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By Lee Hughes
Staff Reporter 

Medical Lake ponders state budget changes

School district planning should limit major budget disruptions

 

Last updated 3/14/2019 at 9:46pm

Shannen Talbot

Below are State Legislative District 6 House and Senate legislators, their assigned legislative committees, and contact information. Sen. Jeff Holy Holy is on the Senate Early Learning & K-12 Education committee, and is the ranking minority member of the Higher Education & Workforce Development Committee. 360-786-7610 jeff.holy@leg.wa.gov Rep. Mike Volz Volz is the assistant ranking minority member of the House Education Committee, and a member of the Appropriations Committee. 360-786-7610 jeff.holy@leg.wa.gov Rep. Jenny Graham Graham is the assistant ranking minority member of the House College & Workforce Development Committee, and a member of the Public Safety Committee. 360-786-7962 jenny.graham@leg.wa.gov

Lawmakers in Olympia have educators wringing their hands wondering what their school district's budget will look like once this year's legislative dust settles.

Although in a good position financially, whatever happens, the fiscally conservative, property-poor Medical Lake School District may still lose money, according to Superintendent Tim Ames.

The approximately $500,000 Ames said MLSD stands to lose from its $25.9 million annual budget is a bitter pill to potentially be forced to swallow from its already tight budget.

There are three main issues currently in play in Olympia that may - or may not - cause MLSD to take a financial hit. How much depends on the Legislature's final decisions.

The first is an effort to equalize statewide inequities that Engrossed House Bill 2242 - the so-called McCleary fix - caused when it was passed in 2017.

The state funds schools based on a "prototypical" model - a fancy word for what is essentially basic education services. Local needs beyond the prototypical model are funded through local levies.


Before McCleary, school districts could ask district voters to approve levies for things like maintenance and operations, capital costs and construction bonds. The amount districts could collect, however, was capped. The levy lid, as it's called, was capped at 28 percent for most districts, according to legislative documents.

But this method of funding favored richer school districts, where home values were far in excess of those in rural Eastern Washington districts. Richer district levies resulted in more money for schools at a lower rate for taxpayers.


The McCleary fix did away with most of that.

EHB 2242 went into effect the beginning of this year, after it pumped nearly $2 billion into the states schools last year. The new law put in place a new levy lid - either $2,500 per student, or a maximum rate of $1.50 per $1,000 of a districts assessed property value.

MLSD saw the writing on the wall last year before the law went into effect when it asked voters for a new replacement levy.

Recognizing that voters had been saturated with talk of a levy cap of $1.50 per $1,000 of assessed value, and even though that cap was not yet the law, district officials decided not to ask for more.

"We could have run our straight-up levy but we thought we might as well go with the $1.50 cap because that's all the voters were hearing," Ames said.

It worked. District voters overwhelmingly passed both a three-year, $1.50 per $1,000 M&O levy - now euphemistically called an "enrichment levy" - plus a six year, 40 cents per $1,000 capital levy that will carry the district forward through 2024.

The combined levies cover about 9 percent of the districts costs, Ames said.

Impact Aid, a federal program that reimburses the MLSD for its services to Fairchild Air Force Base, adds another 7 percent of the districts budget, Ames said.

He noted that more spendthrift districts with higher levies would be forced to close a funding gap when their current levies expire and new levy lid limitations come into play. Some, Ames said, could lose over $1 million in levy funding, and are already talking layoffs. No so Medical Lake.

"So for us we really didn't lose that much," Ames said of Medical Lake's current levy. "We're just going to take the capital levy and do things we would have done with our old levy. So basically we've got the same amount in combined levy. We're in a good position."

Levy Equalization

Two other funding changes could have a major effect, however.

The McCleary case involved a lawsuit alleging not only an underfunding of state basic education, but that school levies favored property-rich districts, which created a gap that put property-poor rural districts, many east of the Cascades, at a disadvantage.

Those districts received Local Effort Equalization, or levy equalization, funds to make up the difference in levy funding, a system that's worked predictably since 1987.

But new legislative proposals in the works may change that system by raising the levy lid, but cutting levy equalization funding, which puts MLSD in a bind.

Although the Legislature has assured those school districts who rely on levy equalization funds that they will be held harmless through the 2019-2020 budget year, come the 2020-2021 budget cycle the proposed legislation could cut MLSD's levy equalization funds by $270,000, according to Ames.

The district is currently allotted $1.8 million in levy equalization funds, according to Director of Finance Chad Moss.

School Employees Benefit Board

Then there's the looming change in school employee health insurance costs.

His biggest concern as Ames looks into the future is the School Employees Benefit Board, or SEBB; a statewide health insurance program that he said will also cost Medical Lake money.

Part of the McCleary fix involved the state's appropriation of school district health insurance programs which, prior to the McCleary fix, was managed individually by districts.

The state negotiated a $900 million tentative agreement with school employee unions that included full benefits for employees, even those who work less than half time.

And because SEBB is a state insurance pool, districts lost control over how they managed their individual insurance pools, something that Medical Lake administrators had historically used to the district's advantage.

Currently, the state provides $820 for 90 certified MLSD employees to cover the cost of health insurance. But Medical Lake has 106 certified employees, according to Ames.

So Medical Lake administrators got creative. Some employees who already have coverage through a spouse or some other option choose to opt-out of insurance coverage, thus making insurance available to more district employees. It also drove insurance costs down, Ames said.

But that local flexibility disappears under SEBB.

Now, the state will provide $1,100 for roughly 60 percent of the districts employees, Ames said. But if an employee opts out of insurance coverage, the district must return the money to the state pool, thus eliminating the district's flexibility to use locally pooled insurance dollars as it had in the past.

The net result, Ames said, is a loss of $240,000 per year in funding to the district.

"We're paying for the teachers that don't want (insurance)," Ames said.

Implementation of SEBB may be delayed, however, which is fine with Ames. Because the tentative agreement was negotiated, then handed to the Legislature to fund, lawmaker's hands are tied: they must either pass it as-is, or send it back for re-negotiation.

Overall, between issues related to levy equalization and the cost of SEBB insurance, MLSD stands to lose over $500,000 annually beginning in the 2020-2021 budget year.

Current Legislation

There are multiple bills on legislators desks meant to fix the McCleary fix. One, Senate Bill 5313, proposes lifting the levy lid to 20 percent of a districts operating costs. Ames dismissed the proposal.

"We will never ask for 20 percent. We never have," Ames said. "We're not going to ask for that burden."

He noted that MLSD is sensitive to the outlook of district voters.

"They are very conservative overall," Ames said. "They don't like their taxes being raised. We ask for what we think we can do to help us run our budget."

Lee Hughes can be reached at lee@cheneyfreepress.com

 

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