WASBO 2011 Local Levy and LEA. AN OVERVIEW LEVY/ LEA.

WASBO 2011

Local Levy and LEA

AN OVERVIEW

LEVY/ LEA

Local M&O Levies

The state constitution provides school district the authority to levy property taxes with a 50% yes vote.

Duration may be one to four yearsIf election fails, proposal may be resubmitted one

more time in a calendar yearReferred to as an “excess Levy” as it is in excess of

the statutory percentage limit on property tax.Revenues are for enhancement to the state basic

education program. – Examples: Extracurricular, enhanced classes, additional salaries for additional duties.

Levy Limits Today

28% starting 2011 / was 24% in 2010After the Doran decision in 1977, Levy Lid

law had established a 10% Levy Lid.

A Growth Model

Fiscal Year Revenue Levy Revenue Percent

1974–75 $994,472 $320,566 32.23%

1980–81 1,908,531 152,700 8.00%

1985–86 2,500,556 277,484 11.10%

1990–91 4,082,666 475,256 11.64%

1995–96 5,415,752 773,351 14.28%

2000–01 6,739,204 1,024,717 15.21%

2005–06 8,139,545 1,317,017 16.18%

2009–10 9,944,680 1,737,022 16.69%

2010-11 10,127,259 1,798,244 17.76%

** Dollars in Thousands, LEA not included, 2010-11 reflects F-195 budgeted figures.

Levy Authority

Maximum levy authority is calculated by OSPI based upon law and rule as adopted under WAC 392-139. It is calculated for a calendar year therefore, affects

two school years. It is adjusted to reflect resident student population. Levy authority is reduced by any LEA provided under

state formula.

Levy Authority

Calculated using: Prior year State and Federal revenues paid by OSPI Direct Federal Funding from second PY F-196

Adjusted for inflation and BEA changes to be reflective of current year amounts.

91 districts have levy authority above 28%. For 2010 only 43 of these exceeded 24%

Levy Information

Actual district by district information 0n levies is available on the OSPI website at:

http://www.k12.wa.us/safs/PUB/LEV/1011/lv.asp

Local Effort Assistance (LEA)

This is an attempt to equalize tax rates between property rich districts and property poor districts.

Calculation is based upon a theoretical levy rate of 14% at both the district and state level.

To be eligible a district must Have a tax rate for the theoretical 14% levy that is

greater than the rate for the state theoretical levy. Pass a levy.

Local Effort Assistance (LEA)

To receive the maximum LEA – a district does not have to pass a 14% levy.

Rather, they must pass a levy that would raise an amount equal to their tax base times the state average tax rate for a 14% levy.

OSPI reduces the districts overall levy authority by the amount of LEA that the district will receive.

Example

The districts 14% levy amount is $422,000District’s tax base is $100,000,00014% rate would be $4.22 / 1,000State Average rate for a 14% levy is $1.00* per

1,000District must pass a levy equal to $100,000

$1.00 X 100,000,000 / 1,000 = 100,000.

LEA would be calculated as $322,000 ($4.22 - $1.00) x $100,000,000 / 1000

* Example purpose only - Not the actual rate

So who gets LEA?

For 2010:220 districts will receive LEA totaling $261

million. These districts serve 709,500 students

12 additional district are eligible but did not pass a levy. These districts serve 2,286 students.

63 Districts are not eligible for LEA. These districts serve 269,117 students.

How Levy/LEA dollars used

School Districts do not track the use of Local/LEA dollars discreetly in our systems.

However, OSPI can generally track state and federal funding dollars provided.

The difference must be local. Correct?

How Levy/LEA dollars Are Used?

Program and Expenditure Purpose

Local Dollars Expended

%

1 Levy, LEA, Misc Local $2,083.1

2 Extra Curricular/ Community 85.5 4.1%

3 Pupil Transportation 130.8 6.3%

4 Special Education 77.2 3.7%

5 NERC 502.6 24.1%

6 Add’l BEA Classified Staff 168.5 8.1%

7 Add’l BEA Instructional Staff 195.0 9.4%

8 Add’l Salary – Classified 210.7 10.1%

9 Add’l Salary – Admin 169.7 8.1%

10 Add’l Salary – Instructional 608.8 29.2%

11 Food Nutrition 11.7 0.6%

SESSION HIGHLITES

LEVY/ LEA

Legislative Changes

At this point in time neither budget addresses any changes to LEA funding.

