Bonds, Levies and Budgets

DECISIONS, DECISIONS, DECISIONS

The TSD Board must decide relatively quickly(within the next 60 days) as to whether or not it is going run a levy, multiple levies and/or bonds.  I figured I would provide a brief outline of the difference between levies and bonds, and also lay out some of the options TSD has been discussing.  Most of this information was gathered from the September 12th budget workshop(which was after the scheduled Board meeting) and can be viewed here.  The budget workshop starts about 1 hour and 2 minutes into the meeting.  

WHAT IS THE DIFFERENCE BETWEEN A LEVY AND A BOND?  

While a little oversimplified, here are the basic differences:  

——–Levies require 50% approval while Bonds require 60% approval. 

——–Levies take care of short term operational needs(think salaries, extra-curricular activities, maintenance, technology, etc) and bonds are used to fund long term projects(construction of schools).   

With the current Levy expiring in 2020, and some pretty significant Capital Projects that need to be funded, the TSD Board is currently engaged in a debate about what it should ask the citizens to kick in as levy/bond funds over the next few years.  

WHAT IS THE TIMELINE?

TSD’s current Education Programs and Operations(EP&O) levy has been voted approved through 2020.  So, in order to extend the levy in 2021 and beyond, there must be voter approval before 2021, so a vote needs to happen in 2020.   Most school levies/bond are run in the spring, and not in the November general election.  Any levy/bond must be approved by the Board, and the submitted for filing with the County Auditor.  Here is the timeline proposed by the Superintendent at the September 12th meeting.  

October 24th meeting—TSD Board approves levy/bond request 

December 13th filing date—Last day for TSD to file to be on the February ballot

February  11th—-Vote by TSD taxpayers in Special Election

There is not much time between now and the time the decision will be made so I would encourage you to contact the Board members and/or Superintendent if you want to provide any input.  

REFRESHER ON SCHOOL FUNDING AFTER THE MCCLEARY FIX.  

The McCleary case determined that basic education should be funded at the State level.  In theory, the State Legislature has determined it will provide funds for basic ed, and the local districts should not have to contribute funds for basic ed. 

The State provides funding based upon the prototypical school model.  The state model funds on a per student, not a per building, model.  TSD receives funds based upon how many employees are needed(as determined by the Legislature) in the prototypical school model.  As an example, at the elementary level, the state funds 1 librarian for every 603 students, 1 nurse for every 5,263 students and 1 custodian for every 241 students, and so on.  If a school has 300 students, TSD gets funding for one-half of a librarian.  If it has 1200 students, TSD gets funding for two librarians.  TSD must use levy funds to pay for all employees in addition to that which is funded in basic ed. 

roto

The same funding model is used for teachers, administrative staff and almost all other school employees.   I did a prior blog on this topic which can be found here.    

LEVY MONEY USED TO FILL THE GAP

I doubt the State is providing adequate funding in most districts.  There is no dispute the funding provided to TSD is wholly inadequate, at least in relation to historical practice.   TSD employs more people, and pays those employees more, than the state funding model suggests.  TSD taxpayers support additional funding, which results in higher quality staff, and better student/teacher/administrator ratios. 

TSD has traditionally used levy funds to fill the gap.  This was the practice even prior to the McCLeary fix and contract negotations in 2018, even though those factors resulted in much larger use of the levy funds.  

However, the current TSD levy expires in 2020.   Accordingly, TSD must pass a levy prior to the fall of 2020 or face the proposition of having no levy funds in 2021, which would result in drastic cuts.  Remember that TSD used to be able to collect about $3.00, then the Legislature restricted the amount that could be collected in 2019 to $1.50, and upped the amount to $2.50 for 2020 moving forward.  The amount of EP&O(previously Maintenance & Operations)levy money received by TSD is as follows(future years projected based upon an assumption voters will approve $2.50 rate):

evy

As noted above, 2019 presents a difficult year, much of that was due to a gap that created, and fixed, by the legislature which is discussed in a prior blog here.  The result is that, if voters approve the $2.50 rate, TSD will receive pretty historically comparable levy revenue.  The Board must decide if it will ask for the same, less or more.  If the voters opt not to approve the levy, TSD is in serious financial peril. 

WHAT IS THE LEVY MONEY USED FOR?

