Drawbacks of the Ross Hunter – Randy Dorn Extend and Pretend School Funding Plan

This is a report on the Education Funding Press Conference held by the Washington State Superintendent of Public Instruction Randy Dorn from 10 am to 11 am on Tuesday April 14 2015. In short, Randy called for extending the deadline to fully fund public schools by an additional 3 years from the current 2018 deadline until the year 2021 (at which time they will of course call for another extension of the deadline to 2030 or beyond). School funding in Washington state has already been below the national average for nearly 20 years (since 1997). Apparently this is not a long enough period of time for our elected officials in Olympia to figure out how to restore school funding. In addition, at the press conference, Randy endorsed “adding” state school funding by transferring about one billion dollars from local levy property taxes to the state general fund. This is a proposal advocated by Ross Hunter and commonly called the Levy Swap. The primary purpose of this article is to describe the drawbacks of the levy swap which is actually a one billion dollar increase in property taxes paid mainly by middle class working families. The Ross Hunter/Randy Dorn proposal would still leave Washington as one of the lowest funded most over-crowded school systems in the nation. By first, a review of the press conference.

The press conference was attended by about 20 reporters from the main stream media. To my knowledge, I was the only parent and/or teacher in the room. Here is a link to the video of the full press conference posted on TVW (it takes a while to load):
http://www.tvw.org/scripts/iframe_video.php?eventID=2015040113&start=&stop=

Here is a link to the details of Randy Dorn’s Education Funding Plan:
http://k12.wa.us/Communications/FullyFundPlan/default.aspx

The press conference began with an introduction from State Treasurer Jim McIntire who focused in on the fact that the state legislature has thus far ignored the problem that school funding is now unconstitutionally dependent on unreliable and unfair local levies. He said he will talk more about this problem at his own press conference on school funding that will be on Thursday April 16 at 2:30 pm.

Randy Dorn then introduced what he called a “Complete Plan to Fully Fund our Public Schools” by talking about his motivation when he first came to Olympia as a State Representative in 1989. Randy says his motivation was to “make a difference in the lives of our kids.” For the record, here has what has happened to school funding in Washington State during the past 30 years since Randy first came to Olympia in 1989.

#1 Washington state fell from being 11^th in the nation in school funding to 45^th in the nation in school funding. Washington state is now $4,000 per pupil per year (or $4 billion per year) below the national average in school funding. This has resulted in Washington state having among the highest class sizes and the most over-crowded schools in the nation.

#2 Washington state fell from paying more than 66% of actual school construction and repair costs to paying less than 10% of actual school construction and repair costs. As a consequence of reliance on local school bonds to build schools, billions of dollars in school bonds have gone down to defeat and Washington now faces a $20 billion school construction backlog. More than 100,000 students in our state are forced to spend their school days in poorly ventilated temporary classrooms (one of the highest percentages of unhoused students in the nation).

#3 The levy lid, or the maximum percent of local funding to state funding, as nearly tripled from a levy lid of 10% to a levy lid of 28%. This is one of the things the Washington Supreme Court has said is unconstitutional because it results in a system of rich schools that can pass property tax levies and poor schools that cannot pass property tax levies. Here is a chart on the rise in the local levy lid since 1980:

#4 As a consequence of the above four policies, all of which Randy Dorn voted for while he was in the legislature, local property taxes on middle class homeowners have more than doubled. For example, the total levy revenue collected in 2000 was one billion dollars. Today, the total local levy revenue collected is two billion dollars. The average property tax on homes in East King County have risen from about $2,000 per year to more than $4,000 per year. Many families have been driven out of their homes by this huge increase in local property taxes. The higher the local levy lid went, the worse school funding became in Washington state: From OSPI and US Census and National Center for Education Statistics

Meanwhile as a result of the state legislature granting billions of dollars in tax breaks to billionaires, and the resulting concentration of wealth, also known as the Trickle Down Failed Economics plan, we now have record unemployment and the percent of students in Washington State who live near the poverty line (qualify for Free or Reduced Price Lunch) as nearly doubled from about 30% to about 50%:

So while Randy Dorn certainly has made a difference in the lives of our children, it has not been a good difference. In fact, his past policies have been a disaster for middle class families and for our schools and our children.

The legislature has now been found in “contempt of court” for following the exact policies previously advocated by Randy Dorn which were then and still are a direct violation of the Washington State Constitution. With a track record like this, I was not expecting much from this press conference. But I was surprised by his support for the Ross Hunter Levy Swap as being the “solution” to our school funding crisis.

For the record, I and State Senator Maralyn Chase met with Randy Dorn in 2009 to seek his support for repeal of the Intangible Property tax exemption (now called Senate Bill 6093). Randy decline to support this bill and instead advocated a state income tax proposal which became Initiative 1098 and was defeated by the voters in 2010. Senate Bill 6093 would dramatically lower property taxes on middle class families while increasing funding for public schools by $4 billion per year bringing school funding in our state back up to the national average by requiring billionaires to pay their fair share of state property taxes.

