WENATCHEE — School officials statewide are weighing the consequences of boosting enrichment levy tax rates above the $1.50 cap, a move approved this spring by lawmakers in a tweak to the state’s new education funding formula.
Part of the debate for schools is whether collecting additional levy funds — even if previously approved by voters — will betray voter confidence and put future school ballot measures at risk — whether for levies or bonds.
At the same time, school districts could use the extra levy funds to help make ends meet, in some cases restoring budget cuts already made.
“The pros and cons always come down to services for students and communication and trust with your voters,” said Michelle Price, superintendent of the North Central Educational Service District that includes 29 school districts in Chelan, Douglas, Grant and Okanogan counties. “Our districts work hard to provide the highest level of service to their students and to communicate transparently with their community. This is all very confusing with no one best answer.”
Voter reaction to local levy lid lift increases could be more complicated because tax bills in February also will reflect the return of the full state school tax rate.
“People probably have forgotten that we got a reprieve last year on the State School 2 tax that all got socked with in 2018 — at $1.10 per $1,000 of assessed value,” said Chelan County Assessor Deanna Walter. “It went down to about 75 cents. It’s going back up. People need to be prepared.”
Last year, some taxpayers saw tax reductions because of the levy cap and the reduction in state school tax.
“That’s all going away,” she said. “The rules have changed to the game.”
The State School 2 tax and cap on local levies — referred to as the levy swap — were part of the McCleary fix, the Legislature’s 2017 response to a court order demanding the state fully fund basic education.
The changes resulted in outcry, first from taxpayers hit with increased state taxes before the local levy rates were capped, and then from school districts faced with cutting budgets while trying to figure out a new funding system that has more strings attached. Districts are restricted in how they can spend the money, leaving funding gaps for programs previously funded with local levy dollars.
This spring, the Legislature, responding to school district concerns, raised the $1.50 cap on what are now called EPO (educational programs and operation) levies rather than M&O (maintenance and operations) levies, to $2.50 for every $1,000 of property value for taxes collected in 2020.
It did not extend last year’s temporary rollback of the state tax, though, which means higher property tax bills are coming, Walter said, no matter what individual school districts decide about collecting excess local levy funds.
Chelan County’s property values have increased by about $1 billion, an average of 9 percent, Walter said.
“If your value increase is greater than 9 percent, it creates a tax shift and you will be paying more. If you’re under that 9 percent, you will still probably see an increase because of the State School 2 tax,” she said.
The only scenario Walter can see for a reduction in tax bills is to have a bond or lid lift expiring.
“It’s going to be tough this year,” she said.
The law lifting the levy cap goes into effect July 28. School districts with levies on the books for amounts above that rate have until Nov. 30 to decide whether to collect the additional levy amount.
The scenarios being hashed out in school board meetings depend on timing and circumstance.
If districts have multi-year M&O levies already approved by voters for amounts that result in rates above the $1.50 cap, the districts can collect up to $2.50. Doing so requires a board resolution as part of the budget process. The decision rests with the school board since voters previously approved the levy amounts even though they were capped after-the-fact.
“The board would weigh the community impact and commitments they made to the voters at the time they ran their levy and then decide at what rate they will certify their levy collection,” Price said.
Districts that renewed EPO levies using the $1.50 cap could ask voters in November for a supplemental levy up to the $2.50 rate.
Districts facing renewal of their EPO (M&O) levy this year could ask for an amount up to the $2.50 rate for a period of one to four years.
Walter said she would encourage school districts faced with renewing levies to ask for the amount they feel the community will accept, even if it’s above the capped rate. If approved by voters, it would provide access for the additional funds should the Legislature raise the cap again next year.
“It hurts to see school districts put in a situation where they have to go back out. They were following the direction of the Legislature, which can change very quickly,” she said.
Price said each of the 29 school districts in the NCESD is facing a slightly different scenario.
“Some are in the middle of a levy and will be running this year, some ran this year, some have multi-years already approved by voters, and some just one year. It’s all over the board,” she said. “Ultimately, how each district moves forward with the new rules is a local school board decision.”