Joint Task Force on Local Effort Assistance

July 16, 2002

Bill Freund, Consultant To The Task Force

2

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

Washington’s K-12 Finance System

4

Other 6%

Federal 9%

Local15%

State70%

2001-02 Budgeted RevenuesSource $ in 000s*

State $5,093,394

Local Taxes 1,068,227

Federal 629,915

Other 481,084

Total $7,272,670

Currently Washington’s school districts receive about 70 percent of their general fund revenues from the state and 15 percent from local taxes.

5

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.

1974-75 K-12 RevenuesSource $ in 000s State* $ 522,426

Local Taxes 327,670

Federal 92,609

Other 82,866

Total $1,025,572

State 51%

Federal9%

Other8%

Local Taxes32%

* Includes state Teachers Retirement System Contributions.

6

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 DistrictsSPECIAL LEVY

Average 1975 1974-75School Assessed Levy Rate Per Levy $District Val/Pupil $1,000 AV Per Pupil

State Avg.* $56,869 $7.86 $447Seattle $103,237 $8.19 $845

Highline 40,949 14.44 $591Tacoma 52,550 11.06 $581

Soap Lake 29,245 15.88 $464San Juan 214,653 1.99 $428Spokane 47,960 6.30 $302

Kelso 36,058 7.80 $281Centralia 100,263 2.48 $248Rochester 43,236 1.32 $57

* Districts with levies. Some districts had no leviesSource: Miller Report, 1975

7

The state’s main allocation formula (apportionment) was also very different than today’s formula.

PRE 1978 K-12 FINANCING SYSTEMWEIGHTED 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) FOR EACH VOCATIONAL FTE IN GRADES 9-12

2) TEACHER EXPERIENCE AND EDUCATION (Based on a table)

3) DISTRICTS WITH ENROLLMENT <250 9-12 GRADE FTES

4) NON HIGH DISTRICTS WITH LESS THAN 100 FTES

5) SMALL SCHOOL PLANTS – DESIGNATED REMOTE & NECESSARY

6) CONSOLIDATED DISTRICTS (FOR 4 YRS AFTER CONSOL.)

7) FTEs RESIDING ON TAX EXEMPT PROPERTY

8) INTERDISTRICT COOP FTEs

1.00

0-1.0

2.00

2.00

2.00

2.00

0.25

0.25

8

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.

9

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…”

10

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 Vocational EducationSpecial Education Most of Pupil TransportationTransitional Bilingual Education Learning Assistance

4. The most important factors in determining adequate funding are staff compensation and pupil/staff ratios.

The 1977 and 1983 school funding cases established a series of funding principles for the state.

11

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.

Funding principles continued

12

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.

13

Current state budget architecture: six basic ed programs account for about 90% of state funds.

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%

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

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)

2001-03 K-12 State Funds Budget

The main basic ed formula, apportionment, is a staff per student formula with various formula elements.

STAFFING RATIOSStaff Per 1,000

Students Students Per Staff

K-4 Certificated Instructional Staff (49/1000 K-3 req.) 55.4 18.05 5-12 Certificated Instructional Staff 46 21.70 Certificated Administrative Staff 4.00 250 Classified Staff 16.67 60

Vocational Students per Certificated Staff (incl. Admin.) 19.50

WORKLOAD FTEs

K-12 FTE Enrollment 956,639 K-4 FTE Enrollment 335,849 Vocational Education Enrollment (FTE) 61,074

NUMBER OF STAFF FTEs

Certificated Instructional Staff Units 47,698 Certificated Administrative Units 3,861 Classified Staff Units 16,113

SALARY COSTS PER STAFF (not including benefits) Certificated Instructional Staff Average Salary $44,340 Certificated Administrator Average Salary $50,550 Classified Average Salary $26,887

NON-SALARY COSTS (Books,Utilities, Equip, Maintenance, Etc)

Regular Non-Employee Related Costs per Certificated Staff $8,519

Vocational NERC per Certificated Staff $20,920

2001-02 SCHOOL YEAR TOTAL $3.91 Billion

AVG. ALLOCATION PER STUDENT $4,094

15

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.

