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Regionalization is another headache in school funding

Some districts benefit, others suffer from formula

Students sit at desks at Northern Heights Elementary surrounded by their stationary and books stacked next to them.
Students sit at desks at Northern Heights Elementary in Bellingham in September 2022. Bellingham Public Schools lost funding due to a dropping regionalization factor, which is supposed to aid districts in high-cost-of-living areas. (Hailey Hoffman/Cascadia Daily News)
By Hailey Hoffman Visual Journalist

Six years after a “regionalization” factor was introduced as a form of cost-of-living boost for state funding of Washington school districts, critics are seeking changes to a formula they are calling “broken.”

Regionalization was introduced by the Washington Legislature in 2017, with the goal of providing retention pay for teachers and certificated staff in school districts with high costs of living. 

However, six years later, some local districts are receiving less money from the state than in 2018 because, critics say, the formula that determines payouts is flawed.

The plan for regionalization came in the wake of the 2012 McCleary Decision, in which the Washington Supreme Court found the state “was not fulfilling its obligation to fully fund education in the state.” The regionalization factor looks at median home values within a school district and 15 miles beyond its borders. From there, the state provided an additional 6%, 12% or 18% of base funding to school districts facing more expensive home values and higher costs of living.

All the districts in Whatcom County received between 6% and 16% additional funding between fall 2018 and spring 2023, according to data from the Washington Office of Financial Management. School districts quickly came to count on that funding.

However, Bellingham, Ferndale and Mount Baker are among 23 districts whose regionalization factor will drop again over the next two years. The districts have seen a steady downturn, starting at 12% in 2018, and a drop to 6% by fall 2024.

Superintendent Greg Baker said the drop will account for a loss of $3.8 million over the next two years. Ferndale School District said it will account for a loss of $500,000 in revenue next year.

“When you look at our county, the fact that we’re going all the way down to 6 [percent] — I couldn’t make sense of it,” Baker said in an April 24 interview. “We have the highest housing prices of anywhere in our region.”

Median home prices in Whatcom County have only gone up over the last few years, reaching $575,000 in Whatcom County and $635,000 in Bellingham in February 2023, according to real estate agent Gennie Clawson with Compass Real Estate.

Rep. Steve Bergquist, who is on the House Education Committee, said when regionalization was first established, Bellingham was paying teachers “higher than property values determined,” so the state agreed to give them a higher regionalization factor to start (12%) and drop it over four years (to 6%).

While the district said they knew the factor would drop, they hoped for adjustments to the formula to provide extra needed funding for certificated staff salaries. 

“Nobody I’ve been able to talk to says, ‘Oh, the formula actually is meeting the intent of what we’re doing,'” Baker said. 

Some districts, however, have benefitted from recent regionalization adjustments. Lynden and Meridian school districts, for example, jumped from 6% in 2022–23 to 12% in 2023–24, increasing their state funding.

Regionalization factors are intended to maintain competitive, market-rate salaries for school districts in regions with higher costs of living, said Katy Payne, executive director of communications for the Washington Office of the Superintendent of Public Instruction (OSPI).

Additionally, differing regionalization factors can create competition between districts with higher and lower allotments, Payne said. 

“Due to the way they are applied, it is sometimes the case that neighboring school districts are competing with each other over staffing, with districts with lower regionalization factors unable to offer the same competitive salaries as districts with higher regionalization factors, despite their proximity to each other,” she said in an email. 

To many districts and for Dan Steele, the assistant executive director of governmental relations with the Washington Association of School Administrators (WASA), the formula is broken.

“We argued to throw out the entire formula, but legislators weren’t for that,” Steele said.

In February, OSPI and other organizations, like WASA, brought their concerns with regionalization to the Legislature. In a budget request, OSPI proposed that regionalization be rebased and restructured.

Specifically, it asked for the same regionalization factor to be assigned to an entire county, following the district with the highest regionalization. Additionally, OSPI asked the state to consider following a wage model, as opposed to the median residential values of the area.

“What a house costs is part of cost of living, but it’s not the only cost of living,” Steele said. “The labor market is a more accurate and reasonable measure.”

Recommendations also include higher base salaries for teachers across the state and capping the regionalization factor to 12%. They also asked for hiring and retention bonuses. 

The original bill stated that during the 2023 Legislative session — six years later — regionalization and school funding would be reviewed and rebased “to ensure that state basic education allocations continue to provide market-rate salaries and that regionalization adjustments reflect actual economic differences between school districts.” The Legislature opted to continue with the current formula and will reevaluate in four years, as required by the law.

Bergquist said OSPI’s suggested regionalization fix would cost the state billions of additional dollars. 

“From what we can tell, there is no inexpensive fix that would leave districts pleased with the result, no matter what you do,” he said. 

Bergquist additionally pointed to increased funding for special education and last year’s investment in staff to support social-emotional learning, like counselors and nurses. For districts that already funded the extra positions through levy dollars, it freed up that funding to further invest in more staff in those programs or use it elsewhere, he said.

Local Rep. Joe Timmons, who also sits on the House Education Committee, said the Legislature is continuing to evaluate all the factors impacting school funding. 

“I’m committed to taking a look at this more holistically, to take a look at how to avoid winners and losers and make it more equitable across the board,” Timmons said. 

Payne said although the Legislature did not take action on their requests, OSPI will continue to advocate for legislative change regarding regionalization.

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