Lawmakers debate whether to spare school districts from ‘levy cliff’ — and possible budget cuts

School district officials have long questioned whether Washington lawmakers can fix the unconstitutional way the state pays for schools by April, when the Legislature is scheduled to adjourn.

It turns out, some Democratic lawmakers are doubtful, too. That’s why they say the Legislature needs to act quickly to prevent devastating cuts to school district budgets and widespread teacher layoffs.

Democrats in Olympia want the Legislature to delay a planned cut to school districts’ local taxing authority, which threatens to reduce school districts’ budgets by millions of dollars in the 2017-18 school year if a new state funding plan isn’t worked out.

Starting in January 2018, school districts throughout the state stand to lose about $358 million per year if the Legislature doesn’t postpone changes to how much they can collect in local property taxes, according to estimates by legislative staff.

School district officials say the budget impact would be even higher — closer to $500 million annually across the state’s 295 school districts.

“Many districts are in fact drafting two separate budgets — a worst-case and a best-case scenario — to make sure that they can prepare,” said Dan Steele, lobbyist for the Washington Association of School Administrators.

“Certainly, all districts are preparing for a potential budget crisis.”

The so-called “levy cliff” is of lawmakers’ own making. In 2010, the Legislature voted to temporarily increase school districts’ ability to raise money through their local property tax levies, a move intended to help cash-strapped districts weather the economic recession.

Raising the levy lid also was aimed at giving school districts some cushion in their budgets as the Legislature worked to pour more state money into schools by 2018 — a goal that has since turned into a court mandate.

In the McCleary case, the state is under a court order to fully fund public education by September 2018. Right now, the state is in contempt of court and absorbing a $100,000 daily fine because the Legislature has failed to come up with a plan to meet the 2018 funding deadline.

A legislative task force assigned to come up with possible McCleary solutions ended in a stalemate last week.

Now, with both the McCleary deadline and the loss of school districts’ levy capacity approaching fast, lawmakers are debating which conundrum they should tackle first.

Republicans disagree that lawmakers should delay the planned reduction in school-district levy authority. Instead, they say the Legislature should focus on solving the state’s larger problem: Shouldering the full cost of paying teachers and other school employees.

School districts use their local property tax levies to supplement what the state pays to hire staff, an arrangement the state Supreme Court has ruled unconstitutional.

A comprehensive school-funding overhaul could involve reducing local school district levy collections, while increasing state money for schools — a plan Republicans argue would negate the need for an extension of the current levy lid.

“I am not willing to concede at this point that we cannot fix this problem,” said state Rep. Drew MacEwen, R-Union.

By contrast, if lawmakers intervene now to delay the drop in school-district levy capacity, “we remove that pressure to get the job done and get done on time,” MacEwen said Thursday.

Last year, lawmakers included a proviso in the state budget saying the Legislature would reconsider delaying the levy cliff if the Legislature looks unlikely to fix the way it pays for schools by April 30.

If that’s the case, lawmakers said they will reconvene their school-funding task force — the same one that failed to come up with recommendations last week — in early April to propose a temporary solution to help school districts avoid budget cuts.

House Majority Leader Pat Sullivan, D-Covington, said the problem with waiting until April is that school districts are working on their budgets now. Some districts need to start identifying which staff members would receive layoff notices as soon as February, he said.

Another problem, he said, is that the previous work of the Legislature’s school-funding task force hardly inspires confidence.

While Democrats on the task force came up with detailed recommendations on how much teachers should be paid and other areas of school finance policy, Republicans issued guiding principles that didn’t include cost estimates or specifics.

The task force ended up not issuing a final report because lawmakers couldn’t agree on whether to include any of that work.

For now, Sullivan said, school districts “have to assume this money goes away.”

“I would be a little frustrated and nervous myself if I were a school board member or a superintendent,” he said.

“All this does is provide insurance, so if we don’t get an agreement by the time that they have to finalize their budgets, they know they’ll get no less money next year than they are getting today,” Sullivan said.

A proposal to keep the levy lid at its current level through January 2019 — delaying the reduction in tax collections by one year — passed out of the House Appropriations Committee on Thursday, but with support only from Democrats.

Last year, a proposal to continue the levy lid lift for one extra year cleared the Democratic-controlled House with broad bipartisan support, but stalled in the state Senate, which is led by Republicans.

Sen. Joe Fain, the Senate majority floor leader, said he shares House Republicans’ concerns about the political consequences of postponing the levy cliff.

“If we were going to solve this crisis, as I believe we will, we have to keep the pressure on,” said Fain, R-Auburn.

He said leaders will continue to look at the issue as they get closer to the end of the 105-day legislative session.

“We are not closing the door on any options,” he said.

This story was originally published January 14, 2017 at 5:25 PM with the headline "Lawmakers debate whether to spare school districts from ‘levy cliff’ — and possible budget cuts."