Joint Task Force on Local Effort Assistance July 16, 2002 Bill Freund, Consultant To The Task Force Outline of Presentation • Washington’s K-12 Finance System • Origin of the levy lid and levy equalization • Levy lid and levy equalization mechanics • Other levy equalization topics including – Number receiving – Cost and reasons for cost increases – Review of 1997 Joint Legislative Levy Equalization Study 2 Washington’s K-12 Finance System Currently Washington’s school districts receive about 70 percent of their general fund revenues from the state and 15 percent from local taxes. Federal 9% Other 6% Local 15% 2001-02 Budgeted Revenues Source $ in 000s* State $5,093,394 Local Taxes 1,068,227 Federal 629,915 Other 481,084 Total $7,272,670 State 70% 4 The situation was different in the 1974-75 school year when school districts relied on M&O levies for a large part of their funds. Local Taxes 32% 1974-75 K-12 Revenues Source $ in 000s State* $ 522,426 State 51% Other 8% Federal 9% Local Taxes 327,670 Federal 92,609 Other 82,866 Total $1,025,572 * Includes state Teachers Retirement System Contributions. 5 In the 1974-75 school year, large differences existed among districts in levy revenue and property tax rates. 1974-75 Property Tax Profiles Among Selected Districts School District Average Assessed Val/Pupil State Avg.* Seattle Highline Tacoma Soap Lake San Juan Spokane Kelso Centralia Rochester $56,869 $103,237 40,949 52,550 29,245 214,653 47,960 36,058 100,263 43,236 1975 Levy Rate Per $1,000 AV $7.86 $8.19 14.44 11.06 15.88 1.99 6.30 7.80 2.48 1.32 1974-75 Levy $ Per Pupil $447 $845 $591 $581 $464 $428 $302 $281 $248 $57 * Districts with levies. Some districts had no levies Source: Miller Report, 1975 6 The state’s main allocation formula (apportionment) was also very different than today’s formula. PRE 1978 K-12 FINANCING SYSTEM WEIGHTED PUPIL GUARANTEE (for school year 1977-78) @ $600 PER WEIGHTED PUPIL FORMULA WEIGHING FACTORS BASE WEIGHT PER FULL TIME EQUIVALENT STUDENT (FTE) 1.00 PLUS ADDITIONAL WEIGHTING PER PUPIL AS FOLLOWS: 1) 2) 3) 4) 5) 6) 7) 8) FOR EACH VOCATIONAL FTE IN GRADES 9-12 TEACHER EXPERIENCE AND EDUCATION (Based on a table) DISTRICTS WITH ENROLLMENT <250 9-12 GRADE FTES NON HIGH DISTRICTS WITH LESS THAN 100 FTES SMALL SCHOOL PLANTS – DESIGNATED REMOTE & NECESSARY CONSOLIDATED DISTRICTS (FOR 4 YRS AFTER CONSOL.) FTEs RESIDING ON TAX EXEMPT PROPERTY INTERDISTRICT COOP FTEs 1.00 0-1.0 2.00 2.00 2.00 2.00 0.25 0.25 7 This high levy percentage dropped for 1976 collections due to levy failures and resulted in a lawsuit against the state and the 1977 Doran decision. • Prior to 1977: – No limit on amounts school districts could raise from local levies. – The Seattle School District levy and those of 64 other districts failed in 1975 for 1976 collections, prompting a law suit against the state. • 1977 Doran Decision: – State must define and fund basic education through regular and dependable tax sources and could not rely on local excess levies for that funding. 8 The School Funding I lawsuit was based on Article IX of the Washington 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…” 9 The 1977 and 1983 school funding cases established a series of funding principles for the state. 1. Education is the “paramount duty” of the state and takes precedence over all other state financial obligations. 2. The Legislature must define basic education and provide adequate funding for those programs. 3. Programs considered basic education are: Regular Apportionment Special Education Transitional Bilingual Education 4. Vocational Education Most of Pupil Transportation Learning Assistance The most important factors in determining adequate funding are staff compensation and pupil/staff ratios. 10 Funding principles continued 4. It is the Legislature’s obligation to establish a sufficient salary to attract and retain competent teachers. 