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House, Senate approve competing bills to raise ‘levy lid’ as session nears end

Responding to school districts that say a law enacted two years ago triggered a fiscal crisis for them, the House and Senate approved competing bills to allow school districts to raise more money from local property taxes.

Now, the question is whether the two chambers can reach a compromise that will gain final approval before the regular session ends at midnight Sunday.

If legislators can’t, the outcome could trigger job cuts including teachers in several districts around the state. Legislators in 2017 restricted the amount that school districts can collect through local operating levies, a law known as the “levy lid.” In return, lawmakers raised the state property tax rate to pay for a sharp increase in K-12 funding. The state Supreme Court, which ruled in 2012 that the school-funding system was unconstitutional, ended its oversight of the McCleary case last year.

Legislators have struggled throughout the 105-day session to craft a bill to raise the local levy lid at the request of several school districts including Tacoma, Olympia, and Seattle. Each version of the bill created winners and losers, as is common with school finance. Many rural districts have urged lawmakers to keep the current system in place, saying they have won approval for levies from voters recently by stressing that local property tax rates were lowered by the levy lid.

By a 54-42 vote early Saturday, the House approved its levy lid “fix” bill, HB 2140. The Senate passed its version, SB 5313, late Friday by a two-vote margin.

School districts on Saturday found themselves in a familiar position, trying to figure out how the last-minute, complex bills would affect their ability to raise additional funds through local levies. They also were waiting for a new version of the bill, given that the House and Senate have to agree on a bill or nothing will be passed.

In fact, as Tacoma Superintendent Carlo Santorno prepared to testify at 1 p.m. Saturday at a committee meeting on HB 2140, Senate Majority Leader Andy Billig was attempting to strip the House’s solution to raising the levy lid out of the bill in favor of the Senate plan. As a result, Santorno, accompanied by lobbyist Charlie Brown, spoke generally about levies.

Tacoma Public Schools is among several districts that have said they face a budget shortfall for the upcoming school year. The district said earlier this month that more jobs could be cut and teachers won’t be exempt.

“I’ve spent the last two weeks with my leadership team figuring out the nitty-gritty numbers of potential cuts,” Santorno told lawmakers. “It’s been exhausting and discouraging.”

Sen. Christine Rolfes, the Bainbridge Island Democrat who is chairwoman of the budget-writing Senate Ways & Means Committee, told Santorno that she is “personally sorry for the policy that we passed two years ago that put so much pressure on Tacoma. I’m hoping we can fix that this year.”

The district faces a $30 million budget deficit for the 2019-20 school year because the levy lid has deprived it of revenue, district officials say.

“We’re just really worried,” said Rosalind Medina, chief financial officer of Tacoma Public Schools. “We’ve seen the legislation seem very promising at the 11th hour and then behind closed doors, something goes sideways. Our fear is that all of our worst-case scenarios will come to fruition yet again. Even if they give us the levy bill and it sounds great, then they give us something else that causes us damage that completely mitigates all the money we get from the levy bill. That’s our big fear.”

Both HB 2140 and SB 5313 are expected to enable districts to raise hundreds of millions of dollars more from local property taxes. School districts collected about $2.6 billion through maintenance and operation levies, now called enrichment levies, in 2018. This year, due to the levy lid, the total is expected to plummet to $1.6 billion, according to nonpartisan legislative staff.

The Washington Education Association, which represents teachers statewide, said Saturday it preferred HB 2140.

“The levy bill passed by the House gives school districts the most flexibility to continue providing students the support they need beyond state-funded basic education,” said WEA spokesman Rich Wood.

In urging the House early Saturday to pass HB 2140, Majority Leader Pat Sullivan, D-Covington, said the Legislature needed to revisit its 2017 decision to approve the lid on enrichment levies.

“The restrictions that we put on local levies were just a little too tight. There are proposals that have been offered that provided way too much opportunity for districts to raise money, but I think that this one is a reasonable approach.

“We’re responsible for that basic education portion and local districts are expected to come up with funds to provide for those enhancements, whether it’s music programs, extra arts programs, sports, clubs; all those things that help round out students’ educational opportunity,” Sullivan said.

Republican House members predicted that the bill would aggravate inequities among property-wealthy and property-poor districts.

“What happens is when we allow districts to levy large local levies, they become reliant on those levies and that in turn reduces the state’s desire and will to fully fund basic education,” said Rep. Drew Stokesbary, R-Auburn.

Stokesbary said the bill would trigger local property tax increases totalling hundreds of millions of dollars statewide.

Rep. Mike Volz, R-Spokane, said the state is opening the door to be sued by school districts harmed by the Legislature tinkering with the school-funding system.

“We got the McCleary fix. We got the fix to the fix; now the fix to the fix to the fix. We’re going to be here next year if we’re not already in court because we’re heading down the same path again that started this whole thing,” he said.

Rep. Laurie Dolan, D-Olympia, said school districts need more flexibility in generating funds tax through local property tax levies.

“When, two years ago, we locked down local levies, we took away their checkbook,” she said.

Dolan stressed that HB 2140 includes a large amount of levy equalization assistance funds that will help property-poor districts that “can’t help themselves.” Those are funds the state sends to districts to ease the property-tax burden of districts with lower property values.

The debate in the Senate late Friday over SB 5313 had a sharper edge, in large part due to a fiery speech from Sen. John Braun, the Centralia Republican who is the ranking GOP member on the Ways & Means Committee.

Democrats who control the chamber rejected an amendment from Braun that would have kept the levy lid in place. His amendment also would have added $500 per student for school districts and pumped more money into the K-12 system for special education students.

The Senate approved an amendment from Sen. Guy Palumbo, D-Maltby, to provide levy equalization assistance funds to charter schools, which are open to all students, run by nonprofit organizations and publicly-funded.

Braun suggested the amendment could kill the entire bill as it moves to the House because of opposition to charter schools by education groups and several Democratic lawmakers.

“This is just veto bait. This is going to help the underlying bill this evening, but ultimately I have my doubts as to whether it is in the final deal,” he said.

The bill’s sponsor, Sen. Lisa Wellman, D-Mercer Island, said her measure would give school districts “a little more flexibility” in how much they can raise from local levies.

“McCleary funded basic education as required and the teachers’ salaries most particularly,” said Wellman, adding that it’s up to local school districts to pay for “enrichment activities” including bilingual programs, field trips, Saturday school, athletics, drama and debate clubs, marching bands, and summer programs to help students not forget what they learned the previous school year.

“Districts choose to run their levies. Some districts have no levies at all. they choose to run them and they choose the amount they are running them for. This bill gives the district an opportunity get additional monies if they so choose and to use them as they so choose,” she said.

Wellman said the bill also requires the state auditor to examine whether local levy funds are spent within state guidelines.

Braun said legislators will think back on passage of the bill as a “big mistake” for several reasons, including that it would trigger school property tax increases.

“There’s no protection for bargaining. We can blame the teachers’ union, but the truth is they are just doing their job. But we’re not. We’re not doing our job. We’re putting more money out there to bargain. This is not going to go for counselors and nurses and these extra-curricular activities. It will be bargained away -- guaranteed,” he said.