Schools may avoid $60M cut in levy equalization

School officials aren't celebrating just yet, even though a decision this week to scrap plans for a special legislative session apparently means the state can't cut $60.3 million from levy equalization money.

"I am a skeptic," said Ray Tolcacher, Prosser School District superintendent. "I'm happy, no question, but we still don't know all the ramifications."

In particular, Tolcacher remembers having to give back money to the state last November when a revenue forecast at the time put the state budget roughly $6 billion in the hole.

"I'm concerned as one of the superintendents in this for a long time that we have no guarantees they won't do this to us again," he said.

Levy equalization has been a hot topic among educators and lawmakers since the Legislature proposed to hack nearly $800 million from K-12 education in response to a $9 billion state deficit.

About $4 billion was cut from state programs in health care, higher education, K-12 education, natural resources and public safety in the operating budget adopted by the Legislature in late April. The remaining $5 billion hole was plugged with one-time federal stimulus money, transfers from other state funds and by suspending pay raises and pension contributions.

One of the cuts widely bemoaned by school districts was $60.3 million from levy equalization money, which is intended to level the financial playing field for districts with low property tax collections.

For most districts that get the money, the cut would have taken about 12 percent of their equalization dollars. In the Tri-Cities, that would have been more than $2 million from the Kennewick and Pasco school districts and just over $1 million from Richland.

But lawmakers who proposed the cut ran into a wrinkle when they couldn't get House Bill 1776 out of the House on the last night of the legislative session.

The bill would have raised the statutory cap on school district levies, allowing districts to ask voters for more money to pay for schools.

It also would have amended the law that requires the state to fully fund levy equalization -- and without that amendment, the proposed $60.3 million budget cut can't be made, said Sen. Rodney Tom, D-Bellevue, vice chairman of the Senate Ways & Means Committee and lead Democratic budget writer.

"It can only be changed by statute," Tom said. "It can't be changed by just what we do in the budget."

That means the state will have to use some of the $822 million the Legislature held in reserve in case revenues continue to fall short of projections, Tom said.

That was exactly the result Republicans hoped for when they tied up House Bill 1776 in three hours of debate on the session's final night.

Rep. Skip Priest, R-Federal Way, said he spoke against the bill because it showed the state had its priorities backward.

"That bill exemplified all that is wrong with our current school financing system," said Priest, the ranking Republican on the House Education and Education Appropriations committees. "First of all it showed the absolute reliance and importance of (levy equalization) by many school districts in our state, while at the same time it suggested the way the state should meet its education funding responsibilities was to allow school districts to ask voters to pay for more of it. It is absolutely the wrong message."

Priest said he believes the state constitution is clear that the state is required to pay for education.

"We are required to provide ample and uniform funding," he said. "Under the constitution, our number one priority is providing sufficient funds to meet our educational priorities. ... We are not meeting our responsibility to provide ample and uniform funding. Until we address that issue, we have to make sure (levy equalization) is provided to the school districts we worry about the most."

Tom argued that levy equalization, while well-intentioned, has become broken and does not fund the districts most in need.

"There is a lot of misinformation about levy equalization," he said. "In concept it's a great program that we should have to help property-poor districts."

The problem Tom sees is that the formula has evolved so that "property poor" doesn't mean what it used to.

Levy equalization was conceived in the 1970s to help districts that had relatively low property assessments, and therefore would have to raise taxes disproportionately high to fund schools.

But with the formula applied to districts based on tax rates and not property values, that skews who gets money, he said. And it isn't always the poorest or most needy districts that get help.

"It doesn't equate to poor kids," he said.

He gave the example of Tukwila, which gets no levy equalization money despite a 67 percent poverty rate.

"And you could take somewhere that has a zero percent poverty rate, but a high tax rate and they get money," he said.

Priest countered that levy equalization may need reform, but it's important to keep it in place until that can happen.

"Until we meet our constitutional responsibilities, it is irresponsible to make any decisions about (levy equalization), because it is critical to make sure kids in property-poor districts have at least the chance to receive the same educational opportunities as kids in rich districts," he said.

Tolcacher praised Priest and Rep. Larry Haler, R-Richland, for fighting for levy equalization. Prosser stood to lose about $468,000.

"They really stood up and did everything they could to make sure this was not taken from us," Tolcacher said.