Joint Task Force on Local Effort Assistance August 20, 2002 Bill Freund, Consultant To The Task Force

2 Presentation Outline I.Review Of Levy Equalization Formula Page 3 II.Levy Base As A Levy Equalization FactorPages III.Assessed Value As A Levy Equalization Factor Pages IV.Attributes Of Levy Equalization DistrictsPages V.Levy Equalization Cost & Components of Change Pages VI.Task Force Purposes Under EHB 3011Page 39 VII.Statutory Purpose Of Levy EqualizationPage 40

3 The levy equalization formula equalizes the property tax rate necessary to raise a 12 percent levy. State Average Tax Rate For A 12% Levy

4 Levy Base As A Factor In Levy Equalization

5 One of the two factors in establishing a district’s levy equalization eligibility is the levy base per student.

6 Of the 228 districts eligible for levy equalization in 2002, almost three-quarters have above average levy bases per student.

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is similar to 2002 in the number of districts eligible for levy equalization. But the percentage of enrollment in districts eligible for levy equalization is higher in 2002.

9 The levy base per student is affected by allocation differences in state and federal programs.

10 The influence of federal programs in explaining levy base per student differences among districts has been growing.

11 Assessed Value Per Student As A Factor In Levy Equalization

12 Differences in assessed value per student affect eligibility for LEA.

13 Of the 228 districts eligible for LEA in 2002, 199 districts have below average assessed value per student.

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15 Differences in assessed value per student among districts are the primary driving force in the cost of levy equalization.

16 Selected Attributes Of Levy Equalization Districts 1.Size of Districts and Levy Equalization Amount 2.District Poverty Rates and Assessed Values

17 In 2002, about 41% of LEA funds went to districts with enrollment over 10,000 students. Districts of less than 1,000 students received the largest amount per student.

18 Poverty Almost 86% of districts with above average poverty were eligible for levy equalization in “Poverty rate” in this context refers to the percentage of a district’s enrollment that is eligible for free and reduced price lunch. 175 of 296 school districts with 44.6% of the state’s enrollment exceeded the state average poverty rate of 31.2% in the school year. Of the 175 districts, 150 were eligible for levy equalization. The 150 districts had 34% of the state’s enrollment. Of 199 districts eligible for LEA with below average assessed value per FTE, 131had a poverty rate exceeding the state average. These 131 districts had 32.9% of the state enrollment.*

19 Refer to map identifier code sheets for school district numbers

20 * Poverty in this context means percentage of a school district’s enrollment that is eligible for free and reduced price lunch.

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22 Levy Equalization Costs and Components Of Change 1.Cost of Levy Equalization Components of change and Change in Voter Approved Levies Levy Base Changes Legislative Policy 6.Assessed Value

23 Levy equalization program costs have increased substantially since 1999.

24 Factors contributing to the increase in costs of levy equalization vary depending on the time frame chosen for analysis.

25 Voter Approved Levies The number of school districts with levies has grown substantially since Source: “School District Property Tax Levies, 2002 collections”, published by the Office of the Superintendent of Public Instruction.

26 The levy rate per $1,000 of Assessed Value for a 12 percent levy has been dropping. Estimated

27 M&O average levy rates per $1000 of AV have been declining even though levy dollars/FTE have been increasing.

28 School districts have been using more of their levy capacity. This has increased the amount of LEA for some districts.

29 Since 1999 school districts have been qualifying for a greater percentage of available state levy equalization funds.

30 Of districts with levies, 216 districts were under their maximum levy authority. Of this group, 82 districts had levies at least 40%* below their levy authority. * For example a 24% district with a 14% levy is 42% below levy authority.

31 Five of 22 districts without levies in calendar year 2002 had levy failures. The other 17 districts did not submit a levy request.

32 Of 17 districts without 2002 levies, 15 had above average revenues per student and substantial ending balances.

33 Levy Base Federal funds as a percent of total funds in the levy base have increased since Since federal funds are not distributed equally, the LEA impact is significant.

34 Policy Changes and Levy Base The method of distributing state and federal funding increases can have differing effects on LEA costs.

35 Legislative Policy Changes - Increasing the levy equalization percent from 10% to 12%. The increase from 10% to 12% levy equalization effective in calendar year 2000 has the following effect in 2002: 2002 LEA Cost Under 12% levy equalization = $148.8 million. Under 10% levy equalization = $124.6 million. Difference = $ 24.2 million The $24.2 million is 16.3% of the 2002 calendar year LEA cost.

36 Assessed Value (AV) From , AV growth was above average in 4 counties and below average in the other 35 counties.

37 Assessed Value Had King County assessed values grown at the state average of the other 34 counties, less districts would be eligible for LEA and the cost would be lower.

38 Statutory Purpose of Task Force and Statutory Purpose of Levy Equalization

39 Purposes of the Joint Task Force pursuant to Engrossed House Bill Changes in state and federal funding since the levy equalization program began in 1989 make it necessary to examine the levy equalization formula and to determine whether the purpose is fulfilled. 2.Complete a thorough analysis of the program, its impacts, and revenues included in the levy base. 3.Determine whether the statutory purpose of the program is being met under the current allocation formula. 4.Present the findings and recommendations of the task force to the legislature by December 1, 2002.

40 “ 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 Note: The language up to the last sentence was added to the levy equalization statute in Purpose of the levy equalization program – as added to the law in 1999.