Meanwhile, the Ross Hunter property tax proposal increases rather than decreases property taxes on middle class families while providing very little additional funding for public schools. The key point of the Hunter Levy Swap is that it transfers about half of the current $2 billion per year in local levy funds to the state General Fund. It supposedly does this without raising local property taxes. Here is a graph of the general plan (the exact split is slightly more complex as local property taxes pay for other things in addition to public schools, but this is the general idea).

The Hunter Levy Swap also “resets” the Levy Cap at $2500 per student instead of using a percentage of state funding. In addition to transferring one billion from local levies to the general fund, the proposal would set up another billion dollars in additional local property taxes in some but not all school districts. We have posted a PDF of Ross Hunter’s Levy Swap Proposal on our website, Washington Tax Fairness Coalition (dot) org for those who would like to download it and/or read it online. Here is a link on to Ross Hunter’s proposed Levy Swap Bill:
http://washingtontaxfairnesscoalition.org/school-funding-through-tax-fairness-pdf-downloads

As I have written about many times in the past, here are the drawbacks of the Ross Hunter Property Tax Swap:

#1: The property tax swap actually increases the levy lid from 28% to 33%:
Ross Hunter would change from the current 28% of state spending to a maximum of $2500 per pupil per year. But since the state currently spends about $7500 per pupil, $2500 divided by $7500 equals a new Levy Lid of 33%. Thus, what Ross is really doing is raising the levy lid was again, this time from 28% of state spending to 33% of state spending. But to hide this fact, he changed the term to be based on maximum dollars per pupil rather than using percent of state spending.

#2: Property Taxes would be increased in middle class school districts but not in wealthy property rich school districts.
The increase in the levy lid from 28% to 33% would result in higher property taxes in most school districts, such as the Snoqualmie Valley, Tahoma and Snohomish School Districts (and any other school district currently at the 28% levy lid) while other more wealthy school districts, such as the Bellevue and Mercer Island School Districts, would not see any property tax increases because they are already “grandfathered” in at a rate above 33%.

Source OSPI Maximum Levy Authority 2014 Report 1030
http://www.k12.wa.us/safs/PUB/LEV/1415/lv.asp

#3 Property Taxes on Middle Class Homeowners in “Suburban Bedroom Communities” would be increased more than one billion per year. The Levy Swap includes a “Do No Harm” provision. What this means is that school funding in wealthy school districts would not be reduced as a result of this proposal. There would be no harm to wealthy school districts such as Bellevue and Mercer Island. However, in order to provide the billion dollars in new revenue needed to bring the state legislature closer to compliance with the state constitution, rural and suburban “bedroom” communities would see a yet another substantial rise in their local property taxes. The problem is that these communities may be property rich, but they are “dollar poor.” Their property taxes are already too high and should be lowered not raised!

Here is how the Levy Swap will eventually raise taxes on rural and suburban homeowners.

What about lowering the levy lid back to 10%?
One option that would prevent local school districts from raising the local levy back up to $2,000 per year is if the Levy Lid was lowered back to a maximum of 10% – what it was in 1980 before Randy Dorn was first elected. I specifically asked Randy Dorn before his press conference if he would support lowering the Levy Lid back to 10%. He said he did not and that his proposal did not have a specific limit to the levy lid.

#4 The Ross Hunter Property Tax Swap does not actually guarantee an increase in school funding. In fact, school funding may actually go down!
The property tax swap raises the amount of revenue that will go to the state general fund by about one billion dollars by taking away about one billion dollars from the amount currently collected by local school districts. Put another way, of the two billion dollars currently collected in local levies, the state would take one billion or about half of the current local levy funds. However, 100% of these local levy funds go towards funding schools and paying teachers. In transferring this billion dollars to the state general fund, there is no telling what the state will actually spend this revenue on. The legislature could invest the entire amount on public schools or it could invest some portion of it on something else. Any amount invested on something else would result in a reduction of total funds going to our public schools.

#5 The Levy Swap does nothing to address the unfairness of our state tax structure.
Washington state has the most unfair tax structure in the nation. Our middle class pays far above the national average in state taxes while billionaires in our state pay much less than the national average. In fact, by increasing taxes on middle class school districts, while not increasing taxes on wealthy homeowners in Bellevue and Mercer Island, the levy swap would actually make our unfair state tax system even more unfair.

#6 The only real solution to the school funding crisis is Senate Bill 6093 which repeals the 1997 tax break exempting property of the wealth from our state property tax. This would restore school funding in our state to the national average and make our tax structure more fair.

Here is a list of seven benefits of Senate Bill 6093 over the current proposals of the State House and Senate and over the Levy Swap proposal.

For more information on the benefits of the School Funding Through Tax Fairness Act, visit our website: http://washingtontaxfairnesscoalition.org/

Originally published at Washington Tax Fairness Coalition