This is not a guarantee that final budget will also protect LEA funding

However, several bills have been introduced that would affect Levy Base: 1814 1815 -

This bill would add the Edu-Jobs funding into the levy base for the 2011 and 2012 Levy calculations for district that approved levy prior to April 30th, 2011.

Effectively double counts Edu-Jobs $$ in the 2011 levy base.

Reintroduced April 26th.

HB 1814 - EduJobs in Levy Base

HB1815 - Levy Base Revision

Expands school districts' Maintenance and Operations (M&O) levy base by including the positive difference between the per-pupil general apportionment for the 2009-10 school year (excluding per-pupil fringe benefits) and the district's per-pupil state general apportionment for the prior year (excluding per-pupil fringe benefits), multiplied by the district's average annual prior year enrollment.

Excludes from this addition amounts already included in the levy base for the kindergarten through fourth grade staffing ratio enhancement.

HEADED UP BY OFM

Levy / LEA workgroup

Levy and LEA Workgroup

Formed under SHB 2261/ 2776Headed up by OFM – Paula Moore and Jim

CrawfordComposed of 16 membersFirst meeting was May21, 2010Report due June 30th 2011.Materials for Group may be found at:

www.ofm.wa.gov/levy

Levy/LEA Workgroup Members

Brian Benzel Whitworth University ,Vice President, Finance and Administration At Large Don Cox Retired (Prior Superintendent, Legislator, and Professor) At Large Harvey Erickson Bethel School District, Chief Financial Officer At Large Nancy Faaren Olympia School District Principal, Capital High School AWSP Larry Francois Northshore School District, Superintendent WASA Scott Izutsu Yakima School District. Assistant Superintendent, Financial Services At Large Michael Mann Legislative Evaluation and Accountability Committee LEAP Sally McLean Federal Way School District, Chief Financial Officer At Large Doug Nelson Public School Employees of Washington/SEIU 1948 PSE/SEIU Randy Parr Washington Education Association, Budget Analyst/Lobbyist WEA Douglas Poole North Central Education Service District At Large Larry Quarnstrom Rochester School District, Maintenance Director At Large

(and also WA Assoc. of M&O Administrators) Ted Thomas Longview School District School Board Director WSSDA Valerie Torres Department of Revenue Tax Policy Specialist DOR (Diann Locke) Department of Revenue Tax Policy Specialist DOR Carolyn Webb Mukilteo School District Executive Director for Business Services WASBO

Levy and LEA Workgroup – Legislative Charge

Develop options for a new system of supplemental school funding through local school levies and local effort assistance;

Recommend a phase-in plan so no school district suffers a decrease in funding due to implementation of the new system of supplemental funding;

Examine local school district capacity to address facility needs associated with phasing in full day kindergarten and K-3 class size reductions; and

Provide the Quality Education Council with analysis on the potential use of local funds that may become available for redirection due to increased state funds for pupil transportation and maintenance, supplies and operating costs.

Levy and LEA Workgroup

While several legislators envisioned proposals for significantly different levy/LEA models, current funding issues and lack of faith in improved funding has group focused on “do no harm”.

Group has considered several different models for Levy and LEA as well as changes in funding resources for education.

Levy and LEA Workgroup - Issues

LEA is not always acknowledged as a local tax relief program for local taxpayers.

This has created some proposals that would use LEA to provide additional school funding rather than provide taxpayer relief.

Levy and LEA workgroup

The groups reviewed a variety options in regards to how other states provides levies and proposal related to funding. I highlite only a few:

Governor’s Tiered ProposalZarelli BillThe Vermont Model.A flat per student Levy limit.

