Joint Task Force on Local Effort Assistance Staff Presentation June 13, 2002 Bryon Moore, Senate Ways and Means Committee Staff Denise Graham, House Appropriations Committee Staff Ken Kanikeberg, Office of Superintendent of Public Instruction Staff

2 Outline of Staff Presentation Overview of Washington’s K-12 System –Legal Background to K-12 Finance –Overview of “Basic” Education Programs –Description of Basic Education Formulas Introduction to Local Effort Assistance (LEA) Program –The Levy Lid –The Purpose of LEA –Overview of LEA History –The Basic Components of LEA –Trends in LEA

3 The State Constitution  Article IX, Section 1: “It is the paramount duty of the state to make ample provision for the education of all students…”  Article IX, Section 2: “ The Legislature shall provide for a general and uniform system of schools…” The foundation for Washington’s system of funding education is the state constitution.

4 The Doran Decisions  While there were a numerous legal principles established in the Doran decisions, some of the more significant include: -Education is the “paramount duty” of the state and takes precedence over all other state financial obligations. -The Legislature must define and provide adequate funding for basic education through a regular and dependable tax source instead of a heavy reliance on local excess levies -Programs considered basic education are: regular apportionment; vocational education; special education; most of pupil transportation; transitional bilingual education; and remediation (learning) assistance programs. -Local school operations levies may be allowed as long as they enrich programs outside of the legislative definition of basic education and are not used to reduce the state’s obligation to fund basic education. The funding system is the result of legislative response to court decisions in the 1970s and 80s.

5 About 90 percent of the funding provided by the state is considered basic education.

6 Basic education dollars are distributed through various formulas with the primary intent of equalizing educational opportunity

7 Dollars in Thousands* State$5,093,394 Local Taxes 1,068,227 Federal 629,915 Other 481,084 Total$7,272,670 * K-12 Budgeted Revenue School Year. School districts receive about 70 percent of general fund revenues from the state.

8 After the Doran decision, excess levies as a portion of school district general fund revenues dropped dramatically

9 The failure of Seattle School District’s excess levy in 1976 resulted in the Doran decision. Prior to 1977: –No limit on amounts school districts could raise from local levies. –Seattle School District levy failed in 1976, prompting a law suit against the state 1977 Doran Decision: –State must define and pay for basic education through a regular and dependable tax source instead of a heavy reliance on local excess levies

10 Along with enacting the Basic Education Act and increasing state funding for education, the Legislature responded by limiting local levies Levy Lid Act: –Beginning in 1979, limited most school district levies to 10 percent of a district’s basic education allocation. –Grandfathered above 10 percent those districts that historically relied heavily on M&O levies; phased down grandfathered levy authority to 10 percent by –Plan to bring grandfathered districts down to 10 percent was eventually abandoned.

11 Ten years later, the Legislature increased the amount districts could raise through local levies and created the local effort assistance program Legislature: –Doubled the levy lid to 20 percent of state and federal revenues to districts beginning with the 1988 collections. Districts were still grandfathered at higher levy lids. –Adopted levy equalization program. The formula equalized to 10 percent of state and federal revenues to districts.

12 Throughout the 1990s, the Legislature continued to increase the amount districts could raise through local levies and increased levy equalization. 1993: Increased levy authority by 4 percent for 1994 and : Extended the 4 percent increase in levy authority for 1996 and : –Changed levy lid increase from 4 percent to 2 percent for –Changed levy lid increase for 1999 to 4 percent. –Increased levy equalization to 12 percent for 74 districts with the highest property tax rates beginning in : Increased levy equalization to 12 percent of state and federal revenues for all qualifying districts beginning in 2000.

13 The 2002 Legislature decreased levy equalization allocations by 1 percent for calendar year HB 3011 also created the Joint Task Force on Local Effort Assistance

14 “ The purpose of these funds is to mitigate the effect that above average property tax rates might have on the ability of a school district to raise local revenues to supplement the state’s basic program of education. These funds serve to equalize the property tax rates that individual taxpayers would pay for such levies and to provide tax relief to tax payers in high tax rate school districts. These funds are not part of the district’s basic education allocation.” RCW 28A The purpose of the levy equalization program is stated in statute.

15 The formula equalizes the property tax rate necessary to raise an amount equal to 12 percent of a district’s state and federal revenues. If the tax rate necessary for a district to raise an amount equal to 12 percent of its state and federal revenues is greater than the statewide average tax rate, the district is eligible to receive a levy equalization allocation. To qualify for an allocation, a district must also have a voter approved levy. The amount a district can raise in local levies is decreased by the amount of levy equalization it receives.

16 *Ninety-one grandfathered districts have higher levy lids. While levy authority is capped at 24%* of state and federal revenues, the levy equalization formula equalizes the tax rate necessary to raise an amount equal to 12 percent of state and federal revenues.

17 District assessed value and state and federal revenues determine eligibility and amount of levy equalization.

18 Over 70% of school districts are receiving levy equalization funding this year. 210 districts are receiving levy equalization in CY percent of the students are in districts receiving levy equalization funding. Of the 86 districts that aren’t receiving levy equalization, 18 are eligible but do not qualify because they did not pass a levy.

19 About 60 percent of the districts not eligible for levy equalization allocations are in the Puget Sound corridor.

20 The cost of the levy equalization program has almost doubled since 1994.