PHOENIX — Washington state is racking up court-imposed penalties approaching $2 million, a positive for the credits of school districts in the state, Moody's Investors Service said this week.
The Washington Supreme Court put in place a fine of $100,000 per day starting Aug. 13 in as a penalty for the state's failure to fund schools at the levels the court had mandated. In a 2012 case, McCleary v. State of Washington, the Supreme Court found that the state was not meeting a constitutional obligation to fully fund basic education and mandated $4.6 billion of new K-12 funding by 2018.
The fine has no major impact on Washington's credit, Moody's said, because the fine is a tiny portion of the state's $38.2 billion dollar two-year operating budget.
"At a projected cost of $36.5 million per year, or $73 million over the biennium, the fine represents just 0.01% of the state's 2015-17 biennium budget," Moody's said. "The fine is also subject to appropriation by the legislature, further softening its impact."
But the order does create "public and legal pressure" on the state to ramp up education funding even more, Moody's said. The state passed a budget in June after a third special session, increasing education funding by $1.3 billion over the two years. Moody's said at that time that both school districts and public universities would benefit from that added cash.
Washington Gov. Jay Inslee released a statement on the fine, acknowledging that the state knew when it passed the budget that it had more work to do.
"The detailed plan the court demands in order to fulfill our constitutional obligation will be more complex and expensive than the significant steps we've already taken," he said.
Inslee met with lawmakers to discuss education funding on Monday, Moody's said, but it is uncertain if a special session to address the issue would be called before the end of the year.
"According to state officials, full compliance with the McCleary decision will be difficult because of complexities associated with the local school district levy system, particularly as it pertains to salaries and compensation, Moody's said. "Additionally, the state estimates full compliance could cost an additional $3.5 billion above the most recent biennium funding level."
Washington must also address 2014's Initiative 1351, a voter-approved measure that mandated class size reduction in grades four through 12 by fiscal 2018 at an estimated cost of $2 billion per year. The legislature can temporarily suspend that requirement.