5. Once the Legislature has established what is considered to be 100% funding of basic education needs, it cannot reduce that funding level due to state revenue problems. 6. The funding formula is not “cast in concrete”; it is the continuing obligation of the Legislature to review the formula as the education system evolves and changes. 7. 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. 11 The 1977 legislature responded to the K-12 funding lawsuit by passing three key pieces of legislation. The Basic Education Act, which defined basic education in terms of a minimum staffing ratios to be funded by the state, and district obligations to provide curriculum offerings and program hours. The Appropriations Act, which explicitly defined the state’s definition of basic education in terms of staffing ratios and cost factors. The Levy Lid Act, which limited school district M&O levies to 10 percent and set a four year timeline for all districts to get down to that level. 12 Current state budget architecture: six basic ed programs account for about 90% of state funds. 2001-03 K-12 State Funds Budget BASIC EDUCATION PROGRAMS * GENERAL APPORTIONMENT (RCW 28A.150.260) $7,498,021 73.2% SPECIAL EDUCATION (RCW 28A.150.370) 828,926 8.1% TRANSPORTATION (RCW 28A.160.150) 385,695 3.8% LEARNING ASSISTANCE PROGRAM (RCW 28A.165) 135,956 1.3% 87,501 0.9% BILINGUAL (RCW 28A.180) INSTITUTIONS (RCW 28A.190) 37,730 0.4% 329,146 3.2% 51,667 0.5% $9,354,642 91.3% COST-OF-LIVING INCREASES (I-732) (About 98% basic ed) HEALTH BENEFIT INCREASES (About 98% basic ed) SUBTOTAL: BASIC EDUCATION PROGRAMS NON-BASIC EDUCATION PROGRAMS STUDENT ACHIEVEMENT FUND (I-728) 391,149 3.8% LEVY EQUALIZATION (LEA) 295,863 2.9% 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% 4,275 0.0% 12,699 0.1% EDUCATIONAL SERVICE DISTRICTS 9,328 0.1% FOOD SERVICES 6,200 0.1% $890,837 8.7% $10,245,479 100.0% BETTER SCHOOLS PROGRAM TRAFFIC SAFETY EDUCATION HIGHLY CAPABLE SUBTOTAL: NON-BASIC EDUCATION PROGRAMS TOTAL- STATE FUNDS *Note: A large portion of the programs labeled "Basic Education Programs" are within the Legislature's current definition of basic education. However, there are a few components funded within several of these programs that are outside of the definition of basic education. The largest is the lower K-4 staffing ratio in apportionment which amounts to $240 million in the 01-03 Biennium. 13 The main basic ed formula, apportionment, is a staff per student formula with various formula elements. STAFFING RATIOS K-4 Certificated Instructional Staff (49/1000 K-3 req.) 5-12 Certificated Instructional Staff Certificated Administrative Staff Classified Staff Vocational Students per Certificated Staff (incl. Admin.) Staff Per 1,000 Students 55.4 46 4.00 16.67 Students Per Staff 18.05 21.70 250 60 19.50 WORKLOAD K-12 FTE Enrollment K-4 FTE Enrollment Vocational Education Enrollment (FTE) 956,639 335,849 61,074 NUMBER OF STAFF Certificated Instructional Staff Units Certificated Administrative Units Classified Staff Units 47,698 3,861 16,113 SALARY COSTS PER STAFF (not including benefits) Certificated Instructional Staff Average Salary Certificated Administrator Average Salary Classified Average Salary $44,340 $50,550 $26,887 NON-SALARY COSTS (Books,Utilities, Equip, Maintenance, Etc) Regular Non-Employee Related Costs per Certificated Staff Vocational NERC per Certificated Staff $8,519 $20,920 2001-02 SCHOOL YEAR TOTAL AVG. ALLOCATION PER STUDENT FTEs FTEs $3.91 Billion $4,094 There is a small school factor in the apportionment formula which allocates “bonus units”. • This formula recognizes diseconomies of scale by providing additional staff for districts with: – – – – K-6 enrollments of less than 60 students 7-8 enrollment of less than 20 students Small High Schools of less than 300 students Remote and necessary schools of less than 25 students • Of the 138 districts that are receiving a state small school allocation, 93 also receive levy equalization and 45 do not. • The cost of the small school factor was $40.4 million in the 2000-01 school year, not including levy equalization. 