August 22, 2018
Dear Superintendents:
As you know, I communicated directly to legislators on July 26 with concerns I have
related to the “McCleary solution,” and specifically E2SSB 6362 (2018). My
communication focused on two main points: A) Legislative salary language for
2018–19 was not clear; and B) The new funding model creates disparate
opportunities for districts to raise compensation in 2018–19 and beyond.
Following communication with our legal counsel, the Public Employment Relations
Commission (PERC), and the State Auditor’s Office, please consider the following as
formal guidance from the Office of Superintendent of Public Instruction (OSPI) as
you proceed with your work to implement provisions of EHB 2242 (2017) and E2SSB
6362 (2018), the “McCleary bills.”
Concerning Salary Limitations for 2018–19
Earlier this summer, PERC received a request to make a legal determination about
salary limitations for 2018–19. On August 2, PERC denied this request for
declaratory judgment because all of the necessary parties did not consent to the
determination of the matter.
With no judgment by PERC, we engaged in further discussions with legal counsel,
and we continue to believe that the 3.1% salary limitation, cited by some legal
opinions that you may have received, is not clearly articulated in E2SSB 6362. The
statutory language is ambiguous. As E2SSB 6362 moved through the Legislature,
each version added additional flexibility for districts to increase their average total
salary for instructional staff (CIS) and classified (CLS) school employees in addition
to the 3.1% inflation adjustment.
Your practical limitation on collective bargaining is your ability to fund compensation
increases in the short-term AND your ability to sustain those increases. Not every
district will have an equal opportunity to provide compensation increases
with double-digit percentages.
Risk Factors
We analyzed several variables and we believe there are some school districts with
financial limitations on their ability to provide salary increases consistent with
various settled collective bargaining agreements (CBAs). These districts have four
things in common:
1) They were already paying average CIS salaries very near, or above, the
new state average salary allocation.
2)

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3) Their average 2018–19 state allocation for CIS salaries is less than the
average CIS salary paid for 2017–18.
4) They did not get an experience factor increase for the 2019–20 year.
5) They are losing 50% or more of their local voter-approved levy capacity
when the new levy thresholds kick in for calendar year 2019.
There are unique factors that affect each district, so these criteria are not the only
variables, but they do give us some indication of where there is more long-term
financial risk to a particular district.
Role of the State Auditor
We will maintain a constant dialogue with the State Auditor’s Office as we
implement the complex provisions of the McCleary bills. The Auditor will continue to
audit school district expenditures, including expenditures on compensation and
enrichment activities, in accordance with the guidance OSPI provides in its
Accounting Manual, related bulletins, and other communications, including this
guidance.
OSPI’s Role in School District Financial Accountability
As you move forward with collective bargaining and district budgeting, please note
that OSPI has three new or amended statutory mandates to ensure compliance with
the new laws and long-term fiscal health:
1) RCW 84.52.053(4)(b) requires school districts to “receive approval of an
enrichment levy expenditure plan from the superintendent of public
instruction under RCW 28A.505.240 before submission of the proposition
to the voters.”
We sent guidance related to pre-ballot approval on May 30, 2018, and we
are already receiving levy proposals for February 2019 ballot issues.
2) The Legislature now requires that you produce four-year budget plans and
submit those to your local educational service district (ESD) and OSPI for
review and comment. RCW 28A.505.040(1) states that “[t]he four year
budget plan must include an estimate of funding necessary to maintain
the continuing costs of program and service levels and any existing
supplemental contract obligations.” Our fiscal staff sent four-year budget
plan guidance to business officers at the educational service districts
(ESDs) on June 6, 2018. We will begin reviewing plans this fall to comply
with our financial health indicator work as described in #3.

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August 22, 2018
3) RCW 28A.505.040(3)(c) requires OSPI to consider information provided in
the four-year budget plans when determining school district financial
health rankings.
We are reviewing the factors OSPI currently uses in determining those
rankings. We are likely to add criteria consistent with four-year
sustainability to our financial health rankings. We will continue to
collaborate with the State Auditor’s Office on this work so our levy
reviews; four-year budget reviews; and financial health indicator work is
consistent, clear, and easily interpreted by you and the Auditor’s Office for
their work.
The Bottom Line
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The 2018–19 salary language in E2SSB 6362 is ambiguous, and we do not
believe salary increases are limited to 3.1%.
You are limited by what you can afford and what you can sustain.
Due to the new financial model passed by the Legislature in 2017 and
amended in 2018, several districts have less financial opportunities to
provide the large percentage increases for salaries that we have seen thus
far.
The State Auditor will continue to audit to OSPI guidance and our Accounting
Manual;
OSPI will review pre-ballot levy plans and four-year budget plans; and
We are likely to consider additional criteria in the four-year budget plans
when we produce financial health rankings each year.

I know you are working hard with your boards and your local education associations,
and these are very uncertain times related to school finance. As we move into the
fall and prepare for the legislative session, I look forward to working with
superintendents and education stakeholders to put new solutions in front of the
Legislature that address some of the inequities of the new system and make
additional progress on competitive salaries for educators in every part of the state. I
will send additional communication about our operating and capital budget requests
as we make further progress and prepare for submission to the Governor and
Legislature.
As always, email or call me directly if you have questions or want further
clarification. We will send this message to your business officers and other
education stakeholders to ensure full transparency of our guidance.

Chris Reykdal
360-790-3151