January 7, 2021
San Juan school districts face big budget shortfalls due to levy cap
Hayley Day

Public schools on Lopez (at left), Orcas and San Juan islands are facing large budget shortfalls as a cap on local levy collections takes effect. The cap is part of a strategy aimed at making school funding more equitable across the state, but is impacting smaller districts with “serious, unintended consequences.”

photo: Amy Nelson © 2021
January 7, 2021
San Juan school districts face big budget shortfalls due to levy cap
Hayley Day

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Updated Jan. 9, 2021

A law to make state education funding more equitable has had the opposite effect in the San Juan Islands. While San Juan property owners are paying more in state education taxes, less funding is going towards local schools.  

A new cap on local enrichment levies limits some districts from collecting the entire amount of local education taxes that voters have previously approved. 

These changes have left the islands’ smaller, rural districts — which already have higher expenses per student than more populated areas — hundreds of thousands of dollars in the red.

On Lopez Island — where the last enrichment levy passed by nearly 75% in 2018— only about 60% [Ed.: corrected Jan. 9, 2021] of the assessed amount approved in that election can be collected each year of the levy’s four-year period. The district is roughly $400,000 below its projected $5.5 million school budget this school year alone.

This school year, San Juan Island School District is in the red by $894,973, while Orcas Island School District is down $742,905.

Enrichment levies cover basics such as utilities, special needs programs and the school nurse, as well as supplemental classes such as drama and art.

Before staff, classes and athletics take deeper cuts, San Juan County school supporters are seeking both state law changes and local donations.

“We’re not asking for any money from the state,” said John Helding, a former member of the Lopez Island School District Board. “We are just asking them to let us fund our unique needs … with our own local funds that our taxpayers, through their generosity and support of the school, are more than willing to provide. Since [the state is] not supporting all the costs, let us do it.”

McCleary and the bottom line

Education in Washington state is funded by two tax sources: state allocations and local school district assessments calculated on property taxes.

A major funding change resulted from the state Supreme Court’s ruling in a nearly decade-long case seeking equitable pay for “basic education” as promised in Washington’s constitution. The 2012 ruling, known as the McCleary Decision, asserted that it is inequitable to allow districts with higher property values the ability to collect more money than districts with lower property values.

The state addressed the McCleary ruling by raising its portion of education taxes to allocate across Washington while lowering the amount that local school districts can collect on enrichment levies.

By 2019, a cap on local enrichment levies — previously called maintenance and operations levies — took effect.

Chris Greacen
Lopez Island school board member Chris Greacen is among those finding that a newly implemented cap on school levies discriminates against smaller school districts such as those in the San Juans. (Photo courtesy Robert Harrison)

Lopez Island School Board Member Chris Greacen said he had heard rumors of a cap when the district’s 2018 levy was passed. However, he thought that once the shortfalls were noticed, the cap “would be an oversight that legislators would fix.”

But the fix hasn’t come.

“There needs to be better education funding across the state. People, by and large, are happy to pay higher taxes to support education,” he said, “but at the same time, we want the ability to collect enough to keep our own schools from going insolvent.”

Keith Whitaker, business manager for the Orcas Island School District, said representatives from the Northwest Education Services District suggested that the Orcas District try to pass an enrichment levy at a higher rate than what is allowed to be collected in case the law changes. That levy passed this past November, but not all of the voter-approved funds can be collected under the current ruling. 

‘Economies of scale’ hit small districts

Prior to McCleary, the amount districts could raise from enrichment levies was based on a percentage of a school district’s budget, said Greacen. Now, the formula uses a fixed rate based on the number of enrolled students.

The cap is now at $2.50 per $1,000 of assessed property value or $2,500 per student, whichever is less. On Lopez, where there are high-valued waterfront properties, the lesser of the two options is $2,500 per student. That’s about $1,600 per student less than the previous budget formula, Greacen said [Ed.: clarified Jan. 9, 2021].

However, he noted, setting funding at a fixed rate does not account for how much more smaller school districts pay per student, compared to larger districts.

“For our K-12 school, with just 226 students, to offer math beyond algebra and geometry, we still need a teacher, even if the class only has two students,” said Greacen. “And that teacher needs a living wage.”

When you divide the costs of expenses — staff, buildings, classroom resources, athletics, etc. — by the number of students in the school, Lopez Island School District is paying about $24,000 to teach each student this school year, said Greacen. In a larger school district, the cost to educate each student can be half as much, he said.

The new system, said Greacen, discriminates against smaller school districts like Lopez.

“If there weren’t economies of scale, [the changes] would be equitable,” he said, “but [the] formulas don’t take into account economies of scale; that it just costs more to educate students at smaller schools.”