15 The small school formula* sets a minimum staffing floor for districts with low enrollments. Small School Formula Bonus Unit Examples K-6 District With Less Than 25 FTE Students Grade FTE Span Students K-4 5-6 9.02 10.85 Total CIS Staff Regular Apportionment .5 Cert. Inst Staff .5 Cert. Inst Staff Small School Formula CIS= 1.76+{(FTE-5)/20} 1.0 Cert. Inst Staff 2.5 CIS Bonus CIS Staff 1.5 CIS Small High School With Less Than 300 FTE Students With No Voc or Special Ed Students Grade FTE Span Students 9-12 120 Total CIS Staff Regular Apportionment Small High School Formula 5.5 Cert. Inst. Staff CIS= 9.0+{(FTE-60)/43.5*.8732} 5.5 Cert. Inst. Staff Bonus CIS Staff 10.2 CIS 4.7 CIS * Organization and Financing of Washington Public Schools published by SPI contains formula detail on pages 45 and 46. 16 The state allocation for certificated instructional staff varies by school district. K-12 Salary Allocation Schedule For Certificated Instructional Staff 2001-02 School Year Years of Service BA 0 27,467 1 27,836 2 28,464 3 29,401 4 30,063 5 30,750 6 31,147 7 32,164 8 33,195 9 10 11 12 13 14 15 16 or more BA+15 28,209 28,588 29,231 30,192 30,896 31,595 31,974 33,010 34,088 35,205 BA+30 28,977 29,366 30,025 31,009 31,727 32,443 32,850 33,909 35,008 36,169 37,344 BA+45 29,746 30,171 30,900 31,931 32,689 33,468 33,928 35,055 36,248 37,455 38,724 40,029 41,293 BA+90 32,219 32,668 33,414 34,490 35,290 36,085 36,531 37,724 38,954 40,223 41,529 42,895 44,298 45,736 47,181 48,408 49,376 BA+135 33,811 34,252 35,030 36,177 37,007 37,853 38,308 39,569 40,867 42,201 43,572 44,979 46,446 47,947 49,505 50,792 51,808 MA 32,931 33,297 33,995 35,027 35,755 36,503 36,904 38,031 39,225 40,430 41,700 43,005 44,362 45,766 47,212 48,439 49,407 MA+45 MA+90 or PHD 35,403 35,793 36,509 37,585 38,355 39,121 39,508 40,700 41,930 43,200 44,505 45,872 47,275 48,712 50,251 51,557 52,589 36,996 37,377 38,124 39,273 40,072 40,889 41,285 42,546 43,843 45,177 46,549 47,956 49,422 50,923 52,481 53,846 54,923 17 There are 34 districts with state funded salaries above the state salary allocation schedule. Certificated Instructional Staff Base Salaries, 2001-02 School Year Grandfathered Districts Compared to All Other Districts Total Base Salaries 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Everett Orondo Northshore Marysville Puyallup Vader Shaw Island Southside Lake Chelan Mukilteo Lopez Island Seattle Oak Harbor Edmonds McCleary Eastmont Boistfort 29,209 29,153 28,985 28,900 28,389 28,378 28,359 28,249 28,238 28,159 28,129 28,016 28,008 27,800 27,786 27,759 27,718 % Over "All Other" 6.3% 18 6.1% 19 5.5% 20 5.2% 21 3.4% 22 3.3% 23 3.2% 24 2.8% 25 2.8% 26 2.5% 27 2.4% 28 2.0% 29 2.0% 30 1.2% 31 1.2% 32 1.1% 33 0.9% 34 All Other Districts Eatonville Taholah Green Mountain Benge Darrington Evaline Loon Lake Thorp Wenatchee Lake Washington Bellevue Centerville Port Townsend Sumner Kelso Toppenish Cosmopolis $27,467 Total Base Salaries % Over "All Other" 27,685 27,663 27,657 27,656 27,656 27,649 27,649 27,627 27,621 27,605 27,542 27,534 27,533 27,520 27,510 27,491 27,490 0.8% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.6% 0.6% 0.5% 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 18 Each school district’s salary allocation by employee group is specified in the appropriations act using LEAP Document 12E. 2001-02 LEAP Document 12E Extract School District 01 109 Washtucna 01 122 Benge 01 147 Othello 01 158 Lind 01 160 Ritzville 02 250 Clarkston 02 420 Asotin-Anatone 03 