Education: Should the State pay up?

September 29, 2014 by  

If you’ve been tuning in to the election campaigns, you may wonder at claims that Republicans are guilty of “illegal” cuts to education and should PAY UP immediately!  Well – a little historical perspective might be helpful before you buy that line.

Remember when the recession hit in 2008? Revenues were 30% lower than ongoing spending.   To balance the budget (A constitutional requirement in Arizona) the two largest budget items, education (accounting for 51% of the budget, including higher education) and health & welfare (about 25% of the budget), were reduced – as was nearly every other budget line item.

(By the way, unless they had an oil well in their backyard, every other state made dramatic reductions to their education budgets, too – even Democrat-majority states.)

When the recession officially ended in 2009, the state kept education funding levels fairly stable through a variety of means – Federal stimulus funding, one-cent sales tax revenues, one-time solutions (fund transfers from other agencies, lease-purchase agreements, etc) – plus the Legislature passed laws to allow districts to use their funding more flexibly during these years.

In 2012 the Legislature began restoring funding levels as revenues (and revenue projections) increased –  and in light of disappointing actual revenues, we probably did that too quickly.

In the meantime, the Cave Creek School District sued the State claiming K-12 schools were owed inflation funding over and above the funding formula based on their interpretation of Proposition 301, which voters passed in 2000.  The State was interpreting Prop. 301 literally –  that the word, “or” in the first paragraph of the act actually meant “or”- not “and” as the schools claimed – and ultimately the courts ruled, so the state had been applying a 2% inflation rate to either the base level of funding OR the other components – not both. (see the actual wording of Prop. 301 below)*

But the Maricopa County Superior Court did rule against the State – even on appeal.  So the State does owe the schools – but how much?

Now the amount the State owes must be decided – and that is a big deal.   It can mean an annual increase of either $80 or $317 million per year to school districts, depending on whether the courts count the years the state paid schools over and above the inflation funding the schools were entitled to.

Obviously, this is a huge funding difference and likely why the schools want the State to settle on the issue of $1.6 billion in back payments rather than have the State appeal the higher annual amount going forward.  But the State is appealing.   Here’s why –

Two Facts:

  1. The State can’t pay money it doesn’t have.  The ongoing spending the State is committed to already outstrips projected revenues over the next few years – including the rainy day fund – creating a structural deficit.  So the lower amount is the fiscally responsible action.  $80 million could be absorbed more easily in the budget, whereas, in the current economy, adding $317 annually would be an added burden to taxpayers who are barely making it now.
  2. It is the right thing to do as taxpayers should not pay the schools twice for the years they paid schools more than was owed by Prop. 301.  Read Sen. President Andy Biggs’ piece from the Arizona Republic.

Thought you ought to know the rest of the story.

*15-901.01. Inflation adjustments

IF APPROVED BY THE QUALIFIED ELECTORS VOTING AT A STATEWIDE GENERAL ELECTION, FOR FISCAL YEARS 2001-2002 THROUGH 2005-2006, THE LEGISLATURE SHALL INCREASE THE BASE LEVEL OR OTHER COMPONENTS OF THE REVENUE CONTROL LIMIT BY TWO PER CENT. FOR FISCAL YEAR 2006-2007 AND EACH FISCAL YEAR THEREAFTER, THE LEGISLATURE SHALL INCREASE THE BASE LEVEL OR OTHER COMPONENTS OF THE REVENUE CONTROL LIMIT BY A MINIMUM GROWTH RATE OF EITHER TWO PER CENT OR THE CHANGE IN THE GDP PRICE DEFLATOR, AS DEFINED IN SECTION 41-563, FROM THE SECOND PRECEDING CALENDAR YEAR TO THE CALENDAR YEAR IMMEDIATELY PRECEDING THE BUDGET YEAR, WHICHEVER IS LESS, EXCEPT THAT THE BASE LEVEL SHALL NEVER BE REDUCED BELOW THE BASE LEVEL ESTABLISHED FOR FISCAL YEAR 2001-2002.

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