16

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 Regular Small SchoolSpan Students Apportionment Formula

K-4 9.02 .5 Cert. Inst Staff CIS= 1.76+{(FTE-5)/20}5-6 10.85 .5 Cert. Inst Staff

Total CIS Staff 1.0 Cert. Inst Staff 2.5 CIS

Bonus CIS Staff 1.5 CIS

Small High School With Less Than 300 FTE StudentsWith No Voc or Special Ed Students

Grade FTE Regular Small High SchoolSpan Students Apportionment Formula

9-12 120 5.5 Cert. Inst. Staff CIS= 9.0+{(FTE-60)/43.5*.8732}

Total CIS Staff 5.5 Cert. Inst. Staff 10.2 CIS

Bonus CIS Staff 4.7 CIS

* Organization and Financing of Washington Public Schools published by SPI contains formula detail on pages 45 and 46.

17

The state allocation for certificated instructional staff varies by school district.

K-12 Salary Allocation Schedule For Certificated Instructional Staff K-12 Salary Allocation Schedule For Certificated Instructional Staff2001-02 School Year 2002-03 School Year

Years of MA+90Service BA BA+15 BA+30 BA+45 BA+90 BA+135 MA MA+45 or PHD

0 27,467 28,209 28,977 29,746 32,219 33,811 32,931 35,403 36,996 1 27,836 28,588 29,366 30,171 32,668 34,252 33,297 35,793 37,377 2 28,464 29,231 30,025 30,900 33,414 35,030 33,995 36,509 38,124 3 29,401 30,192 31,009 31,931 34,490 36,177 35,027 37,585 39,273 4 30,063 30,896 31,727 32,689 35,290 37,007 35,755 38,355 40,072 5 30,750 31,595 32,443 33,468 36,085 37,853 36,503 39,121 40,889 6 31,147 31,974 32,850 33,928 36,531 38,308 36,904 39,508 41,285 7 32,164 33,010 33,909 35,055 37,724 39,569 38,031 40,700 42,546 8 33,195 34,088 35,008 36,248 38,954 40,867 39,225 41,930 43,843 9 35,205 36,169 37,455 40,223 42,201 40,430 43,200 45,177

10 37,344 38,724 41,529 43,572 41,700 44,505 46,549 11 40,029 42,895 44,979 43,005 45,872 47,956 12 41,293 44,298 46,446 44,362 47,275 49,422 13 45,736 47,947 45,766 48,712 50,923 14 47,181 49,505 47,212 50,251 52,481 15 48,408 50,792 48,439 51,557 53,846 16 or more 49,376 51,808 49,407 52,589 54,923

18

There are 34 districts with state funded salaries above the state salary allocation schedule.

Total % Over Total % OverBase Salaries "All Other" Base Salaries "All Other"

1 Everett 29,209 6.3% 18 Eatonville 27,685 0.8%2 Orondo 29,153 6.1% 19 Taholah 27,663 0.7%3 Northshore 28,985 5.5% 20 Green Mountain 27,657 0.7%4 Marysville 28,900 5.2% 21 Benge 27,656 0.7%5 Puyallup 28,389 3.4% 22 Darrington 27,656 0.7%6 Vader 28,378 3.3% 23 Evaline 27,649 0.7%7 Shaw Island 28,359 3.2% 24 Loon Lake 27,649 0.7%8 Southside 28,249 2.8% 25 Thorp 27,627 0.6%9 Lake Chelan 28,238 2.8% 26 Wenatchee 27,621 0.6%

10 Mukilteo 28,159 2.5% 27 Lake Washington 27,605 0.5%11 Lopez Island 28,129 2.4% 28 Bellevue 27,542 0.3%12 Seattle 28,016 2.0% 29 Centerville 27,534 0.2%13 Oak Harbor 28,008 2.0% 30 Port Townsend 27,533 0.2%14 Edmonds 27,800 1.2% 31 Sumner 27,520 0.2%15 McCleary 27,786 1.2% 32 Kelso 27,510 0.2%16 Eastmont 27,759 1.1% 33 Toppenish 27,491 0.1%17 Boistfort 27,718 0.9% 34 Cosmopolis 27,490 0.1%

All Other Districts $27,467

Certificated Instructional Staff Base Salaries, 2001-02 School YearGrandfathered Districts Compared to All Other Districts

19

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

Total CISBase Certif.

