By Melissa Santos

The News Tribune

One of the key issues dividing lawmakers as they work to fix how Washington state pays for schools isn’t what to include in their new two-year budget.

It’s what to do about local school district property tax levies, which right now are being used unconstitutionally to pay for state responsibilities, including some of teachers’ and other school employees’ salaries.

In the McCleary school-funding case, the state Supreme Court has said relying on local money to bridge state funding shortfalls violates the state constitution. The court has ordered lawmakers to put a plan in place this year to fully fund the state’s basic education system by Sept. 1, 2018.

That leaves lawmakers in the position of deciding whether they need to reduce or eliminate local levies to comply with McCleary — or, whether simply adding more money from the state is enough.

On that point, policymakers don’t always agree.

“I think mostly what it says is it’s the state’s paramount duty to pay for basic education,” said David Schumacher, the budget director for Democratic Gov. Jay Inslee. “Whatever local levies are used for or not, once you pay for basic education, you’re done. It kind of makes it a moot point.”

Yet many lawmakers think that to comply with the court’s order, the state needs to reduce school districts’ local taxing capacity more dramatically, in addition to specifying that local levy dollars can’t be used to cover the state’s basic education costs.

“I do not want to have a levy rate that continues the existing constitutional problem,” said state Sen. John Braun, R-Centralia, the Senate’s chief budget writer. He identified high local-levy rates as “the entire problem with the unconstitutionality of the current system.”

But what exactly does the high court say about what the Legislature needs to do about local levies?

Contrary to what lawmakers sometimes argue, letting school districts continue to raise large sums of money locally doesn’t necessarily violate the tenets of the McCleary case.

The court made that clear in a footnote in one of its most recent orders, which said overhauling the levy system was not part of its prior mandate.

“The state contends that the matter of salaries must be tied to reform of the local levy system, making this a particularly complex matter requiring time and study and discussion,” the court wrote in 2015.

“We offer no opinion on whether full state funding of basic education salaries must be accompanied by levy reform, but how the State achieves full state funding is up to the Legislature.”

At the same time, the court has “determined that the State may not rely on local levies to pay for basic education generally.”

Theoretically, that means the state can let school districts raise local taxes at any level they want — as long as the state gives those districts the right amount of state money to pay for their basic education costs, said Thomas Ahearne, the attorney for the plaintiffs in the McCleary case.

Where the situation becomes unconstitutional is when the state isn’t providing enough money, and school districts have to dip into their local levy money to fill the gaps, he said.

The court has said local levy money isn’t stable and dependable enough to pay for public schools, since levies must be routinely approved by local voters.

But Ahearne said the court case doesn’t address which type of dollars go where, or how high local levies can go, as long as the state is meeting its obligations.

“It’s not illegal for school districts to use local levies to hire a teacher. What is illegal is for the state to not be fully funding that salary,” Ahearne said.

That’s the legal side of things. The political reality looks a little different, according to politicians on both sides of the aisle.

State Sen. Hans Zeiger, the chairman of the Senate Education Committee, said it’s true the Legislature probably could leave local levies high and still technically be in compliance with the court’s order.

Doing so, however, would require a level of tax increases that most lawmakers and members of the public wouldn’t support, he said.

Republicans, who control the Senate with the aid of one conservative Democrat, are proposing instead to solve McCleary by reducing local levies and replacing them with a flat statewide property tax, which they said will reduce property taxes in many areas of the state.

The GOP plan, which involves swapping local money for state money, would eliminate local levies for a year, and later cap school districts’ local property tax collections at 10 percent of the money they receive from state and federal sources.

Right now, most districts have a much higher levy lids of 28 percent, and some districts are grandfathered in at even higher levels.

Zeiger, R-Puyallup, said when local levies remain as high as they are now, there’s increased potential for that money to be used to plug state funding gaps. He and other Republican lawmakers are concerned that unless they reduce levies by a substantial amount, the state could end up facing another McCleary-like lawsuit in the future.

“I think we have to make this a sustainable deal, so we’re not back here a few decades from now doing the same thing all over again,” Zeiger said.

Democrats who control the state House, however, don’t see the need to lower local levies nearly as much as what Republicans are proposing. They have proposed capping local levy collections at 24 percent of school-district revenues.

Still, House leaders agree they need to do a better job of tracking how local levy money is spent — not necessarily as a legal matter, but as a practical one.

The problem is, right now it’s hard to figure out how much money the state is on the hook for, said state Rep. Kris Lytton, D-Anacortes, who chairs the House Finance Committee.

Enacting new accounting measures to track what local levy money is paying for would help the state ensure it is keeping up with its school-funding responsibilities year to year, she said. House Democrats also agreed earlier this year that local levy money shouldn’t be spent on basic education costs.

“If we don’t have those accounting and transparency measures in place, how do we know we’re not getting into the same situation we’re in now, where basic education is being paid for out of local levies?” Lytton said.

Republicans say the other reason it makes sense to look at reforming local school district levies is to ensure equitable funding between rich and poor school districts.

Right now, districts with lower property values struggle to raise as much money for schools as districts in areas where property values are higher — a problem exacerbated by high levy lids.

Equity isn’t an issue that is directly addressed in the McCleary lawsuit, which focuses instead on the state’s constitutional duty to amply fund basic education, said Ahearne, the plaintiffs’ attorney.

Still, it makes sense to try to address both concerns at once, said Chris Korsmo, CEO of the Seattle-based League of Education Voters. A separate part of the state constitution that isn’t the focus of McCleary says the Legislature “shall provide for a general and uniform system of public schools.”

“I don’t know how many more chances we are going to get at huge systemwide funding changes, because I think legislators are getting tired of it,” Korsmo said.

“My argument is, let’s do it once and do it right.”