K-12 Funding Proposal – Local Levy Swap

I’m stepping outside my role as Ways and Means chairman to put out a personal proposal for comment. The idea described below is a big one, moving around about a billion dollars in property taxes that are used for the support of public schools.

I’m giving a speech on this topic Saturday morning at the Washington State School Directors Association (WSSDA) conference, and the support files for the proposal are linked at the bottom of this post.

Making changes this significant in how schools are funded is a big deal, and the proposal will require a 2/3 vote in the legislature if it’s to be adopted. It’s revenue-neutral in the beginning, but grows more quickly than the current system does. That will let us step up our funding of schools as we recover from the economic troubles we have today. If enough members are interested in the idea it’ll move through the system. If not, we will be stuck with some very ugly budget choices.

30 years ago, Washington State’s system of financing education was ruled unconstitutional for the same set of conditions that have re-emerged and again exist today.  The budget situation we face this year is likely to result in additional reductions that will exacerbate the problems in the system.

  • In the McCleary case two years ago Washington courts ruled that school funding was unconstitutionally inadequate. Since then the recession has resulted in even more reduced funding.
  • The percent of the total funding for schools coming from local levies as a is back up to near the level it was when the Doran cases said the system was unconstitutional.  This level of dependence on our current local tax system was found by the court to be unreliable and results in uneven distribution around the state.
  • The state’s contributions to K-12 education – due to the combined effects of initiatives and the mechanics of how our statewide property tax is collected – has also diminished over time.   The original goal of setting aside $3.60 per $1,000 of property value is not even close to a reality.

The combined effects of these factors have led us to a funding system which is increasingly unstable and unreliable, and ultimately, unsustainable.  This sets the stage for a replay of the types of devastating levy failures that crippled the system 30 years ago.

The legislature cannot add billions to the education budget in the worst economic downturn since the depression, but we can fix the structural elements of the system that will allow it to grow as we come out of the recession, and rebalance the dependence on local funding.

The basic idea is to do a revenue-neutral swap of state property tax for local levies, staying within the constitutional 1% limit for regular property taxes. This would make the statutory $3.60 per 1,000 set aside for public education a meaningful, rather than hollow, commitment, and bring $1 billion of existing local excess levies into a more regular and dependable tax structure – the statewide property tax.

  • Raise the state property tax from the current $2.03 per thousand dollars of property value to $3.20, raising about $1 billion in funding that is constitutionally dedicated to public school funding.
  • Distribute the new money to school districts using the normal school funding formulas, and simultaneously reduce each district’s local levy by the amount of new money they receive. This guarantees that each district will not be hurt financially by what is effectively a revenue neutral ‘swap’ of local for state tax collections in each school district.
  • Allow state property tax collections to grow as property values recover from the downturn, helping us deliver on our constitutional requirements.
  • Reset local levy lids in a simpler way, so that local communities better understand the relationship between their local levies and school programs and services.   Set a simple per student levy lid that naturally adjusts for inflation and student growth in district.

With these changes we would no longer need “levy equalization,” hundreds of millions that we use to correct for the fact that some districts don’t have the property base to collect similar amounts of levies. These districts will be better served by increased state funding and less reliance on levies.

In addition, we should make local school levies more reliable, since they are likely to be a significant part of school funding well into the future. Instead of voting to renew levies every 4 years we should amend the constitution to allow voters to approve levies that would stay in place until the district wants to increase them.

Together these changes would result in a more stable system, a system that grows as we come out of the recession,  and one that distributes funding more fairly across the state.

Support Files:

About the Author

Ross

I am the Director of the Department of Early Learning for Washington State. I formerly represented the 48th Legislative District in the State House of Representatives, chairing the Appropriations committee and spent many a year at Microsoft.

3 Comments on "K-12 Funding Proposal – Local Levy Swap"

  1. I will try to create some overview links, though it is very, very hard to come up with a working knowledge of the system quickly if you don’t have tutors to help you understand the nuances as well as the political implications of how everything works.

    I don’t typically release spreadsheets because the numbers can be “adjusted” and then presented as my work, but I can understand the interest here. I’ll track down a set and put them out.

  2. It’d also be helpful to link to an overview of how our schools are funded today. I feel like my knowledge on the topic is very spotty, and I suspect most other constituents feel similarly (or are mistakenly over-confident in their knowledge of the topic, given its apparent complexity).

  3. Nice. I’d like to play with the numbers in the spreadsheets a bit; is there any chance you could make those files available in some spreadsheet format (or tab-delimited format, for easy importing into a spreadsheet)?

    Ideally I’d like to see schools substantially supported by a highly progressive income tax like I-1098; obviously that didn’t work out last year, but I hope we can come back around to something like it in the future. In the mean time, a shift like you suggest is likely our best bet.

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