017 Kennewick 03 050 Paterson 03 052 Kiona-Benton City 03 053 Finley 03 116 Prosser 03 400 Richland 04 019 Manson 04 069 Stehekin 04 127 Entiat 04 129 Lake Chelan Total CIS Base Salaries 27,467 27,656 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 27,467 28,238 Certif. Admin 55,924 34,389 47,712 61,858 53,465 50,359 48,792 46,790 49,040 52,618 51,454 53,577 50,188 55,653 56,977 65,740 46,133 Classified 25,738 27,371 26,801 25,605 26,940 26,873 24,241 26,460 23,368 26,674 26,503 26,427 26,574 26,479 21,611 25,994 27,067 19 The remaining basic education programs have funding formulas of varying complexity. Basic Education Programs Main Allocation Criteria, 2001-02 School Year MAIN ALLOCATION CRITERIA Apportionment Staffing Ratios Special Education Age 0-2, 1.15 x basic ed amount FUNDING DRIVER DRIVER $ PER STUDENT 956,639 FTEs Avg $4,094 2,283 students Avg $4,448 Age 3-21, .9309 x basic ed amount 116,228 students 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 $423 per LAP unit Transportation (0perating) Based on distance students live from school "as the crow flies" 4.6 million miles $37.07 per mile 20 Origins of The Levy Lid And Levy Equalization The 1975 Miller Report which was a K-12 finance study commissioned by the legislature concluded the following: "The present system of financing Washington State's common schools is the major contributing factor in creating unequal educational opportunities among students across the state and in creating inequalities in the relative tax burden borne by property owners. While the guarantee concept and equalization concepts of the present system of financing Washington State's .....schools are sound, these concepts are effectively negated by the large amount of special levy property tax revenue used to finance schools. Special levy revenue is not distributed equally across the state on a per-pupil basis, nor is the special levy property tax burden equalized among property owners. These two aspects .... and the increased dependence by schools on special levies create substantial inequities in the staffing and resources available to students as well as inequities in taxation among property owners." SOURCE: MILLER REPORT, 1975 22 Why did the legislature limit levies in 1977? The 1977 bill report on the levy lid act cited the following rationale: 1. Under the state constitution the legislature has the responsibility to “provide for a general and uniform system of public schools”. 2. The legislature implemented a four-year phase-in to full state funding for basic education to eliminate the inequities that exist due to reliance on excess special levies. 3. Excess tax levies for common schools should therefore have restrictions placed on them to insure property tax reductions in relationship to the proposed increases in state funds. 4. After full funding is achieved, special levies would be required only for enrichment. 23 As a result of the levy lid act, levies as a percent of total revenue dropped dramatically. But, since 1981, the percent has been increasing. 35% 30% Percent of Total School District Revenues Seattle School District levy fails 25% 20% First full year of levy lid. 15% 10% 5% 0% 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 School Year - End 91 92 93 94 95 96 97 98 99 00 01 24 Since 1977 the legislature has made various changes to the levy lid act increasing district’s levy authority. Major State Levy and Levy Equalization Policy Changes 1978-2003 Calendar Year Levy Lid Percent Levy Base Changes Levy Equal. % Grandfather Districts Number Phasedown Pre-1979 No Limit -- -- -- -By 1981 1979 10% State Basic Ed -- 50 1980-85 10% Added state progs. -- 150 by 1982 -- -- Fed rev. & inflation adj. -- 91 Levy red. funds 10% 91 Max. of 30% 1986-87 Higher of actual, By 1983,then '90 Less than 150 By 1993 18.18% or