Legislature looks at how to fund school plans

February 24, 2017 GMT

Lawmakers are considering several plans in Olympia that would change how the state funds basic education. The next question is how they will be funded.

Currently the state collects property taxes to support schools in Washington’s 39 counties. The revenue is redistributed among the districts using what’s called a “prototypical school model,” which allocates staffing for a set number of students. In the McCleary decision, the Supreme Court said this tax resource was not enough to fully fund basic education.

To make up the difference, school districts often ask voters to approve taxes to pay for operations and maintenance, also referred to as local levies, to fund what state dollars don’t. The levy lid is set by the Legislature and currently sits at 28 percent, which means that voter-approved levy dollars can make up to 28 percent of the district’s overall budget.

Senate plan

Senate Republicans — the Senate Majority Caucus — propose a state-imposed $1.80-per-$1,000-of-property-value tax rate be instituted in each district. The revenue would be put toward the $12,500 allocation for each student. The state would be responsible for making up the difference for districts whose property values are unable to raise the $12,500 amount.

Under this plan, 189 districts would see a decrease in property taxes, one school district would see no change in property taxes, and 105 districts would see an increase in property taxes. The Senate Republican plan would also use existing revenues in the state general fund, which have not been specified. According to Office of Financial Management calculations, all districts would see an increase in funding assuming the funds include the unspecified revenues.

School districts would be able to continue to use local funding options through voter-approved special property tax levies, but at a decreasing amount as the new state funding plan takes effect.

The levy lid would remain at 28 percent in 2018 under this Senate plan. In 2020, districts could fund up to 10 percent of their budget with voter-approved levies, but these funds couldn’t be used for basic education purposes. Local effort assistance, or levy equalization, would be replaced by the per-pupil allocation.

The plan projects adding an additional $1.8 billion in 2017-19 and $3.5 billion in 2019-21 to the education budget when this article went to press. Further calculations may be released at a later time as the plans develop.

House Democrats

House Democrats are still developing a funding plan to pay for their proposed education budget, HB 1843, but they have discussed a capital gains tax on investment income and closing corporate tax exemptions. Under their proposal the levy lid would decrease to 24 percent by 2019 and LEA would also be phased down. Their proposed budget would add $7.5 billion over the next four years to meet the fully funded basic education requirement.

Governor’s plan

Inslee’s education funding plan, HB 1046, proposes to reduce property taxes in 119 out of 225 school districts. Local property taxes wouldn’t be raised in any district. Instead, increased funding would be acquired through new business and occupation taxes, a carbon-emissions tax, a capital gains tax and closing some tax exemptions.

Inslee’s proposal would freeze the local levy lid at the current 28 percent in 2018 and reduce the lid to 15 percent and (LEA) to 7.5 percent in 2019. Grandfathered levies would be eliminated in 2019. His proposed policies would add an additional $3.4 billion to the 2017-19 education budget.

Three Senate Democrats

The plan proposed by the three Democratic senators, SB 5825, locks in levies at each school district’s current rate. Similar to the Republican levy model, districts that are unable to reach $11,500 with state-imposed levy dollars would receive assistance from the state. Up to $1,000 could be raised per pupil in local levy funds for enrichment programs that are not covered by basic education funds.

Funding for SB 5825 would also be raised through online sales taxes. Currently, out-of-state sellers are not required to collect retail sales tax on their products sold in Washington state. There is no sales tax requirement if the seller does not have a physical presence in the state.

As the Legislature works toward a basic education funding solution, West Valley School District Superintendent Gene Sementi understands that legislators will need to reach across the aisle.

“I would hope as the negotiations proceed, that the middle-ground position solves the McCleary issue,” he said, “Among those bills, the answers are there.”