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State Lawmakers 'Behind' In Work To Solve Property Tax Problem In School Funding

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For years — decades, even — problems with how local property taxes fund public schools have vexed Washington lawmakers.

Now, they may have mere weeks to solve them.

Lawmakers are still hashing out a property tax system overhaul that seeks to end school districts' reliance on local levies to pay expenses the state's supposed to cover. Coming up with a solution was a key demand of the state Supreme Court's McCleary decision.

But lawmakers from both parties didn't file bills addressing the levy issue until mid-April. Kim Justice, senior budget analyst with the left-leaning Washington Budget and Policy Center, says they've been procrastinating.

"Let's be honest: the Legislature is behind the ball on this ... They should’ve been talking about this a few years ago, and planning for it. They haven’t, and so here we are today, trying to address this and scramble around it," Justice said.

The Property Tax Problem: Uneven Distribution

But in the McCleary ruling, the state Supreme Court said funding schools with local taxes is rife with problems.

First, districts with higher local property values — say Seattle or Bellevue — can route more money to local schools than districts like Yakima, for example, where property values are low.  This means that wealthy districts get a distinct (and potentially unfair) advantage in school funding.

Compounding potential funding inequities are historic variations in actual tax rates. Seattle and Mercer Island legally can assess a 37-cent tax for every dollar in state and local funding they receive; but Tacoma can only impose 35 cents for each dollar in property tax — and most districts can only raise an extra 28 cents.  
This means some wealthy districts not only have high-value property to tax, they can tax that property at a much at a higher rate.

And lastly, the court questioned the vary nature of local levies as school funding sources. Voters can reject local property tax increases, the court noted, which can create an unreliable revenue source.

Political Landmines: Tax Equity, Or Tax Increase?

Yet the process of addressing the levy issue is fraught with policy conundrums and political land mines.

For instance, Sen. Bruce Dammeier, R-Puyallup, offered a proposal that includes a "levy swap" — it forces down local property taxes while increasing the state's property tax rate.

The result of Dammeier's proposal: net property tax rates would increase in districts like Bellevue, Issaquah, Seattle and more than 120 others. In Tacoma, Port Angeles, Yakima and more than 170 other districts, net property tax rates would decrease.

The creation of winners and losers makes the bill a tough political sell.

"It would be very easy to characterize any of these proposals as the biggest property tax increase in state history," said House Appropriations Committee Chair Ross Hunter, D-Medina.

"It would be a false characterization," added Hunter, "but you could parse it in the way campaign ads get parsed into being true."

'We Can't Punt'

While Hunter floated a similar levy swap plan in 2012, he doesn't support other pieces of Dammeier's proposal: the new healthcare system it creates for school employees, its repeal of a voter initiative calling for cost-of-living raises for educators and its creation of new regional system for determining how much to pay educators.

Hunter instead proposes to create a working group and a judicially-enforceable set of deadlines that would break the local levy issue — and the closely-related issue of how local levies foot the cost of teacher salaries district-by-district — into more manageable chunks. In a blog post Sunday, Hunter said the issue is simply too controversial and too complicated to address all at once.

Dammeier said that would not satisfy the Supreme Court, which held lawmakers in contempt over their lack of progress on the McCleary mandate. Justices have so far withheld sanctions, pending lawmakers finishing their session.

But Dammeier said it's not just about McCleary; it's about the viability of the school funding system.

"If we don't fix this," Dammeier said, "we're going to see school districts go into severe financial distress because the system was never intended to do what we've been asking it to do. It is breaking down."

"Just to punt for another two years— for thirty years, that's been happening," Dammeier added, "and legislatures have gotten away with it. We cannot."

Kyle Stokes covers the issues facing kids and the policies impacting Washington's schools for KPLU.