presence, and payment methods. For instance, PayPal has offices in Washington, so if PayPal is used for payment the seller will need to collect and send in sales tax. We can make it easy to administer for new sellers because we already to it today.
The Washington State Marketplace Fairness Act is about more than revenue — it’s about establishing fairness for Washington businesses. If you were given a choice at checkout whether or not to pay sales tax, you’d likely choose the latter. But when a competitor can offer the same product without charging sales tax, that puts our local neighborhood businesses at a competitive disadvantage. In his unprecedented invitation to the states, Justice Kennedy even acknowledged the “extreme harm and unfairness” the Quill decision has caused on states like Washington.
How will this affect you as a consumer? Probably not that much. Many online shoppers don’t notice a difference between buying something at Amazon and buying something on Etsy — but you’ve already paid sales taxes on every item you’ve ever purchased from Amazon. The Washington State Marketplace Fairness Act would simply extend our existing system to sales to handful of other retail websites like Etsy, Overstock and eBay.
By passing the Washington State Marketplace Fairness Act, we can conservatively collect more than $240 million by the end of 2019 from sales into Washington by out-of-state businesses. That would be a large piece to the puzzle of fully funding basic education, mental health care and other critical investments. In addition, local governments would collect substantial new revenue from sales and use taxes.
I have the great honor of representing the legislative district that is home to Amazon and, as a technology entrepreneur in the wireless and software industries, I want to ensure that our state’s policies are aggressively technology neutral. Our polices must be fair so that all on line sellers play by the same rules.
Amazon as a global company is extremely nervous that individual states will begin implementing their own sales tax collection policies, but in an era when Congress is both incompetent and irresponsible, states must lead. Nothing can hide the fact that physical presence as a standard to collect taxes is outdated, inefficient and unfair. As a leading sales tax state, our responsibility is to act decisively on this important national issue.
My plan is not a broad-based tax increase, it’s a smart change in our state’s tax collection approach that levels the playing field so everyone plays by the same rules regardless of politics.
In 1992 most folks didn’t yet know what the Internet was. Some universities, companies and agencies had email and tinkered with the coming wave. It’s past time we updated our tax policies for the 21st Century.
We’ve been invited to challenge the Court’s old ruling and establish marketplace fairness for states like Washington that rely on the sales tax to survive, and we plan on accepting that gracious invitation.
Your partner in service,
For four years the battle has raged in Olympia about how to pass a comprehensive transportation package that invests in our state’s public infrastructure, enables our global economy and meets the needs of rural towns, suburban communities and big cities. For four years the dialogue has been framed more by anti-tax rhetoric and proprietary regional interests than aspirational ideas of long-term statewide growth. For four years the debate has become smaller and smaller, more defensive, less courageous and strategic. For the first time in an era of divided government, a convoluted bill to raise the gas tax stumbled from the Republican-controlled Senate to the House with a meek but bipartisan 27-22 vote.
The business community, Seattle Times and other proponents are–understandably–so relieved to see any progress on a transportation package that it becomes easy to brush past the lack of intellectual rigor of the plan itself.
Most in Olympia are committed to a bold, modern 21st Century transportation investment plan. Yet the Senate’s transportation package is inadequate not merely because of the gaping holes in the integrity of the bill itself (the numbers don’t balance–there’s hundreds of millions of spending on projects that aren’t actually funded) but because of the smallness of the approach.
Washington’s public infrastructure and transportation network is at a crossroad between mediocrity and greatness. We will attract hundreds of thousands of new residents in the coming years. We will continue to grow. Our cities will continue to struggle with density, our suburbs will continue to struggle to mix job opportunities with affordable housing, our rural communities will continue to struggle with limited economic opportunities.
On the spending side, the ragged idea that gasoline taxes are exclusively for roads, highways and concrete and not meaningful investment in transit is so impotent it’s embarrassing for us as a state. State dollars exclusively for highways and concrete and local dollars exclusively for transit brings all sides down to the common denominator of self-serving, narrow interests. The lack of transportation connectedness–integrated transportation network of rural, suburban, city, industrial needs–is where the lack of imagination is weak.
On the revenue side, the idea that gasoline taxes continue to be the best form of taxation is itself so outdated it’s hard to imagine a less creative approach. The plan proposes $15 billion in road, bridge, construction and maintenance investments spread strategically across the state to garner votes. The full range of transit requests add another $15 billion or so–virtually every penny from regressive and economically inefficient tax sources.
So let’s ask: If you had the opportunity to invest $30 billion in taxpayer dollars to build a modern, 21st Century transportation system to meet the needs of our growing state is this how you would raise it and invest it?
Not a chance.