Governor’s Proposal for 2011-13

Governor Gregoire’s proposed restructuring of levy equalization into four tiers of districts, with the most property-poor districts receiving the smallest reduction in state funds. LEA payments will be reduced based upon each tier.

Governor’s Tiered Proposal

Tier Reduction

14% Local Tax Rate

Percentage Above State

Average# of district in

tier

Tier 1 1% Over 300% 43

Tier 2 3% 175% to 300% 62

Tier 3 5% 125% to 175% 82

Tier 4 28.75% 100 to 125% 48

This proposal would have saved $39.5 Million.

Zarelli Proposal SB 6858

State & Local School Levy Exchange 12 Concept: Raise State School Levy Decrease Local School Levy.

Proposal: Raise State Property Tax $0.88/$1,000. Decrease All District Levy Lids by 12%

(grandfathering remains). Include a Hold-Harmless Provision for Districts Provide increased funding for Transportation and

MSOC in 2011-12.

Iseminger Proposal

Proposal is summarized as five tenets.Tenent 1 - Reserve a portion of the annual increases in

state funding for k-12 education reformTenent 2 – Shift the 28% levy lid to state collection. Tenent 3 – use state bonding for required capital

improvements Tenent 4 - implement reform by funding the neddiest

students first.Tenent 5 - reform local levies to 10% or $1/1,000

whichever is more.Full proposal may be found on the Levy Workgroup

Page.

The Vermont Model

At the local level, the total budget is approved by voters. The amount approved by voters is translated into a per-pupil amount. The state then calculates a local tax rate for that district based on the budget the voters approved. If the locals approved a per-pupil spending amount higher than 125% of the state average, then a penalty or higher tax rate is applied to that local district.

The Vermont Model – Full Eq

Those with ABOVE average tax rates would receive LEA funds so that no tax payers paid ABOVE the state average (this would be equalizing to a 24% lid, as opposed to current policy of a 12% lid).

Those with BELOW average tax rates would be allowed to collect up to 24%, but there would be a recapture provision calculated. This would work as a deduction from state funding allocations, and for this exercise is labeled DEDUCTION I.

The Vermont Model – Excess Lid

In the spirit of the Vermont model, districts would be allowed to exceed the levy lid. However, Vermont requires districts that exceed a per-student spending rate to pay a higher tax rate. For this exercise, in translating the Vermont model to Washington state, there would be a higher tax rate that kicks in for districts exceeding 24% of the levy lid. Again, this is like a recapture provision and would work as a deduction from state funding allocations.

Per Student Levy Limit

This would provide districts a levy limit based upon a per student rate.

To eliminate grandfathering this would require a rate at approximately $3,600 per student.

Proposal to establish minimum levy authority of $1M to address small district.

LEA is assumed to continue at 50% of any levy limit.

Per Student Levy Limit - Issues

Levy change is easy. LEA change creates winners and losers.

Using a flat rate of $3,000 , 119 district would have to be grandfathered at higher rates.

Would be required to have a rate of $3,600 rate to eliminate cuts or grandfathering.

Higher rate for all would grow the state’s LEA costs.Lower rate could be used to limit LEA and create

grandfathering for districts above set rate.No single rate eliminates large winners and losers

in LEA.

Consideration of Reducing Levy Funds

Basic assumption is that at some level as state funding meets adequacy, the reliance upon local funds is reduced.

How to measure that point?How to offset? $0.50 reduction for every

$1.00 increase in state funds??What would be included in determination of

increased state funds? Benefit Rates? MSOC increases? Salary

Increases? Transportation? Additional Staff?

Consideration of Current Levy Structure

After reviewing various proposals and options, the committee is now looking at the benefits of maintaining the current levy model.

Some tweaks discussed: Most members would like to see ghost money go away. Should the base focus on the actual state and federal

dollars being received per student? Should this be limited to just state?

If the base is adjusted the discussion focused on raising the levy lid to protect district current levy levels.

Levy / LEA Workgroup

The work of this group may be followed at http://www.ofm.wa.gov/levy/#meetings

Final Report is due on June 30th, 2011.