On the last day of the legislative session, the Legislature passed two bills that make changes to school district funding: ESSB 5313 and ESHB 2140. (Gov. Inslee has not yet signed either bill.)

The Legislature has long limited the amount that school districts can raise through local levies. In calendar year 2018, school districts were allowed to levy up to 28 percent of their revenues. As part of the state’s response to the McCleary decision on school funding in 2017, the Legislature further limited levies so that in CY 2019, districts may levy the lesser of $1.50 per $1,000 of assessed value or $2,500 per pupil (RCW 84.52.0531). This reduction in local levy authority was coupled with an additional state property tax of $2.70 per $1,000 of assessed value for CY 2018 through 2021. (The 2018 Legislature then reduced the additional rate for CY 2019 to $2.40/$1,000.)

This year, the Legislature increased the local levy limit (in ESSB 5313) so that beginning in CY 2020, districts with fewer than 40,000 students may levy the lesser of $2.50 per $1,000 of assessed value or $2,500 per pupil. Districts with 40,000 or more students (i.e., Seattle Public Schools) may levy the lesser of $2.50 per $1,000 of assessed value or $3,000 per pupil. This means that in 2020, the state property tax will increase and so will local property taxes in many districts (depending on voter approval).

ESSB 5313 also increases the threshold for local effort assistance (LEA) by $50 per pupil, so that districts generating less than $1,550 from a $1.50/$1,000 levy will get LEA funds. Additional LEA funding is provided for certain districts in southwest Washington. According to the League of Education Voters, this effectively applies to Vancouver and Evergreen school districts in Clark County. (The 2019–21 operating budget increases LEA funding by $61.6 million.)

Via Dahlia Bazzaz and Neal Morton of the Seattle Times, here’s a Senate Committee Services estimate of the effects of ESSB 5313 on LEA, levies, and tax rates by school district. It compares what would have happened under current law in CY 2020 to what will happen under the bill in CY 2020. Statewide, it is estimated that the bill will increase LEA by $51.2 million, levies by $419.3 million, and tax rates by 0.32. The statewide per-pupil increase in LEA plus levies is estimated to be $431.

Additionally, ESSB 5313 requires districts to report expenditures by revenue source for “supplementary enrichment activities beyond the state funded amount.” (These supplementary enrichment activities include special education and professional learning, though they were not included in the definition of allowable enrichment activities under RCW 28A.150.276.) These reports will be audited; if local revenues are found to be funding non-enrichment activities in a district, the amount the district may collect from local levies in the following year will be reduced by the amount spent incorrectly.

The 2018 legislation that reduced the additional McCleary property tax also directed $935 million of the tax in FY 2019 to the education legacy trust account (ELTA) rather than the general fund–state (GFS). This meant that these funds were no longer subject to constitutionally-required transfers to the rainy day fund. The direction of funds to the ELTA was a way to access rainy day funds without a supermajority vote, as we outlined in “Washington’s Budget Sustainability Requirements Work When Followed.”

ESHB 2140 removes the $935 million limit and directs all the collections from the additional property tax in 2019 to the ELTA. The summary of the budget deal indicates that this shifts an additional $84.7 million from the GFS to the ELTA. Effectively, about $64 million now does not have to be transferred to the rainy day fund in 2017–19.

ESHB 2140 also excludes non-represented employees of educational service districts (ESD) from the School Employees’ Benefits Board (SEBB) program until Jan. 1, 2024. The Health Care Authority must study the effects of ESD employee participation in SEBB and report to the Legislature by Dec. 31, 2020.