School District Salaries Admin Classified 01 109 Washtucna 27,467 55,924 25,738 01 122 Benge 27,656 34,389 27,371 01 147 Othello 27,467 47,712 26,801 01 158 Lind 27,467 61,858 25,605 01 160 Ritzville 27,467 53,465 26,940 02 250 Clarkston 27,467 50,359 26,873 02 420 Asotin-Anatone 27,467 48,792 24,241 03 017 Kennewick 27,467 46,790 26,460 03 050 Paterson 27,467 49,040 23,368 03 052 Kiona-Benton City 27,467 52,618 26,674 03 053 Finley 27,467 51,454 26,503 03 116 Prosser 27,467 53,577 26,427 03 400 Richland 27,467 50,188 26,574 04 019 Manson 27,467 55,653 26,479 04 069 Stehekin 27,467 56,977 21,611 04 127 Entiat 27,467 65,740 25,994 04 129 Lake Chelan 28,238 46,133 27,067

20

The remaining basic education programs have funding formulas of varying complexity.

MAIN ALLOCATION FUNDING DRIVER

$ PER

CRITERIA DRIVER STUDENT

Apportionment Staffing Ratios 956,639 FTEs Avg $4,094

Special Education Age 0-2, 1.15 x basic ed amount 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

Basic Education ProgramsMain Allocation Criteria, 2001-02 School Year

Origins of The Levy Lid And Levy Equalization

22

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 schoolsis the major contributing factor in creating unequal educationalopportunities among students across the state and in creatinginequalities in the relative tax burden borne by property owners.

While the guarantee concept and equalization concepts of the presentsystem of financing Washington State's .....schools are sound, theseconcepts are effectively negated by the large amount of special levyproperty tax revenue used to finance schools.

Special levy revenue is not distributed equally across the state on aper-pupil basis, nor is the special levy property tax burden equalizedamong property owners. These two aspects .... and the increaseddependence by schools on special levies create substantial inequitiesin the staffing and resources available to students as well as inequitiesin taxation among property owners."

SOURCE: MILLER REPORT, 1975

23

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.

24

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.

0%

5%

10%

15%

20%

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

Per

cen

t o

f To

tal S

cho

ol D

istr

ict

Rev

enu

es

Seattle School District levy fails

First full year of levy lid.

25

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 Levy Lid Levy Base Levy Grandfather DistrictsYear Percent Changes Equal. % Number Phasedown

Pre-1979 No Limit -- -- -- --

1979 10% State Basic Ed -- 50 By 1981

1980-85 10% Added state progs. -- 150 by 1982 By 1983,then '90

1986-87 Higher of actual, -- -- Less than 150 By 199318.18% or ESD avg.

1988 20% Fed rev. & inflation adj. -- 91 Levy red. funds

1989-93 -- Lag adj. (1993) 10% 91 Max. of 30%

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 --

26

Currently 91 districts have levy authority percentages that exceed 24 percent.