ESD avg. 1988 20% 1989-93 -- Lag adj. (1993) 1994-95 20%+temp. 4% -- 12% Prorated 91 -- 1996-97 20%+temp. 4% -- 10% 91 -- 1998 22% -- 10% 91 -- 1999 24% -- 10%, & 12% 91 -- for lowest quartile 2000-02 24% -- 12% 91 -- 2003 24% -- 12% Prorated 91 -- 25 Currently 91 districts have levy authority percentages that exceed 24 percent. Rank Highest =1 59 40 82 12 11 27 87 15 91 5 41 24 25 1 8 53 51 19 43 22 68 75 9 64 75 65 57 28 13 85 School County District Adams Lind Adams Ritzville Chelan Cashmere Clark Green Mountain Columbia Starbuck Cow litz Toutle Lake Cow litz Kalama Douglas Orondo Douglas Bridgeport Douglas Palisades Douglas Mansfield Douglas Waterville Franklin North Franklin Franklin Kahlotus Grant Wahluke Grant Quincy Grant Coulee/Hartline Grays Harbor Cosmopolis Jefferson Brinnon King Seattle King Federal Way King Enumclaw King Mercer Island King Highline King Vashon Island King Renton King Skykomish King Bellevue King Tukw ila King Riverview Max Rank Levy Highest % =1 County 25.20% 68 King 28.12% 71 King 24.79% 80 King 33.58% 61 King 33.61% 42 King 31.19% 71 King 24.24% 71 King 33.51% 68 King 24.01% 60 Kitsap 33.73% 17 Kittitas 28.00% 6 Klickitat 32.00% 89 Klickitat 31.70% 46 Lew is 33.90% 20 Lew is 33.69% 58 Lew is 26.67% 31 Lew is 26.79% 3 Lincoln 33.40% 55 Lincoln 27.50% 30 Lincoln 32.97% 9 Lincoln 24.90% 21 Lincoln 24.88% 38 Lincoln 33.67% 43 Okanogan 24.95% 56 Pend Oreille 24.88% 65 Pierce 24.93% 78 Pierce 25.43% 26 Pierce 30.66% 14 Pierce 33.54% 36 Pierce 24.72% 79 Pierce School District Auburn Tahoma Snoqualmie Valley Issaquah Shoreline Lake Washington Kent Northshore Bainbridge Damman Centerville Roosevelt Vader Evaline Boistfort White Pass Sprague Reardan Creston Odessa Harrington Davenport Pateros Selkirk Steilacoom Hist. Puyallup Tacoma Carbonado University Place Sumner Max Rank Levy Highest % =1 County 24.90% 33 Pierce 24.89% 83 Pierce 24.83% 52 Pierce 24.97% 67 Pierce 27.93% 61 Pierce 24.89% 71 Pierce 24.89% 61 Pierce 24.90% 84 Pierce 24.98% 81 Pierce 33.44% 2 San Juan 33.71% 29 Skagit 24.14% 32 Skagit 27.29% 16 Skamania 33.36% 88 Spokane 25.32% 39 Spokane 29.43% 50 Stevens 33.77% 49 Stevens 26.02% 86 Thurston 30.42% 7 Walla Walla 33.67% 18 Walla Walla 33.01% 48 Walla Walla 28.21% 54 Whatcom 27.50% 35 Whatcom 25.47% 34 Whitman 24.93% 75 Whitman 24.87% 89 Whitman 31.47% 47 Whitman 33.52% 37 Whitman 28.29% 4 Whitman 24.86% 23 Whitman 45 Whitman School District Dieringer Orting Clover Park Peninsula Franklin Pierce Bethel Eatonville White River Fife Shaw Anacortes Conw ay Mount Pleasant Spokane West Valley (Spo) Valley Loon Lake Olympia Dixie College Place Columbia (Walla) Bellingham Blaine Lacrosse Joint Lamont Tekoa Pullman Palouse Garfield Steptoe Colton Max Levy % 28.85% 24.78% 26.76% 24.91% 24.97% 24.89% 24.97% 24.77% 24.82% 33.82% 30.54% 29.15% 33.46% 24.18% 28.20% 26.91% 27.01% 24.34% 33.70% 33.43% 27.07% 26.35% 28.51% 28.75% 24.88% 24.14% 27.27% 28.27% 33.76% 32.42% 27.35% 26 Refer to map identifier code sheet for school district numbers 27 Levy Lid and Levy Equalization Mechanics The basic levy components: • • • • Levy Base Levy Lid Percent Assessed Value Property Tax Rate 28 There are some common factors between levies and levy equalization. • The levy base for both is most state and federal allocations to the district. • The amount a district can raise in local levies is decreased by the amount of levy equalization it receives. • A school district’s maximum levy lid is equal to the following: (Levy Base x Levy Authority Percentage) minus State Levy Equalization Allocation • The levy authority percentage is 24% for 205 districts, and higher for 91 “grandfathered” districts. 29 Purpose of levy equalization – as added to the law in 1999. “ 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 Note: The language up to the last sentence was added to the levy equalization statute in 1999. 