Much Ado About McCleary

by John Stafford

INTRODUCTION

In 2012, the Washington State Supreme Court, in its McCleary decision, upheld a lower court ruling that found the State to be in violation of Article 9, Section 1 of the State Constitution. This article asserts (in part) that, "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." The Supreme Court ordered the State to make additional investments in K-12 education. Then, in 2014, The Court found the State to be in contempt for failing to make adequate progress toward achieving these objectives. Last week, the Court held a hearing to listen to arguments from both the McCleary plaintiffs and the State regarding whether the State has made sufficient progress since 2014 to warrant purging the contempt finding. The Court will make a ruling in the near future.

The McCleary decision has profound implications for the State's public education system as well as (potentially) its tax structure. This issue will be the central focus of the 2017 State Legislative Session. This article seeks to explain the true significance of McCleary by distilling it into its foundational components. It is not a comprehensive history of the McCleary case, nor a prediction of what the Supreme Court will decide in its pending ruling, nor a partisan essay (all of which are available elsewhere).

Five arguments are made: (a) Washington State has gone from being a high spending state to a low spending state on K-12 education; (b) the State has made insufficient progress toward increasing its educational spending under McCleary; (c) the reason the State has become a low-spending state is two decades of tax policy negligence, and the only way to address the problem is therefore tax policy reform including a tax increase — both anathema to the Republican Party; (d) at this juncture, both parties are adopting a coy, political approach to guard against the election implications of their respective policy positions; and (e) there is the possibility of a "Grand Bargain" to address McCleary, albeit one that will involve political leadership as well as significant new taxation.

WASHINGTON HAS BECOME A LOW SPENDING STATE ON K-12 EDUCATION

Washington State is a high-income state — in 2015, we had the 12^th highest personal income per capita in the United States. Most higher-income states spend larger amounts per pupil on K-12 education (because they realize that educational spending is a powerful investment, and they can afford to make it). But not Washington State — we are a below average state in per pupil spending. Consequently, we are 43^rd in the nation in K-12 spending as a percentage of personal income. Moreover, this measure has declined precipitously over that past two decades, as shown in Chart One. Washington State has gone from spending far more relative to personal income than the national average in 1995 to spending far less than the national average in 2013. If we had maintained prior spending levels relative to personal income, no one would have ever heard of McCleary.

THE STATE'S RESPONSE HAS BEEN INADEQUATE

The State Legislature has passed several bills (e.g., ESHB 2261, SHB 2776 and E2SSB 6552) to establish educational funding requirements for its schools. These require additional spending in four categories: materials/supplies/operating costs; transportation; class size reductions in K-3 as well as all-day kindergarten; and teacher compensation. In order to address McCleary, the State has made significant progress in the first three categories. However, it has been remiss on the fourth — which is the largest, requiring roughly $3.5 billion per biennium. This calls for the state (not local governments) to take responsibility for the overwhelming majority of teacher compensation (this is referred to as a "levy swap" because levy responsibility is transitioned from local governments to the state). Failure to address teacher compensation is what triggered the Court's 2014 contempt ruling. And in the 2016 Legislative Session, the Legislature did nothing to address this problem, except to pass a bill (E2SSB 6195), which states that the Legislature needs more time and more data and will do something to address the issue in 2017. This response has been mocked (deservingly so) as the "plan to create a plan."

Noting that the Legislature had done nothing to address the area of teacher compensation, Chief Justice Barbara Madsen noted the obvious: "You would think you'd start with that piece." Randy Dorn, State Superintendent of Public Instruction, stated that the State's strategy of doing nothing on teacher compensation and then arguing that the contempt finding should be purged was tantamount to "thumbing its nose at the Court."

So why is the Legislature delaying and obfuscating rather than actually identifying a funding source to deal with the area of teacher compensation? For the exact same reason that McCleary emerged as a problem in the first place: the incessant, irresponsible Republican pursuit of lower taxation in Washington State.

WASHINGTON'S TAX POLICY NEGLIGENCE

Washington is in the midst of a mind-boggling decline in its level of taxation. Between 1995 and 2013, Washington went from being the 11^th highest to the 35^th lowest state in the nation in state and local taxes as a percentage of personal income. This is shown in Chart Two:

The reader will, of course, note the direct link between Chart One and Chart Two. Stated simply, as Washington State has moved from being a high tax state to a low tax state, it has underfunded most its basic services, including public education. Between 1995 and 2013, taxes as a percent of personal income fell by over 22%, while K-12 educational expenditures as a percent of personal income fell by over 28%. In effect, they move roughly in lockstep. In my view, Washington State's current tax policy is negligent. And this leads, predictably, to lawsuits — not just involving K-12 education via McCleary, but also with respect to mental health, DSHS staffing levels, prison services, etc.