The existing philosophical construct perpetuates the ridiculous notion that transit investments are separate–the responsibility of local taxpayers to fund on top of their gas taxes by a vote of the people. Sound Transit 3, a vital link to the future, is granted $11 billion in incremental taxing authority in a cobbled construct of sales, property and motor vehicle taxes. Kitsap County is asking for authority to raise their sales tax by 0.3% to construct a passenger-only ferry to cut the commute time from Bremerton to Seattle to 35 minutes (talk about economic development). Snohomish County requests the opportunity to add 0.3% sales tax to fund their Community Transit for buses.
Yes, I’m a regionalist, urbanist, modernist, density-supporting advocate to the core, but I’m no less committed to a strategic framework that works for all statewide on the revenue and spending side of the equation.
The package ignores the painfully obvious: Our transportation revenue sources are dying and it’s time to build a more responsible way to fund our entire transportation system. The weakest link in the current transportation package isn’t poison pills, it is the lack of imagination in how to pay for transportation for the next generation of our state. The lack of transparency and oversight of how transportation dollars are spent is also a legitimate concern from all sides. That means everything from the deep-bore tunnel to the massive 167 project and other mega-projects on the table. The public has a right to be skeptical on all sides, and the Legislature’s package must rebuild trust not detract from it.
Let’s invest in the Metropolitan Revolution for our urban region and authentic economic development for our rural communities by building a stronger network of interconnectedness. Silos of road projects dolled out by legislative district is hardly a visionary strategy.
To pay for it, we should seriously consider in this package some new financing approaches that are more economically efficient. Let’s include the idea of a well crafted vehicle miles travelled program (not GPS-based but rather total annual mileage reporting). We should seriously consider a more comprehensive, regional network of tolls to pay for maintenance and operations of our roads. We should seriously consider an incremental Puget Sound-regional gasoline tax that’s free of the 18th Amendment constraints to help fund trains, buses and other transit options. We should consider the idea of strong public and private sector partnerships. We should seriously consider a payroll tax on large employers to help fund targeted investments in transit so the companies’ own employees can get to and from work more efficiently–with the investments supported by business. And we should seriously consider the idea of a carbon-pricing program where polluters pay–or at least receive less of a subsidy from taxpayers– to help fund our statewide transportation system into the next generation.
A transportation package that perpetuates status quo design of transportation financing and spending serves no one effectively. Without an integrated investment approach that tackles rural, suburban and urban needs–and a creative approach to new, market-oriented and user-based ways of financing transportation–it’s just a glorified list of pork projects with the middle class getting handed the bill. That may garner a handful of votes in the Legislature but it’s unlikely to work well for seven million people of Washington.
We are so much more as a state than what we’ve become.
Your partner in service,
The Washington State Constitution crafted in 1889 includes these mighty words in Article IV, section 1: “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.” This language is as unique as it is powerful. We are the only state in the nation where our state constitution has this forceful paramount duty clause. Our founders believed–and the common perception today–is that this strong state constitutional language directly translates into better educational quality and higher funding for our kids.
As chair of the Finance Committee grappling with funding of our state budget, I believe there is philosophical and policy value in raising the uncomfortable argument that our foundational premise may not, in fact, be true.
The state’s paramount duty clause was penned in the day of the one-room schoolhouse when we had a kindergarten through 8th grade system. The core purpose of Article IX was to establish state oversight of the system of hundreds of local school districts and to ensure good management of the public lands granted to the state by the federal government for the benefit of public schools. There is no question that framers of our state constitution thought this lucrative endowment would result in an unprecedented level of funding for common schools.
Since 1889 this philosophical assumption has not played out for real kids living real lives.
Today, early learning and higher education are more than ancillary, they are core to our desire to educate the whole child and whole person. We cannot have a system where “the paramount duty” is only K-12 and leave the other aspects of education as second class citizens. It doesn’t work for kids, parents, business or an educated civic society.
Washington is a “state” funded education system where most tax dollars are sent to Olympia to be distributed back to local schools and small local levies are intended for modest enhancements. The model has been so fractured, grandfathered, redesigned and reconfigured that it’s unrecognizable.
Our global challenge states—those with high quality of life that we aspire to compete with in constructive ways—have generally chosen to follow a different path through primarily locally funded school systems. The state’s role in those other states is to focus not on primary funding but on structural tax fairness and educational quality.
In our state, the romantic image of strong funding from the state government has not been realized. Political impasse over generations has created a system with unconstitutional funding structures, relatively poor student outcomes and great inequality.
A case can be made that Washington’s top-down approach disconnects schools from their natural, strongest base of support—local families and communities.
The paramount duty has not been fulfilled. Many factors have contributed to the disjointed, ineffective tax and funding structure we have today, a structure that virtually guarantees inequitable access and outcomes. Unfortunately, longstanding political and social constructs bar meaningful progress. Nothing, over 40 years of legal battles where the State has been consistently been told to address the inadequate and inequitable system, has really changed.
We are so much more as a state than what we’ve become.
There are, in fact, other models that might deliver on the Paramount Duty in a more fulsome way than our top-down, centralized approach.