30 Mechanics of Levy Equalization -- Definitions • Adjusted Levy Base = Most state and federal revenues from the previous school year, with various adjustments. – One adjustment is the per pupil inflator which is specified in the appropriations act. It serves to take account of the lag in the levy calculation due to the use of the prior school year as the base. – Another is for students served by one district that are resident in another. • 12% Levy = 12% of a district’s adjusted levy base. • 12% Levy Rate = the property tax rate needed to raise a 12% levy. 12% Levy Rate = 12% levy amount divided by assessed value times $1000 31 Mechanics of Levy Equalization • A district is eligible for state levy equalization if its property tax rate for a 12 percent levy is higher than the state average property tax rate for a 12 percent levy. • A district’s maximum levy equalization amount is based on the difference between the district’s 12% levy rate and the state average 12% levy rate, divided by the state average levy rate, times the district’s 12% levy amount. • To receive levy equalization, a district must have passed a local M&O levy. • A district’s maximum levy equalization allocation is reduced proportionately if the district has not passed a levy with a levy rate that reaches the state average rate for a 12% levy. 32 While levy authority is capped at 24%* of a district’s adjusted levy base, the levy equalization formula equalizes the tax rate necessary to raise a 12 percent levy. Average District District "A" 12 percent of adjusted levy base = $2.2 million 12 percent of adjusted levy base = $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 Equalization Equalization $2.2 million *Ninety-one grandfathered districts have higher levy lids. Amount that can be collected with a levy rate of $1.33 per $1000: $1.1 million 33 The adjusted levy base and district assessed value determine eligibility and amount of levy equalization. Average District District "B" District "C" 12 percent of adjusted levy base = $2.2 million 12 percent of adjusted levy base = $2.2 million 12 percent of adjusted levy base = $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 Equalization Equalization $2.2 million Amount that can be collected 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 be collected with a levy rate of $1.33 per $1000: $600,000 Appendixes B and B1 contain this data for all school districts. 34 Levy base per student differences are one reason for differing property tax rates and differences in levy equalization per student. Examples Of Groups Of Districts With Similar Assessed Values Per Student And Effect Of Differing Levy Bases Per Student Levy Base Per Student Assessed Value Per Student 12% Levy Amount Per Student State Average $5,712 $515,031 $685 $1.33 $160 Walla Walla Clallam Columbia Crescent $5,660 $9,011 $669,120 $670,352 $679 $1,081 $1.02 $1.61 $0 $189 King Whitman Highline Endicott $5,567 $12,485 $546,113 $546,430 $668 $1,498 $1.22 $2.74 $0 $771 Snohomish Pacific Snohomish Willapa Valley $5,269 $6,696 $483,524 $482,774 $632 $804 $1.31 $1.66 $0 $161 King Yakima Federal Way Union Gap $5,217 $6,143 $385,061 $385,227 $626 $737 $1.63 $1.91 $114 $225 County School District Appendix A1 ranks school district levy bases from high to low. 12% Levy Rate per $1,000 AV Per Student LEA 35 Statewide, two state education programs account for almost 82 percent of the levy base for 2002 levies. State and Federal Revenues Included in the 2002* Levy Base % of Total Major State Revenues to Districts Apportionment Special Ed Transportation LAP Better Schools Bilingual 3,829,628,832 428,249,311 191,564,147 74,348,286 59,694,038 42,317,344 4,664,985,346 73.7% 8.2% 3.7% 1.4% 1.1% 0.8% 89.8% Remediation (Title 1) Special Purpose & Direct Fed Grants Food Services & USDA Commodities Special Education Total Federal $ 121,835,844 121,490,242 116,766,504 104,012,331 532,058,746 2.3% 2.3% 2.2% 2.0% 10.2% Total State and Federal $ 5,197,044,093 100.0% Total State $ Major Federal Revenues to Districts *Revenues to districts used to calculate CY 2002 levy equalization are from the 2001-02 school year. SPI calculates most of these revenues, but some are from district budgets. 