DISCUSSION ITEMS

EP&O Levy Planning

Background: 

In April 2020, voters approved a three-year Maintenance and Operations Levy (M&O).   The M&O levy proposed a total amount to be collected in local property tax.

2021 Collection $5,400,000

2022 Collection $5,750,000

2023 Collection $6,100,000

In response to the State Supreme Court mandate following the McCleary Lawsuit, the 2017 Legislature passed Engrossed House Bill (EHB) 2242 to meet its constitutional obligation to fully fund basic education for public schools. In addition to other education-related requirements, this bill made significant changes to school levies.

Prior to EHB 2242 levies were called "Maintenance and Operations Levies".  These were renamed "Enrichment Levies" and/or "Educational Program and Operations Levies" (EP&O).

More significantly, the bill created what is commonly called a "levy swap."  The state substantially reduced the limits on how much school districts could collect in local taxes, forcing school districts who had existing levy authorization to substantially reduce their collection beginning in 2019.   At the same time, the state substantially increased the amount that they were collecting in state property taxes so that it could fund previously unfunded or under-funded basic education obligations.   In 2019 the maximum all school districts, except Seattle, could collect was the lower of $1.50 per thousand of the assessed property value or $2500 per student.  Woodland levied $1.50 which was about $2,000,000 below the $4,750,000 approved by voters in 2016.

In 2019, the Legislature increased the maximum levy limitations for voter-approved local school district enrichment levies.  Beginning in 2020 the maximum local levy cap was set at the lesser of $2.50 per thousand or $2500 per student (School Districts with 9600 or more students could collect the lesser of $2.50 or $3000 per student).  

The Washington State Constitution Article VII, Section 2(a) outlines the "Limitations on Levies"

Specific Relevant Limitations are:

• the proposition to levy such additional tax submitted not more than twelve months prior to the date on which the proposed initial levy is to be made and not oftener than twice in such twelve-month period, either at a special election or at the regular election of such taxing district
• levy additional tax for the support of the common schools ... may provide such support for a period of up to four years (Prior to 1997 the limit was two years)
• a proposition ... to levy an additional tax for a school district shall be authorized by a majority of the voters (50% =1) voting on the proposition, regardless of the number of voters voting on the proposition (Prior to 2007 the Levys required 60% yes vote to pass)

Discussion

In order to have a resolution drafted for board approval the following decisions need to be made by the board of directors:

1) Length of EP&O Levy Authorization.  This may be 1, 2, 3, or 4 years.

2) Amount of Authorization.  The state constitution requires that the Levy be identified as the total collection amount rather than the millage rate.   School Districts who have collected levy funds at the levy lid seek voter approval in excess of the maximum and "roll back" the levy to ensure maximum collection.    The board can establish a total below the $2.50 per 1000 lid or set a target tax-rate and Stacy can calculate an estimated collection to correspond to that tax rate.  A key unknown factor in this calculation is the growth of the total taxable assessed value for the district.

3) Special Election Date.  There are four dates from which school districts can choose.   February 14, 2023, April 25, 2023, August 1, 2023, and November 7, 2023.  The February date is the most common date for school districts to run EP&O propositions.   If the district runs in February and fails to achieve the 50% +1 required for approval we can run the proposition again in April.    If we wait until April and fail to receive voter approval we are unable to appropriately plan for the budget for the following year and make adjustments to staffing that would be required in order to balance the budget.

Considerations

There are many knowns and unknowns for the board to consider as they make determinations regarding term and levy amount, not the least of which is the current and future state of the economy: Inflation, potential recession, etc.   Many families are tightening their belts in order to make ends meet.   Should the school district do the same?  We are currently operating within our budget without significant room to spare.   Maintaining a flat levy collection at the 2023 rate, or even reducing the rate will most probably lead to program reductions.   Increasing levy collections, as we have done historically may be difficult for our taxpayers to support.   

CFO Stacy Brown will present various options to inform the board's decision-making. These will include:

• Maintaining a level tax rate
• Maintaining a level total Levy amount
• Reduced collection amounts