PARTY POSTURING

Both chambers of the Washington State Legislature are hotly contested. The Democrats have a narrow lead in the House (50-48) while the Republicans have a narrow lead in the Senate (26-23). Thus, both parties are highly concerned with the public perception of their policies, as these perceptions could lead to election results that could change control of either chamber. Both parties have adopted posturing techniques to try to position their McCleary stances in an electorally favorable light.

Republicans are opposed to new taxes, and yet are concerned that they will therefore be seen by the public as insufficiently concerned with complying with McCleary and supporting public education. To try to position this "no new taxes" ideology in a positive manner, Republicans have adopted the mantra, "education first." By this, the GOP means that since education is the paramount duty of the State, it should be given the highest funding priority. Taxes, however, should not be raised. Thus, other programs should be cut to pay for public education. Restated within a broader context, the "logic" of this approach is as follows. Washington State is a low-tax state, which means that its social programs are underfunded, and this hurts the poor. In addition, Washington State has the most regressive tax structure in the country, which means that the poor pay a disproportionate amount of taxes. Thus, we operate in a manner that represents a double-blow to the poor — lower levels of social services provided to the poor, and the poor need to pay for a higher share of them than in other states. Against this backdrop, the Republican approach to complying with McCleary is to pay for education by further reducing state services — even further damaging the poor. Then, this proposed scheme is given the misleading moniker: "education first." There is an appropriate word for this depraved strategy and its cynical public positioning: shameful.

The Democrats confront a different political calculus. Obviously, the state needs new progressive taxation to comply with McCleary, and virtually all Democratic candidates favor new taxation. Yet there are political risks associated with advocating for higher taxes in an election year, especially with the two legislative chambers so closely contested. Thus, it is common to hear Democratic candidates state that in order to deal with McCleary, "we need to look at all of our options." Randy Dorn summarizes: "Finishing McCleary is going to take new revenue, and nobody wants to talk about that while they're running for election."

Thus, there is political maneuvering on both sides, albeit reflecting very different realities. The Republicans are on the wrong side of the taxation issue, and trying to dress it up; the Democrats are on the right side of the taxation issue, but trying to tone it down.

GRAND BARGAIN

It is important to note that there is the possibility for a "Grand Bargain" — a series of agreements that taken together, become palatable to both sides. Components of this bargain would likely include: a significant tax increase (most likely a capital gains tax on high income individuals, plus a the targeted elimination of some tax exemptions), which is desired by Democrats; a major levy swap that transitions tax responsibility from local districts to the State, which is more beneficial to the more rural and more politically conservative districts; and perhaps more education funding equalization, which also benefits more conservative districts. Achieving such a bargain will require Republican capitulation on taxation, and political leadership from both parties (which has been made more difficult by the departure from the State Legislature of both Ross Hunter (D) and Bruce Dammeier (R) — individuals who worked toward possibilities in this area during their latter years in the Legislature). Many would argue that this is too much to hope for.

CONCLUSION

There are several themes that emerge from this discussion. First, the Supreme Court is doing a tremendous service to the State by focusing attention on our underfunded K-12 education system. Second, Washington continues to pay an enormous price for having the worst tax system in country. The ongoing decline in taxes as a percent of personal income is having devastating effects on the state. Third and related, McCleary can best be seen, therefore, as an indictment of our tax system rather than an indictment of our education system. Fourth, the McCleary challenge needs to be resolved — not just for the sake of public education and taxation, but also to liberate the legislative process from this burden to enable other pressing matters (of which there are many) to be dealt with. Fifth, there is the possibility of a satisfactory conclusion to McCleary, but this will likely involve some form of "Grand Bargain", a proposition with uncertain prospects to say the least.

John Stafford is a senior substitute teacher for Seattle Public Schools. He is a former partner with Strategic Planning Associates, a corporate strategy management consulting firm in Washington, D.C. He has a B.A. from Dartmouth College, an M.A. from St. Martin's University and is completing an M.A. from the Harvard Extension School. He is involved with the Democratic Party in South Seattle.

Sources: Washington State Office of Financial Management website (source of data for Chart One and Chart Two); Governing Magazine website (data on per pupil education spending by state); The Washington State Constitution; The Seattle Times, September 4, 2016, and September 8, 2016 (quotations).