K-12 Funding Plan Takes Alternative Path Toward McCleary Solution

A proposal by moderate Senate Democrats to fully fund basic education received both praise and concern from panel members and testifiers at a Monday, February 27 public hearing of the Senate Ways and Means Committee. SB 5825 would fund K-12 in part by converting existing local maintenance and operations levies into a permanent local property tax, similar to the Senate Republican’s SB 5607. However, it would keep existing levy rates intact rather than create a statewide rate as proposed in the Senate Republican plan.

While some panel members have questioned the constitutionality of such a move, SB 5825’s chief sponsor State Sen. Mark Mullet (D-5) says it has solid ground in a 1930s State Supreme Court ruling.

Breaking Political Logjam Over Education Funding

Dan Steele told the committee February 27 that despite some reservations about maintaining current levy rates, “we hope that this bill can help break the logjam between the two houses,” He is the assistant executive director of government relations for the Washington Association of School Administrators. He added that the state needs “a plan that can be supported by both the House and the Senate, a plan that can be accepted by the court, and a plan that works for schools and students.”

Washington Roundtable Vice President Neil Strege told panel members “that it (SB 5825) seems to be worthy of being part of the dialogue. It’s good to have multiple approaches on the table, and I think this is a positive contribution to the conversation.”

He added that “it certainly contains the sustainability provisions that we’re looking for. It has a student-centered approach, but lacks the student-weighed formula that we would prefer.”

The Role Of Local Levies In McCleary Solution

The February 27 discussion among lawmakers highlighted some of fiscal and logistical challenges the legislature faces appropriating money to pay for a final McCleary package. While the House Democrats have yet to release a funding bill for HB 1843, SB 5607 has drawn criticism from some for its disparate impact on some school districts that would pay higher taxes while other districts’ tax burden would decrease. HB 1843 would slow the decrease of maximum local school tax levies from 28 percent of total state and federal funding, to 24 percent by 2021. However, it would not convert those levies to a state-imposed property tax.

Committee staff Jeff Mitchell told panel members February 27 that “anytime you have a comprehensive K-12 funding proposal where the primary objective is to essentially replace all the MO (maintenance and operations) levies…no matter what we do, there’s going to be some imperfections.”

Mullet argued his bill avoids some of the problems in the other McCleary proposals by maintaining the local levy rates while shifting the money toward basic education. Under SB 5825, levy equalization spending by the state would also double for districts with higher tax burdens.

Mullet: Nobody’s Levy Rates Go Up

“Nobody has a (local levy) tax increase,” he said. “It’s all the stuff that we already voter-approved to pay to support our local schools.”

He added, “I think the court’s big thing wasn’t so much they hated local levies, they just felt if there’s districts that can’t raise money locally, it’s a raw deal, because how are they supposed to provide an ample education? By doubling LEA (levy equalization), you’re kind of addressing that concern, because you’re telling the districts that can’t raise money locally, ‘You get extra state support.’”

Senior citizens who qualify for the state property tax relief program would be exempt from the new state-imposed local property tax. The bill would allow districts to raise new levies, but with a $1,000 per student cap.

The Office of the State Auditor would frequently review levy spending to ensure it is not spent on basic education.

Other proposed changes under SB 5825 include:

  • Raising the starting teacher annual salary from $35,000 to $45,000.
  • Replacing the state prototypical school funding model with a baseline per-pupil funding that guarantees $11,500 per student.
  • A “hold harmless” policy so that districts do not receive less money than they would under current state law.

A total cost estimate has not been determined yet for SB 5825, but at minimum it would add $1.5-$1.6 billion in education spending every four years. SB 5825’s backers have proposed two bills calling for an online sales tax to pay for it.

Constitutional Amendment Proposed To Exempt New Tax

Mullet has introduced SJR 8207, exempting the new proposed local property tax from the Washington state Constitution’s provision limiting overall property tax burdens to one percent, or $10 per $10,000 in assessed valuation (AV). It is cosponsored by State Sens. Steve Hobbs (D-44), Dean Takko (D-19), Sam Hunt (D-22), and Steve Conway (D-29). Excess levies are currently exempt from the constitutional one percent limit, along with ports and utility districts.

Committee member State Sen. Joe Fain (R-47) questioned whether the proposed local property tax, in which districts have different rates, could pass legal scrutiny. The state constitution requires property be taxed by the state at a uniform rate.

“We’re kind of trying to live in two universes, the universe where this is a local tax for the purpose of uniformity, but a state tax for the purpose of not relying on local levies, and so hopefully we can have more of a conversation on how that plays out.”

In agreement was Chair Sen. John Braun (R-20), who said it “sounds an awful lot like a state levy. If it’s a local levy, how can this be used to fund the state’s responsibility for basic education? It does seem like you’re kind of living in two different worlds, depending on which part of the constitution you want to comply with.”

Mitchell told members that “these are in essence local taxes…all of the money, all of the property taxes collected within the particular taxing district generating the property tax revenue, it goes right back to those districts.”

Mullet cited the 1935 State Supreme Court case Newman v. Schlarb. In section three of the ruling, the court found that the state could compel local taxing districts to levy a tax on their behalf at different rates, as long as it was uniform within the individual districts, because it would still qualify as a local tax.

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