Lopez high school at risk 

If the funding formula doesn’t change, said Greacen, Lopez could lose its high school. The district already has cut fall sports, prior to the COVID-19 pandemic that restricted athletics, and combined its second- and third-grade classes. This school year, three teachers resigned but were not replaced.

However, these fixes aren’t sustainable, said Greacen. 

Without changes from the state, Helding said he fears the exponential loss of funds over the years. Today, district staff are dipping into reserves to stay afloat, but tomorrow they might have to cut classroom resources.

The reductions could, in turn, cause fewer students to enroll which would result in less funds being collected. Even as expenses like utilities and teachers’ salaries increase, the district will collect only a fixed rate per student.

“Each year when all your other costs go up because your levy lid isn’t part of your budget, you just fall further and further behind the amount of local funding you can provide,” said Helding. “The fear is you get in this doom loop.”

In addition, the pandemic has also reduced student enrollment for districts like San Juan Island, and reduced funding as more students are homeschooled. The inability to collect the full amount of the district’s last enrichment levy adds to the shortfall.

“If we were allowed to collect what voters approved, [our deficit] would decrease by roughly $600,000,” said Jose Domenech, San Juan Island School District business manager.

Uphill battle at the legislature

In the 2020 state legislative session, San Juan County’s 40th District state legislators — Sen. Liz Lovelett, D-Anacortes; Rep. Debra Lekanoff, D-Bow; and Rep. Alex Ramel, D-Bellingham — worked on bills to correct the county school districts’ shortfalls, but none were successful.

Ramel agrees that the current legislation hurts San Juan County schools.

“These small districts have fixed costs that simply are not covered by the state’s per-student formula funding, and by limiting the local revenues that voters have already approved, the legislature has put these districts between a rock and hard place,” he said.

Ramel added that he is committed to working with 40th District legislators to support new bills to rectify the levy lid or possibly add school funding to the state budget.

However, any changes might be an uphill battle.

“The levy cap is intended to improve the equity between school districts in Washington state,” said Ramel. “It’s a good idea but has had a serious, unintended consequence in small districts, especially those that are geographically constrained like the islands. This was a hard-fought compromise that happened before any of the current 40th District team was elected, and the frustrating truth is that other legislators are reluctant to revisit this question.” 

Replacing ‘missing levy funds’

With the ongoing budget shortfall, Lopezians Bill LeDrew, who has an eighth-grader in the district, and Kirm Taylor sought donations to make up for the school district’s loss. Last October, they organized a mailing to roughly 2,000 Lopez Island property owners asking them to replenish what they called “missing levy funds.”

“Our community is willing to support the school, [as] evidenced by the passage of the 2018 school levy,” said Taylor. “When the state removed 40% of the amount we could collect, it seemed to us that people who voted for the levy would consider paying what they would have paid anyway if we asked. So, we asked.”

In the letter, LeDrew and Taylor included examples of how much each property owner would have paid if the entire enrichment levy could have been collected. So far, only $55,000 has been replaced — still roughly $345,000 short of their goal.

On San Juan, the San Juan Island Community Foundation and Valmark, which operates the island’s only two grocery stores, donated $145,000 to help the district adapt to teaching during a pandemic. Donations secured items such as temporary staff and touchless fixtures, like sinks, in the schools. 

“That $145,0000 otherwise would have had to been spent through school district funds, so that money is very much appreciated,” said Domenech.

On Orcas, the district is scheduled to receive roughly $150,000 from the Orcas Island Education Foundation and the Orcas Island Community Foundation, but more is needed.

As on Lopez, the quest to replace those “missing levy funds” continues.

“Lopezians voted overwhelmingly to keep levy collections at the level they’ve been for a while,” said Greacen. “But while voters … spoke, the state didn’t listen. The state capped our ability to collect these voter-approved funds. The money stayed in your pocket. But it doesn’t have to.”

All three island school districts provide information on how to make tax-deductible donations:

  • Lopez: Mail a check to the Lopez Island School District, 86 School Road, Lopez Island, WA 98261.
  • San Juan: Visit www.sjpsf.org or mail a check to San Juan Public Schools Foundation, P.O. Box 1452, Friday Harbor, WA 98250; donations also may be made through the San Juan Island Community Foundation at https://sjicf.fcsuite.com/erp/donate/list through the “Pass Through” fund, including a note that the donation is for the school district.
  • Orcas: Visit oief.org or mail a check to Orcas Island Education Foundation, P.O. Box 782, Eastsound, WA 98245. Donations also may be made through the Orcas Island Community Foundation at oicf.us/donor, selecting an “OISD” fund.