Confused about the “levy swap”? New podcast explains all.

As lawmakers continue to struggle with how to meet the state Supreme Court’s McCleary mandate to reduce school districts’ reliance on local levies to fund basic education, the levy swap has again gained currency. Melissa Santos reports on one legislative proposal. 

A Republican plan to reduce school districts’ use of local levies to pay for basic education would raise property taxes in more than 40 percent of Washington’s school districts, including in high property value areas such as Seattle and Bellevue, according to nonpartisan legislative staff.

As currently written, the property tax swap proposed by Sen. Bruce Dammeier, R-Puyallup, would create higher property taxes in 123 of the state’s 295 school districts starting in 2020, the first year the plan would be fully implemented, Senate committee staff estimated.

There are plenty of permutations of what is, in essence, a simple idea: raise the state property tax, reduce local levies, and used the increased state property tax  revenue to fund the schools. Problem solved: state funding up, local levies down. 
 
But it can quickly become complicated, depending on what else is included and how the dollars are distributed. A new podcast from the Washington Research Council carefully walks through some of the options, including the capital gains tax twist some are promoting.  It’s fairly short, about 15 minutes, and worth the listen. The podcast complements the Council’s policy brief on the same subject. 

School levies emerge as critical issue in what-might-not-be-final days of 2015 Legislature

With the state Supreme Court’s McCleary emphasis on the uneven role of local levies in school funding, legislative attention to the state-local funding mix was inevitable. We noted earlier that competing proposal have emerged in the last weeks of the regular legislative session. 

There are several good news stories on the local levy issue. The Seattle Times editorial board frames the matter.

As the Supreme Court noted, the state has ceded its responsibility to local school districts that raise money from their local taxpayers. The state contributes only around 70 percent of total funding, with the rest coming from federal and local sources. The quality and resources at public schools varies widely because some district voters approve higher levies, creating a haves and have-nots system — the antithesis of what the state’s founders had in mind.

The Times editorial goes on to discuss several of the legislative proposals.

For a good discussion of the competing plans, see this new Washington Research Council policy brief on the levy swap. It’s a key element in most strategies for reducing local levy reliance and boosting state support of basic education. As the WRC notes, current discussions of the swap come with a twist.

There has been a convergence of two policy elements being proposed in Olympia this session. The capital gains tax first floated by Governor Jay Inslee has new life as Senate Democrats connect the proposal’s additional revenue potential with the second element that will need new state revenue: the reduction of local levies currently funding education…

Local property tax levies cannot be used to meet the state’s constitutional obligation to fully fund basic education. The levy swap, substituting state property taxes for local school district maintenance and operation (M&O) levies to fund basic education, is seen by some to be the natural remedy for this portion of the McCleary problem.

The Association of Washington Business has two short newsletter items worth your attention, setting out AWB’s position on local levies and the capital gains tax.  

While the levy discussions seem to be heating up in the Legislature, Austin Jenkins reports that the governor is not on board yet.

In recent days several levy reform proposals have been floated in Olympia. But so far Governor Jay Inslee isn’t embracing any of them.

“It’s kind of a second step,” Inslee said. “We are focusing on the budget right now to take the first step which is actually to have financing for the McCleary decision, that second step I don’t think is necessary to accomplishing the first step. I’m focused on that first step.”

The News Tribune, like the Seattle Times, believes it’s critical to address the levy problem

What has to be done is obvious: Local levies should be lowered sharply and their use strictly limited to genuinely supplemental expenses. The Legislature should assume all responsibility for teacher compensation – and should pay them well. The profession should not come out behind in the bargain.

Lawmakers could pay for this by collecting what districts wouldn’t be collecting once local levies were lowered. Or they could find a different source of revenue.

The Spokesman-Review has a good rundown on the politics complicating levy reform.  And Rep. Ross Hunter, one of the originators of the levy swap concept, has an extended blog post examining the options, their prospects and how they also fit into the budget debate. It’s long and wonky, but provides important insight into the challenges of structuring a politically viable plan. The key takeaway: it’s complicated, involves myriad tradeoffs among affected groups, and any resolution this session will likely be partial and transitional.
 
A lot going on. The session appears headed for extra innings.