SENATE BILL REPORT

EHJR 4220

BYRepresentatives Grimm, Holland, Ebersole, Betrozoff, Cole, Taylor, H. Sommers, Bristow, Hine, Rayburn, Brough, Wang, Jacobsen, Dellwo, Brekke, Nelson, Holm, Rasmussen, C. Smith, Todd, Unsoeld and Locke

Providing funds for school construction.

House Committe on Ways & Means

Senate Committee on Education

Senate Hearing Date(s):March 31, 1987

Majority Report:  Do pass.

      Signed by Senators Gaspard, Chairman; Bauer, Vice Chairman; Rinehart, Bender, Patterson, Smitherman, Warnke.

Minority Report:  Do not pass.

      Signed by Senators Bailey, Benitz, Craswell.

Senate Staff:Don Bennett (786-7424)

                  March 31, 1987

AS REPORTED BY COMMITTEE ON EDUCATION, MARCH 31, 1987

BACKGROUND:

Article IX, section 3 of the State Constitution establishes two funds dedicated to support school construction.  The Permanent School Fund is a "permanent and irreducible" endowment which generates interest earnings for school projects or financing state bonds for schools.  The Common School Construction Fund primarily consists of receipts from state timber sales and leases of school trust lands administered by the Department of Natural Resources and provides cash funding for school construction.

Timber sale revenue for the Common School Construction Fund in 1983-85 is approximately half the amount received in 1979-81 due to defaults on timber sale contracts and lower bids on recent contracts even though the volume of sales is steady.  Revenue of $95 million is expected for 1985-87 while construction and modernization needs will be nearly $160 million due to anticipated enrollment growth and aging school facilities.

As of February 18, 1987 a backlog exists totalling $304 million in unfunded projects which have State Board of Education approval and for which local matching funds have been raised.  New projects will be added to this backlog as school districts pass bond issues to raise the local share of construction costs.

Article VII, section 2 of the State Constitution limits the aggregate of all tax levies by the state and all taxing districts to 1 percent of true and fair value in any year with a few narrowly defined exceptions.

SUMMARY:

A constitutional amendment is to be submitted to the voters in November 1987, to allow a state property tax levy for school construction to be exempt from the 1 percent limitation on regular property taxes.  The state property tax exempt from this limitation must be specifically authorized by a vote of the people, may not exceed 35 cents per $1000 of true and fair value, and may not be imposed for more than 15 years.

Any proceeds of such a levy which are dedicated to the Permanent Common School Fund are included in the "permanent and irreducible" principal of that fund, generating interest for school construction projects.  Bonds financed by interest earnings from the permanent fund could no longer be issued.

Fiscal Note:      none requested

Senate Committee - Testified: Dr. Frank Brouillet, Superintendent of Public Instruction; Bruce Mrkvicka, Budget Liaison, OSPI; Ben Edlund, Assistant Executive Director, Washington State School Directors Association; Dr. Jerry Hosman, Superintendent, Bethel School District; Sharon Long, Director, Evergreen School District; Don Smith, Assistant Superintendent, Evergreen School District; Kris Van Gorkom, Assistant Executive Director, Washington Association of School Administrators; Paul W. Locke, citizen lobbyist; Olaf Kvamme, Director of Government and Board Relations, Seattle School District