36 Factors in the levy base with the greatest per student variation are: small schools, transportation and federal programs. Program Formula Factor Apportionment Dollars per FTE Student Staff Mix Factor Cert. Instruct. Staff Salary Small Schools Per Student Average Lowest Highest $4,024 $2,190 $20,955 1.60528 $42,519 1.29034 $34,177 1.91461 $50,712 $42 $0 $16,445 Special Education Avg. $ Per FTE Student Percent of Enrollment $450 12.1% 0 0.0% Transportation Avg. $ Per FTE Student $183 $7 $3,855 Learning Assist. Avg. $ Per FTE Student $78 $14 $269 FTEs In Lowest Quartile Poverty Rate 19% 31% 4% 5% 60% 98% Bilingual Avg. $ Per FTE Student Percent of Enrollment $45 6% $0 0 $424 60% Federal Avg. $ Per FTE Student $559 0 $780 12.7% $11,376 37 A Comparison of Two School Districts and State Average: Per Student State and Federal Revenues Used in Levy Calculations Per Student Funding $10,000 $5,000 $0 State Avg. Colum bia (Walla) Crescent Sm all Sch Factor $44 $68 $2,343 Other Fed $443 $364 $393 Title 1 $142 $97 $849 Other State $237 $225 $201 State Transp. $211 $245 $502 $4,635 $4,660 $4,723 Apportm nt & SpecEd 38 Differences in assessed value per student are another reason for differences in levy rates for equivalent percent levies. Examples Of Groups Of Districts With Similar Levy Bases Per Student And The Effect Of Differing Assessed Values Per Student Levy Base Per Student Assessed Value Per Student 12% Levy Amount Per Student State Average $5,712 $515,031 $685 $1.33 $160 Snohomish Cowlitz $5,044 $5,045 $419,893 $697,365 $605 $605 $1.44 $0.87 $47 $0 Franklin Pasco Grays Harbor North Beach $6,367 $6,372 $216,282 $1,231,647 $764 $765 $3.53 $0.62 $476 $0 Walla Walla Kittitas $9,359 $9,360 $868,839 $383,892 $1,123 $1,123 $1.29 $2.93 $0 $612 County School District Lakewood Kalama Prescott Kittitas Appendix E compares assessed value per student and eligibility for levy equalization. 12% Levy Rate per $1,000 AV Per Student LEA 39 Of the 228 districts eligible for LEA, about 70% have above average levy bases per student, and about 87% have below average assessed value per student. Assessed Value and Levy Base Per Student And Eligibility For Levy Equalization Levy Base Per Student # of Districts # of Districts Above Avg. Below Avg. Eligible For Levy Equal. Not Eligible For Levy Equal. 162 26 66 42 Assessed Value Per Student # of Districts # of Districts Below Avg. Above Avg. Eligible For Levy Equal. Not Eligible For Levy Equal. 199 6 29 62 Total Number Of Districts 228 68 Total Number Of Districts 228 68 40 Other Levy Equalization Topics 1. Number of districts receiving levy equalization, 1990-2002. 2. State average levy rates for a 12% levy 1995-2003. 3. Cost of levy equalization 1995-2005. 4. Reasons for cost increases in levy equalization. 5. 1997 joint legislative levy equalization study – findings and recommendations. 41 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 do not receive levy equalization, 18 are eligible but do not qualify because they did not pass a levy. 220 200 180 160 140 120 100 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 Number of Districts Number of School Districts Receiving Levy Equalization Funding Calendar Year 42 Refer to map identifier code sheet for school district numbers. 