Rank Highest School

Max Levy

Rank Highest School

Max Levy

Rank Highest School

Max Levy

=1 County District % =1 County District % =1 County District %59 Adams Lind 25.20% 68 King Auburn 24.90% 33 Pierce Dieringer 28.85%40 Adams Ritzville 28.12% 71 King Tahoma 24.89% 83 Pierce Orting 24.78%82 Chelan Cashmere 24.79% 80 King Snoqualmie Valley 24.83% 52 Pierce Clover Park 26.76%12 Clark Green Mountain 33.58% 61 King Issaquah 24.97% 67 Pierce Peninsula 24.91%11 Columbia Starbuck 33.61% 42 King Shoreline 27.93% 61 Pierce Franklin Pierce 24.97%27 Cow litz Toutle Lake 31.19% 71 King Lake Washington 24.89% 71 Pierce Bethel 24.89%87 Cow litz Kalama 24.24% 71 King Kent 24.89% 61 Pierce Eatonville 24.97%15 Douglas Orondo 33.51% 68 King Northshore 24.90% 84 Pierce White River 24.77%91 Douglas Bridgeport 24.01% 60 Kitsap Bainbridge 24.98% 81 Pierce Fife 24.82%5 Douglas Palisades 33.73% 17 Kittitas Damman 33.44% 2 San Juan Shaw 33.82%41 Douglas Mansfield 28.00% 6 Klickitat Centerville 33.71% 29 Skagit Anacortes 30.54%24 Douglas Waterville 32.00% 89 Klickitat Roosevelt 24.14% 32 Skagit Conw ay 29.15%25 Franklin North Franklin 31.70% 46 Lew is Vader 27.29% 16 Skamania Mount Pleasant 33.46%1 Franklin Kahlotus 33.90% 20 Lew is Evaline 33.36% 88 Spokane Spokane 24.18%8 Grant Wahluke 33.69% 58 Lew is Boistfort 25.32% 39 Spokane West Valley (Spo) 28.20%53 Grant Quincy 26.67% 31 Lew is White Pass 29.43% 50 Stevens Valley 26.91%51 Grant Coulee/Hartline 26.79% 3 Lincoln Sprague 33.77% 49 Stevens Loon Lake 27.01%19 Grays Harbor Cosmopolis 33.40% 55 Lincoln Reardan 26.02% 86 Thurston Olympia 24.34%43 Jefferson Brinnon 27.50% 30 Lincoln Creston 30.42% 7 Walla Walla Dixie 33.70%22 King Seattle 32.97% 9 Lincoln Odessa 33.67% 18 Walla Walla College Place 33.43%68 King Federal Way 24.90% 21 Lincoln Harrington 33.01% 48 Walla Walla Columbia (Walla) 27.07%75 King Enumclaw 24.88% 38 Lincoln Davenport 28.21% 54 Whatcom Bellingham 26.35%9 King Mercer Island 33.67% 43 Okanogan Pateros 27.50% 35 Whatcom Blaine 28.51%64 King Highline 24.95% 56 Pend Oreille Selkirk 25.47% 34 Whitman Lacrosse Joint 28.75%75 King Vashon Island 24.88% 65 Pierce Steilacoom Hist. 24.93% 75 Whitman Lamont 24.88%65 King Renton 24.93% 78 Pierce Puyallup 24.87% 89 Whitman Tekoa 24.14%57 King Skykomish 25.43% 26 Pierce Tacoma 31.47% 47 Whitman Pullman 27.27%28 King Bellevue 30.66% 14 Pierce Carbonado 33.52% 37 Whitman Palouse 28.27%13 King Tukw ila 33.54% 36 Pierce University Place 28.29% 4 Whitman Garfield 33.76%85 King Riverview 24.72% 79 Pierce Sumner 24.86% 23 Whitman Steptoe 32.42%

45 Whitman Colton 27.35%

27

Refer to map identifier code sheet for school district numbers

28

Levy Lid and Levy Equalization Mechanics

The basic levy components:• Levy Base

• Levy Lid Percent

• Assessed Value

• Property Tax Rate

29

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.

30

“ 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.

Purpose of levy equalization – as added to the law in 1999.

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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

32

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.

33

*Ninety-one grandfathered districts have higher levy lids.

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 EqualizationEqualization

$2.2 million

Amount that can becollected with a levy

rate of $1.33 per $1000:$1.1 million

34

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 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

Appendixes B and B1 contain this data for all school districts.

35

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 StudentAnd Effect Of Differing Levy Bases Per Student

CountySchool District

Levy Base Per

Student

Assessed Value Per Student

12% Levy Amount

Per Student

12% Levy Rate per

$1,000 AV

Per Student

LEA

State Average $5,712 $515,031 $685 $1.33 $160

Walla Walla Columbia $5,660 $669,120 $679 $1.02 $0Clallam Crescent $9,011 $670,352 $1,081 $1.61 $189

King Highline $5,567 $546,113 $668 $1.22 $0Whitman Endicott $12,485 $546,430 $1,498 $2.74 $771

Snohomish Snohomish $5,269 $483,524 $632 $1.31 $0Pacific Willapa Valley $6,696 $482,774 $804 $1.66 $161

King Federal Way $5,217 $385,061 $626 $1.63 $114Yakima Union Gap $6,143 $385,227 $737 $1.91 $225

Appendix A1 ranks school district levy bases from high to low.

