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February 12, 2016

Budget Update - State Budget Progress Update

McCleary and Levies

As I mentioned last week, the Legislature has made significant progress in meeting many of the obligations that the Supreme Court addressed in the McCleary decision.  However, the most difficult issue remains, and that is the issue of how to reduce the reliance on local levies to fund expenditures that should be a part of basic education, and therefore paid for by the state.

Levy Dollars

The largest portion of levy dollars in most districts goes to support staff costs.  These costs fall primarily into two categories: 1) additional staff beyond the state staffing formula, or 2) additional salary for existing certificated staff in the form of Time, Responsibility, Incentive (TRI) pay.

Supreme Court View

The Supreme Court has been very clear that school districts are relying too much on local dollars to fund teacher compensation.   The challenge for the Legislature is that nearly all 295 districts around the state are paying for some level of staff costs with their levy dollars, usually through TRI pay.  That range stretches from zero days of TRI pay in some very small districts to over 70 days of TRI pay for some large west-side districts. 

Levy Swap

To solve one part of that problem, some legislators have proposed what is called a “levy swap.”  For example, our KSD $25 Million levy  might be split and the state would collect about $20M of it and the local district might continue to collect the other $5 Million for  costs not deemed basic education (extra-curricular activities/athletics, security and police officers, etc.).  The state would then turn around and allocate some portion of the $20 M back to us, enabling the state to claim that it was meeting its obligation to fully fund K-12 basic education.

While this plan would possibly satisfy part of the Supreme Court’s demand that the state pay for all items deemed basic education, it would not necessarily increase funding for K-12 education, as the only thing that would change is who is collecting the taxes, not how much.

The second part of the problem is much more challenging.  That is the issue of staff compensation.  As I mentioned earlier, there is a range of TRI pay from almost no days to over 70 days.  If the legislature takes away the levy capacity from districts and begins collecting that money at the state level, the big unknown is how many TRI days the state would fund and whether the state would place limitations on Districts from funding additional TRI days with remaining local dollars.

The final part of the problem is the enormous difference in tax rates paid by citizens in different school districts.  Using the latest data from 2014 from the OSPI website, to raise $23.4 Million in Levy dollars in Kennewick means a tax rate of $3.48 per thousand of assessed value.  To raise $20.3 Million in Pasco means a tax rate of $4.51 per thousand of assessed value.  To raise $51.7 Million in Bellevue means a tax rate of $1.16 per thousand.  And, to raise $167 Million in Seattle means a tax rate of $1.45 per thousand.  If the legislature tried to equalize the tax rates, some communities would pay a great deal more and some a great deal less. Consequently, some local communities with a large tax base like Bellevue, would see some of their local tax generated revenue now being used as statewide K-12 funding.   That is a major reason why the legislature has been unable to get any kind of agreement on how to move forward.

Next week

I will share some additional thoughts on another issue related to state funding of public education.

Vic Roberts
Director of Business Operations

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