A new model would have to have some critical elements:
- The State’s responsibility is to provide education at all levels. Operating and funding common schools is a fundamental duty of the State but shared with local districts. The State must ensure equity, taking into consideration each schools property values, student need and the cost of implementing the state’s definition of Basic Education.
- General and Uniform-The State must provide for a system of public schools and must define a minimum program that all districts offer. The implementation duty is shared with local school districts, which are authorized to provide funding and programming beyond the foundational program established by the district base regular levy, the state equalization system, and state law establishing minimum program requirements.
- State must require school districts to collect a base regular levy, the amount of which will vary per law based on property values and student needs.
There are states with both higher funding levels and educational quality outcomes that are worth a look. Here’s how they do it.
School funding in Massachusetts is meant to ensure that all school districts have enough resources to provide all students with a high-quality education, taking into account the ability of each local government to contribute financial resources. The formula directs more money to students who need it more and directs more money to districts that have a lower ability to provide local resources. The one, central job of the state government is to ensure equity for all its students through tax equity and thus ability to pay.
Step 1: Calculate district foundation budget
Multiply the number of students at each grade level and demographic group (Low-income, Special Education and more) by a series of education spending categories (Compensation, professional development, etc…).The total across all categories in summed and put into per-student terms. ELL, Special Education, and low-income students generate additional allocations.
Step 2: Required Local Contribution
Each municipality is required to contribute a defined amount in locally raised tax revenues. A uniform statewide percent of local property and state income tax is determined and each municipality must contribute that amount, at minimum, to public education.
Step 3: Fill in the gaps
The required local contribution is subtracted from the district foundation budget (Step 1). The state then pays the difference between those two amounts to the district to make their budget whole.
Step 4: Municipalities may contribute additional local support if they desire
The district budget determines the minimum amount needed to provide a high-quality education, but districts are able to raise local dollars beyond the foundation budget to enhance their local education system.
The state of Massachusetts pays for 42% of public education, while 51% comes from local sources.
Every student generates a base per-pupil allocation. This base allocation is further enhanced for students participating in the Free and Reduced Price meals program, the extended time program, and English language learner program. Additional funding is also provided through gifted students funding and alternative compensation revenue among others.
Alternative Revenue Compensation is additional money provided to districts that develop an alternative compensation model and get it approved by the state.
State covers about 60% of the cost of education with local revenues contributing 32% and federal sources contributing 8%.
The Foundation Program provides base per- student funding for public schools in Maryland, $6,694 in 2010. The state pays districts a certain portion of the Foundation Program amount with a minimum state contribution per student of $1,004 or 15% of the Foundation Program base. Districts are required to contribute the shortfall between the Foundation Program base amount and the actual state contribution. The amount of expected local contribution varies depending on the average per-student wealth of the district relative to the state average.
Additionally, the Foundation Program base amount varies across districts due to the Geographical Cost of Education Index. This index adjusts for variations in the cost of providing education across the state.
Districts receive additional enhancements for low-income, special education, and English language learner students. The enhancement for these categorical programs is dependent on the relative wealth of the district. Property poor districts receive a higher per-pupil categorical enhancement for these programs than property rich districts
Guaranteed Tax Base Formula – Additional enhancements are provided to districts that provide more local funding than is required by the state formula; this Guaranteed Tax Base formula gives greater enhancements to lower-income districts.
The state of Maryland pays for 42% of public education, while 51% comes from local sources.
The real point is to pursue a funding system that produces results for students. Washington ranks 30th in the nation in our high school graduation rate with 79% of incoming freshman graduating in four years. Minnesota ranks 7th in the nation at 88%; Massachusetts ranks 12th at 86%; Maryland ranks 16th at 84%.
The national average in 2011-2012 for per-student funding was $10,667. Washington came in below the average at $9,617 while Minnesota came in above at $10,781; Massachusetts at $14,844 and Maryland at $13,871.
Here is the data from each of these states in three areas (4th grade reading, high school graduation and post-secondary enrollment)
|Subgroup||WashingtonGrad Rate||MassachusettsGrad Rate||Maryland Grad Rate||Minnesota Grad Rate|
2013 NAEP Data
4th Grade Reading
Below is a chart showing the college going rate for students who graduate high school and enroll directly into a postsecondary institution
College Going Rate
There is a clear, compelling and influential linkage between those states with locally-oriented education funding systems and both quality outcomes and higher funding levels. It doesn’t mean they are right and we are wrong or there is only one answer. It just opens the dialogue for us to put tough questions on the table about what type of modern, 21st Century educational finance system we want to build.
Ironically, perhaps we can implement the values of our state constitution to invest in public education more effectively by making a change to our constitution to reconnect our local dollars to local schools.
Perhaps we should use of the opportunity of the crisis—the McCleary lawsuit and public pressure to increase funding and improve outcomes—to reconsider our approach itself.
Your partner in service,