The majority of the Levy money fills the gap between what State allocates and what TSD pays its employees.  In addition, as Superintendent Dotson pointed out during his presentation, the State does not fund many other line items that TSD provides, and I imagine families expect.  The below table shows just a few examples highlighted by TSD at the Sept 12th meeting:

asic-Ed

WHAT WILL/SHOULD TSD ASK OF ITS TAXPAYERS?

The below table shows the levy and bond funds TSD has collected, and projects to collect, in the future.  Assuming a total of $5.00 tax rate(the green is the EP&O level and the tan is the Capital Projects bond), the taxpayer pays $5.00 for every $1,000 in assessed value.  So, if you have a house worth $300,000, you would pay about $1500.  Notably, this is about what taxpayers have been paying.  Superintendent Dotson pointed out that taxpayers like to see stability, so it appears TSD will ask for something around the $5.00 threshold taxpayers have become accustomed to paying. 

uture-tax-rate

WHAT IS THE VOTING HISTORY IN TSD

Bonds require 60% approval, while a levy(EPO, M&O) requires 50% approval.  Since 2003, TSD voters have approved each bond and levy put before them, usually by a pretty healthy margin(even though 2003 passed with just .04% to spare).  

oting

WHAT ARE THE OPTIONS

Run an EPO levy OF $2.50 now.  TSD must run an EPO levy.  The voters not approving an EPO would result in at least $10,000,000 in cuts.  TSD has already burned through its savings and has to educate the students.  TSD not passing an EPO levy would necessitate renegotiation of all employee contracts, drastic cuts to all programs, reduction in staff, etc.   I am sure we will be talking about this in future blogs, but proposing an EPO levy at the maximum rate($2.50) is a no-brainer.  

The big question is if TSD asks for more than an EPO levy.     

Capital Facilities/Safety levy.   One of the objectives of the planning, which makes a lot of sense, is that, given the generosity of TSD taxpayers, TSD does not want to leave any money on the table.  If TSD just asks for an EPO levy, Tumwater taxpayers may end up paying less than $5.00(even though they may be willing to pay more).  If TSD taxpayers are willing to contribute, TSD certainly wants to pitch the need for other projects which could utilize those funds through a Capital Facilities levy.   Below is a list of “needs” as expressed by TSD at the last board meeting.  Keep in mind this would cover a 2 year time period.  

PO

One flashpoint is the student devices line items.  The 2014 Bond approved Chromebooks for TSD students.  That 2014 bond was a one time shot and does not cover replacement or repair of the Chromebooks.  If TSD wants the students to have Chromebooks, it needs more money.  Similarly, the $500K line item for Pre-Planning a new elementary school is also included.  The theory being that we will need a school at some point, and the planning cost could be incurred now. 

While I imagine people will have varying opinions about what money should be spent on, in my view, this is pretty good foresight.    My guess is that TSD will run a Capital Projects Levy that results in a total levy rate of around $5.00.   

Asking voters to approve a Bond for a New Elementary School.  The TSD Board appears to believe it might need a new elementary school sometime in the near future(3-4 years).  There is about a 3 year lag time between when funds are approved and when the school opens.  

The conclusion that a school is needed is primarily driven by projections that appear, at least to me, to be based on some flawed assumptions.  The gist of it is that the projectors(Gassaway—an outside demographer that is pretty good at what it does), assumed TSD’s enrollment for 2019 would be about 7,000.  We know that TSD’s enrollment is around 6100 in 2019.  This is no fault of the projectors as TSD had about 6600 students a few years ago, and was experiencing a growth of 200 or so kids a year when the projections were made.  However, the last 2 years have brought a decrease in students. 

The result is that the projections are flawed as almost all of the 2019 “projections” have not come to fruition–TSD just does not have that many students enrolled at present.  To highlight the example, when it did the analysis back in 2017, Gassaway projected TSD would have about 2900 elementary school students in 2019.  Presently, we actually have 2780, about 120 less than Gassaway projected.  

According to the capacity provided by the schools(even without portables) the schools have room for growth.  Absent a significant increase in enrollment, I do not see any need for another school within the forseeable future(5 years).  I would suggest asking for money for a new school is unwise at this moments.  

CONCLUSION

Given some of the “open wounds” in the community as a result of the bargaining negotiations in 2018, the TSD community may have to work hard to educate the public about any possible levies/bonds that are placed on the ballot.  Along that line, the Board needs to find the sweet spot with respect to the “ask” of the community.  Once that decision is made, or maybe even before depending on what information comes out, I am sure Tami and/or I will offer some updated information.  As always, we welcome your comments and encourage you to reach out to your Board members directly.  

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