Local Levy and LEA
WASBO 2011
LEVY/ LEA
AN OVERVIEW
Local M&O Levies
 The state constitution provides school district the
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authority to levy property taxes with a 50% yes vote.
Duration may be one to four years
If election fails, proposal may be resubmitted one
more time in a calendar year
Referred 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 2010
 After the Doran decision in 1977, Levy Lid law had
established a 10% Levy Lid.
A Growth Model
Fiscal Year
1974–75
1980–81
1985–86
1990–91
1995–96
2000–01
2005–06
2009–10
2010-11
Revenue
$994,472
1,908,531
2,500,556
4,082,666
5,415,752
6,739,204
8,139,545
9,944,680
10,127,259
Levy Revenue
$320,566
152,700
277,484
475,256
773,351
1,024,717
1,317,017
1,737,022
1,798,244
** Dollars in Thousands, LEA not included, 2010-11 reflects
F-195 budgeted figures.
Percent
32.23%
8.00%
11.10%
11.64%
14.28%
15.21%
16.18%
16.69%
17.76%
Levy Authority
 Maximum levy authority is calculated by OSPI based
upon law and rule as adopted under WAC 392-139.
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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
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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 $422,000
 District’s tax base is $100,000,000
 14% rate would be $4.22 / 1,000
 State Average rate for a 14% levy is $1.00* per 1,000
 District 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.
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These districts
serve 709,500 students
 12 additional district are eligible but did not pass a
levy.
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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
3
Pupil Transportation
4
Special Education
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
11
Food Nutrition
85.5 4.1%
130.8 6.3%
77.2 3.7%
608.8 29.2%
11.7 0.6%
LEVY/ LEA
SESSION HIGHLITES
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:
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1814
1815 -
HB 1814 - EduJobs in Levy Base
 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.
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.
Levy / LEA workgroup
HEADED UP BY OFM
Levy and LEA Workgroup
 Formed under SHB 2261/ 2776
 Headed up by OFM – Paula Moore and Jim
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Crawford
Composed of 16 members
First meeting was May21, 2010
Report due June 30th 2011.
Materials for Group may be found at:
www.ofm.wa.gov/levy
Levy/LEA Workgroup Members
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Brian Benzel
Whitworth University ,Vice President, Finance and Administration
Don Cox
Retired (Prior Superintendent, Legislator, and Professor)
Harvey Erickson Bethel School District, Chief Financial Officer
Nancy Faaren
Olympia School District Principal, Capital High School
Larry Francois Northshore School District, Superintendent
Scott Izutsu
Yakima School District. Assistant Superintendent, Financial Services
Michael Mann Legislative Evaluation and Accountability Committee
Sally McLean
Federal Way School District, Chief Financial Officer
Doug Nelson
Public School Employees of Washington/SEIU 1948
Randy Parr
Washington Education Association, Budget Analyst/Lobbyist
Douglas Poole North Central Education Service District
Larry Quarnstrom Rochester School District, Maintenance Director
(and also WA Assoc. of M&O Administrators)
Ted Thomas
Longview School District School Board Director
Valerie Torres Department of Revenue Tax Policy Specialist
(Diann Locke) Department of Revenue Tax Policy Specialist
Carolyn Webb Mukilteo School District Executive Director for Business Services
At Large
At Large
At Large
AWSP
WASA
At Large
LEAP
At Large
PSE/SEIU
WEA
At Large
At Large
WSSDA
DOR
DOR
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
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how other states provides levies and proposal related
to funding. I highlite only a few:
Governor’s Tiered Proposal
Zarelli Bill
The 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
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state funding for k-12 education reform
Tenent 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
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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?
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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:
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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.