43 The levy rate per $1,000 of Assessed Value for a 12 percent levy has been dropping. State Average Levy Rate For A 12 Percent Levy (1995-2005) Levy Rate Per $1,000 Assessed Value $1.600 $1.566 $1.556 $1.543 $1.506 $1.472 $1.500 $1.471 Estimated $1.389 $1.400 $1.331 $1.302 $1.300 $1.234 $1.200 $1.169 $1.100 $1.000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Calendar Years 44 The cost of the levy equalization program has increased substantially since 1995. Levy Equalization Program Fiscal Year Costs 1995-2005 Estimated $200.0 $184.2 $180.0 $170.3 $154.9 $160.0 $140.9 $140.0 $s in Millions $124.1 $120.0 $102.6 $100.0 $80.0 $82.8 $82.0 $83.2 1997 1998 1999 $76.9 $71.0 $60.0 $40.0 $20.0 $0.0 1995 1996 2000 2001 2002 2003 2004 2005 State Fiscal Year 45 Increases in the levy base account for almost half of the increase in the cost of levy equalization from FY 1995 to FY 2003. Factors Accounting For Increases In The Cost Of Levy Equalization 1995-2003 Legislative Policy 23% Levy Base 45% Voter Approved Levies 23% Assessed Valuation 9% 46 King County assessed values have been growing faster than the rest of the state. Change in Assessed Value For School Levies, 1995-2003 King County's Share Of State Total Assessed Value Assessed Value CY 1995 Percent of Total Assessed Value CY 2003 Percent of Total State Total $308,341,526,731 100.0% $529,115,913,379 100.0% King County $127,023,635,923 41.2% $232,675,024,666 44.0% All Other Counties $181,317,890,808 58.8% $296,440,888,713 56.0% 47 The 1997 legislation that provided levy equalization at 12% for certain districts also required a joint House and Senate study of levy equalization. GENERAL FINDINGS FROM THE REVIEW OF LEVY EQUALIZATION RELATED DATA Two-thirds of all school districts receive levy equalization funding. 73 percent are eligible. In many instances the highest equalization payments per pupil go to districts with the highest revenue per pupil. Almost half of the equalization districts receive state small school bonus payments. Large districts consume most of the equalization funding. (87 percent goes to school districts with enrollment over 1000 students). 43 districts (20%) with above average assessed value are eligible for levy equalization. Of districts with the highest free and reduced lunch participation, 29 districts (17%) are not eligible for levy equalization. There is no specific statewide data on the nature of equalization expenditures. 48 1997 Levy Study Recommendations RECOMMENDATIONS TO THE LEGISLATURE No change to the current statute for Levy Equalization is recommended at this time for reasons detailed below. The Legislature should continue to study the data and issues relevant to Levy Equalization in preparation for the 1999 Legislative Session and as part of its continuing need to review education funding. The current study has been unable to review important information. Some reasons for continuing the review of Levy Equalization are as follows: The committee could not identify reliable objective data specifying the use of levy equalization and levy revenues. The 1998 Legislature should consider approaches to gathering this information including a thorough field review of district data on a sampling basis to determine the specifics of this spending. As part of the need to provide basic information about Levy Equalization expenditures, the accuracy of the reported data needs scrutiny to ensure the integrity of what the data is supposed to represent. A focused audit of a sample of districts could accomplish this. The consideration of some financial and property tax data as context for analyzing Levy Equalization issues was not available for committee review. Examples include the relationship of ending fund balances to program expenditures and the reasons for below average assessed values in levy equalization districts. The complexity of the issue and need for more public hearings to consider the extensive data produced in the study effort so far. 49