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

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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

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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.

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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.

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

a GENERAL APPORTIONMENT (RCW 28A.150.260) $7,498,021 73.2%

a SPECIAL EDUCATION (RCW 28A.150.370) 828,926 8.1%

a TRANSPORTATION (RCW 28A.160.150) 385,695 3.8%

a LEARNING ASSISTANCE PROGRAM (RCW 28A.165) 135,956 1.3%

a BILINGUAL (RCW 28A.180) 87,501 0.9%

a INSTITUTIONS (RCW 28A.190) 37,730 0.4%

329,146 3.2%

51,667 0.5%

SUBTOTAL: BASIC EDUCATION PROGRAMS $9,354,642 91.3%

STUDENT ACHIEVEMENT FUND (I-728) 391,149 3.8%

LEVY EQUALIZATION (LEA) 295,863 2.9%

BETTER SCHOOLS PROGRAM 8,996 0.1%

EDUCATION REFORM 67,030 0.7%

STATE OFFICE & STATEWIDE PROGRAMS 51,481 0.5%

BLOCK GRANTS 23,204 0.2%

STATE FLEXIBLE EDUCATION FUNDS 20,612 0.2%

TRAFFIC SAFETY EDUCATION 4,275 0.0%

HIGHLY CAPABLE 12,699 0.1%

EDUCATIONAL SERVICE DISTRICTS 9,328 0.1%

FOOD SERVICES 6,200 0.1%

SUBTOTAL: NON-BASIC EDUCATION PROGRAMS $890,837 8.7%

TOTAL- STATE FUNDS $10,245,479 100.0%

*Note: A large portion of the programs labeled "Basic Education Programs" are within theLegislature's current definition of basic education. However, there are a few components fundedwithin several of these programs that are outside of the definition of basic education. The largestis the lower K-4 staffing ratio in apportionment which amounts to $240 million in the 01-03 Biennium.

COST-OF-LIVING INCREASES (I-732) (About 98% basic ed)

NON-BASIC EDUCATION PROGRAMS

BASIC EDUCATION PROGRAMS *

HEALTH BENEFIT INCREASES (About 98% basic ed)

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ALLOCATION FUNDING $ PER

CRITERIA DRIVER STUDENT

Apportionment K-12 FTEs 956,639 FTEs $4,094

Special Education Age 0-2 2,283 pupils Avg. $4,448Age 3-21 116,228 pupils Avg. $3,601

Bilingual Students with limited english proficiency

62,889 Students $711/Student

Learning Assistance Program (LAP)

92% based on bottom quartile on state test, 8% on poverty factor, for grades K-11

174,275 funding units

$422 per LAP unit

Transportation (0perating)

Mainly students living beyond one mile from school

4.6 Million Miles $37.07 per mile

Institutions Students in DSHS, Corrections, & County custody

2,211 Students Avg. $8,768 per student.

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

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Other 6%

Federal 9%

Local15%

State70%

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 2001-02 School Year.

School districts receive about 70 percent of general fund revenues from the state.

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

0%

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25%

30%

35%

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01

School Year - End

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Seattle School District levy fails

First full year of levy lid.

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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

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Along with enacting the Basic Education Act and increasing state funding for education, the Legislature responded by limiting local levies.

• 1977 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 1982.

– Plan to bring grandfathered districts down to 10 percent was eventually abandoned.

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Ten years later, the Legislature increased the amount districts could raise through local levies and created the local effort assistance program.

• 1987 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.

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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 1995.• 1995: Extended the 4 percent increase in levy authority for

1996 and 1997. • 1997:

– Changed levy lid increase from 4 percent to 2 percent for 1998.

– 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 1999.

• 1999: Increased levy equalization to 12 percent of state and federal revenues for all qualifying districts beginning in 2000.

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The 2002 Legislature decreased levy equalization allocations by 1 percent for calendar year 2003.

• HB 3011 also created the Joint Task Force on Local Effort Assistance

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“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.500.010

The purpose of the levy equalization program is stated in statute.

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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.

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Average District District "A"

12 percent of state and federal allocations = $2.2 million

12 percent of state and federal allocations = $2.2 million

Assessed Value: $1.7 Billion Assessed Value: $850 million

Tax rate needed to raise $2.2 million: $1.33 per $1,000

Tax rate needed to raise $2.2 million: $2.66 per $1,000

Tax rate needed for a 12% levy:$2.66 per $1,000

Tax rate needed for a 12% levy:$1.33 per $1,000

$1.1 million in Levy EqualizationEqualization

$2.2 million

Amount that can becollected with a levy

rate of $1.33 per $1000:$1.1 million

*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.

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

Average District District "B" District "C"

12 percent of state and federal allocations = $2.2 million

12 percent of state and federal allocations = $2.2 million

12 percent of state and federal allocations = $900,000

Assessed Value: $1.7 Billion Assessed Value: $1.1 Billion Assessed Value: $440 million

Tax rate needed to raise $2.2 million: $1.33 per $1,000

Tax rate needed to raise $2.2 million: $2.07 per $1,000

Tax rate needed to raise $900,000: $2.07 per $1,000

Tax rate needed for a 12% levy:$2.07 per $1,000

Tax rate needed for a 12% levy:$1.33 per $1,000

$800,000 in Levy EqualizationEqualization

$2.2 million

Amount that can becollected with a levy

rate of $1.33 per $1000:$1.4 million Tax rate needed for a 12% levy:

$2.07 per $1,000$300,000 in Levy Equalization

Amount that can becollected with a levy

rate of $1.33 per $1000:$600,000

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Over 70% of school districts are receiving levy equalization funding this year.

• 210 districts are receiving levy equalization in CY 2002.• 68 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.

Number of School Districts Receiving Levy Equalization Funding

100

120

140

160

180

200

220

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Calendar Year

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

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$78.6$71.0

$76.9$82.8 $82.0 $83.2

$102.6

$124.1

$140.9

$154.9

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

State Fiscal Year

$s in

Mill

ion

s

Budgeted

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