It was difficult to grasp the effects of a major overhaul to Washington’s property-tax system late last month, when state lawmakers quickly passed the plan within a day of introducing it.
At the time, a top Republican lawmaker said the proposal – which raises the statewide property tax while lowering local school district levies – would end up cutting taxes for 73 percent of Washingtonians.
Meanwhile, several Democratic lawmakers decried how much the measure would raise taxes in some of their districts, including areas in and around Seattle.
Now, nearly two weeks later, both Republican and Democratic leaders seem to agree on one thing: The best way to calculate the tax effects of their new K-12 education plan is to compare the tax rates people are paying today to the rates they’re projected to pay in the future.
And, using that metric, it turns out the initial Republican claim about most people getting a tax cut is about right. That includes many people in Whatcom County.
The key caveat? Those new, lower property-tax rates won’t take effect until 2019 and beyond.
How the plan works
According to projections from nonpartisan staff, about two-thirds of people in Washington live in school districts where tax rates eventually are expected to go down under the plan the Legislature approved.
But during the first year of the new plan, in 2018, virtually all homeowners throughout the state will see their property tax rates go up, according to the nonpartisan Senate Committee Services.
That’s because that year, the plan increases the statewide property tax by about 81 cents per $1,000 in assessed property value. The part of the new law that helps reduce local property tax levies doesn’t take effect until one year later.
Lawmakers approved the property-tax changes to comply with a state Supreme Court order to fix how the state pays for schools. In the McCleary case, the high court said the state must stop relying on local school district property tax levies to pay for basic education costs, such as teacher salaries.
Starting in 2019, the new law will cap those levies at either $1.50 per $1,000 in assessed value or $2,500 per student, whichever is lower. Only then will a majority of Washington taxpayers start paying lower tax rates than they pay now, according to a review of the nonpartisan staff numbers.
Analyzing the effects
To analyze the effects of the new policy, The News Tribune and The Olympian looked at which school districts Senate Committee Services predicted would have lower tax rates in 2019, 2020 and 2021 than they did in 2016. The newspapers then examined how many people live in each of those districts, using population numbers from the state Office of Financial Management.
According to that analysis, 69 percent of Washington residents live in school districts where property tax rates are expected to be lower in 2019 than they were in 2016.
The picture is similar the following two years. About 66 percent of Washington residents live in school districts where tax rates are projected to be lower in 2020 than they were in 2016, and about 64 percent of Washingtonians live in districts that are expected to have lower tax rates in 2021 compared to 2016.
After the initial tax rate hikes in 2018, nearly all school districts in Whatcom County can expect to pay lower tax rates, according to the projections from Senate Committee Services. The exception is in the Blaine School District, which is projected to have a significantly higher rate in the future.
About a third of state residents live in school districts where taxes are projected to be higher in the long term.
Some of those districts are located in cities with high costs of living, such as Seattle, Bellevue, Gig Harbor and Mercer Island. Others are in poorer, more rural areas, such as the small Eastern Washington towns of Orient, Starbuck and Cusick. Island districts like Orcas, Lopez and San Juan also will see increases.
It’s difficult to calculate exactly how the changes in tax rates will translate into precise increases or decreases in residents’ property-tax bills. The Senate Committee Services analysis didn’t include dollar estimates for how much more or less the owner of a median-value home in each of the state’s 295 school districts can expect to pay each year.
A different nonpartisan analysis from House staff in the Office of Program Research included dollar figures for how much people’s property tax bills could have been expected to change.
But those estimates compared tax bills under the new policy to what people’s tax bills theoretically would have been under a now-scrapped plan to lower local property tax collections starting in 2019. The so-called “levy cliff” is something that never will happen now that the Legislature has approved the new policy for local levies. Yet, because the levy cliff was baked into state law before the new tax policy passed, it is the baseline for comparison in most fiscal analyses.
Because of that, the House analysis most likely overstates how much some people’s property tax bills would go up in 2019, compared to what those homeowners pay today. For the same reason, that analysis also most likely underestimates how much other people’s property tax bills would go down.
New numbers coming soon
State Superintendent Chris Reykdal, a former Democratic lawmaker, said his office is working with the state Department of Revenue to put out an analysis he hopes will clarify the effects of the new K-12 plan. Part of that will mean comparing the amount of money school districts get today – and their current levy rates – to what districts can expect in the future.
The new analysis from the Office of the Superintendent of Public Instruction and the Revenue Department most likely won’t be ready until next week.
In the meantime, school district officials are crunching their own numbers to try to estimate how much new money they can expect from the Legislature’s public school plan, said Dan Steele, lobbyist for the Washington Association of School Administrators.
Analyzing the complex funding plan requires making certain assumptions, including how much levy money voters might approve in the future, how assessed property values may change over time and differences in the practices of county assessors.
Steele said local school officials want to make sure those assumptions are correct for their individual districts.
“We’re encouraging folks to run their own numbers, so they can verify for themselves what’s coming down the pike,” Steele said.
Estimated tax changes in local school districts
Most school districts in Whatcom and Skagit counties are expected to see lower property tax rates under a new school levy plan the Legislature approved last month. The exception is in 2018, when virtually every school district in the state is in line for a property tax increase. Here’s a look at how property tax rates are expected to change in local districts, according to one nonpartisan staff analysis. Estimated rates apply to every $1,000 in assessed property value and are considered rough projections.
2016 tax rate
2018 tax rate
2019 tax rate
2020 tax rate
Source: Senate Committee Services