36

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 Major State Revenues to Districts Total

Apportionment 3,829,628,832 73.7%Special Ed 428,249,311 8.2%Transportation 191,564,147 3.7%LAP 74,348,286 1.4%Better Schools 59,694,038 1.1%Bilingual 42,317,344 0.8%

Total State 4,664,985,346$ 89.8%

Major Federal Revenues to Districts

Remediation (Title 1) 121,835,844 2.3%Special Purpose & Direct Fed Grants 121,490,242 2.3%Food Services & USDA Commodities 116,766,504 2.2%Special Education 104,012,331 2.0%

Total Federal 532,058,746$ 10.2%

Total State and Federal 5,197,044,093$ 100.0%

*Revenues to districts used to calculate CY 2002 levy equalization are from the 2001-02school year. SPI calculates most of these revenues, but some are from district budgets.

37

Factors in the levy base with the greatest per student variation are: small schools, transportation and federal programs.

Program Formula Factor Average Lowest Highest

Apportionment Dollars per FTE Student $4,024 $2,190 $20,955

Staff Mix Factor 1.60528 1.29034 1.91461Cert. Instruct. Staff Salary $42,519 $34,177 $50,712

Small Schools Per Student $42 $0 $16,445

Special Education Avg. $ Per FTE Student $450 0 $780Percent of Enrollment 12.1% 0.0% 12.7%

Transportation Avg. $ Per FTE Student $183 $7 $3,855

Learning Assist. Avg. $ Per FTE Student $78 $14 $269

FTEs In Lowest Quartile 19% 4% 60%Poverty Rate 31% 5% 98%

Bilingual Avg. $ Per FTE Student $45 $0 $424Percent of Enrollment 6% 0 60%

Federal Avg. $ Per FTE Student $559 0 $11,376

38

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nd

ing

A Comparison of Two School Districts and State Average: Per Student State and Federal Revenues Used in Levy Calculations

Small 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

Apportmnt & SpecEd $4,635 $4,660 $4,723

State Avg. Columbia (Walla) Crescent

39

Differences in assessed value per student are another reason for differences in levy rates for equivalent percent levies.

Appendix E compares assessed value per student and eligibility for levy equalization.

Examples Of Groups Of Districts With Similar Levy Bases Per StudentAnd The Effect Of Differing Assessed Values Per Student

CountySchool District

Levy Base Per

Student

Assessed Value Per Student

12% Levy Amount

Per Student

12% Levy Rate per

$1,000 AV

Per Student

LEA

State Average $5,712 $515,031 $685 $1.33 $160

Snohomish Lakewood $5,044 $419,893 $605 $1.44 $47Cowlitz Kalama $5,045 $697,365 $605 $0.87 $0

Franklin Pasco $6,367 $216,282 $764 $3.53 $476Grays Harbor North Beach $6,372 $1,231,647 $765 $0.62 $0

Walla Walla Prescott $9,359 $868,839 $1,123 $1.29 $0Kittitas Kittitas $9,360 $383,892 $1,123 $2.93 $612

40

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 StudentAnd Eligibility For Levy Equalization

Levy Base Per Student Total# of Districts # of Districts NumberAbove Avg. Below Avg. Of Districts

Eligible For Levy Equal. 162 66 228Not Eligible For Levy Equal. 26 42 68

Assessed Value Per Student Total# of Districts # of Districts NumberBelow Avg. Above Avg. Of Districts

Eligible For Levy Equal. 199 29 228Not Eligible For Levy Equal. 6 62 68

41

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.

42

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.

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

Nu

mb

er o

f D

istr

icts

43Refer to map identifier code sheet for school district numbers.

44

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)

$1.566 $1.556

$1.506$1.543

$1.472 $1.471

$1.389

$1.331$1.302

$1.234

$1.169

$1.000

$1.100

$1.200

$1.300

$1.400

$1.500

$1.600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Calendar Years

Le

vy

Ra

te P

er

$1

,00

0 A

ss

es

se

d V

alu

e

Estimated

45

The cost of the levy equalization program has increased substantially since 1995.

Levy Equalization Program Fiscal Year Costs 1995-2005

$71.0$76.9

$82.8 $82.0 $83.2

$102.6

$124.1

$140.9

$154.9

$170.3

$184.2

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

State Fiscal Year

$s

in

Mil

lio

ns

Estimated

46

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

Levy Base45%

Assessed Valuation9%

Voter Approved Levies23%

Legislative Policy23%

47

King County assessed values have been growing faster than the rest of the state.

Change in Assessed Value For School Levies, 1995-2003King 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%

48

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.

49

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.