Prop. 123 – Beyond the talking points

April 24, 2016 by  

Yes, Prop. 123 will pump $3.5 Billion into Arizona’s schools immediately without busting the state budget.  But beyond that, I’d like to explain my support for Prop. 123:

Some critics of Prop. 123 balk at giving K-12 any more money – period.  The trust level on how it will be spent – evidenced in how few bond & override questions have passed recently – is near zero in some parts.  Voters blame schools for hiring too many administrators & not paying teachers enough.  For blaming lack of funding for poor student performance.  For saying there is never enough funding.  They want to see education reforms, too.

Okay – but what are we really dealing with?

It really IS time to stop paying lawyers and start paying teachers.  The school funding lawsuit is a critical consideration.  Voters may not realize how deeply divided we are on the disagreement that Arizona underpaid schools under Prop. 301.  That’s why the State is in court.  The Legislature believes we only owe schools about $75 million rather than $300 – plus there’s the back-payments they want, adding billions more.  But that’s beside the point now because Arizona lost. And the State’s appeal doesn’t look good either.  Prop. 123 settles the lawsuit, with the schools receiving about 72% of what the districts would likely have been awarded by the courts.  Continuing the lawsuit would cost everyone more.

But are teachers likely to benefit?  Prop. 123 does not designate where the funding is to be spent.  Under the agreement, it leaves it to the local districts to decide.  I’m okay with that because the public is wary of how schools spend their funds already, especially additional funding authority passed at the ballot.   Parents will keep them accountable for prioritizing teachers.

What happens in 10 years?  Great question.  Everyone agrees that Arizona’s school funding formula needs an overhaul.  It is complicated and the lawsuits (there’s another one coming on capital expenditures!) complicate it even more.  Prop. 123 really is a starting point on school financing.  By getting the lawsuit off the table, the work of attaining a sustainable school financing plan will continue in earnest, especially with the looming 10 year deadline ahead.

Why not use the “extra” revenues and the State’s “rainy day” funds?  Do you buy a house with payments you can’t afford because you can scrap together the down payment?  In the same way, committing ongoing spending to the level that would satisfy the schools based on this year’s extra funds would be irresponsible.  The Legislature does three year budget forecasts now and extra funding at that level is not expected year after year, such as from capital gains taxes.  If we’ve learned anything from our experience in the last recession, it is to be ready to mitigate the damage with at least some cash on hand in the event of another one!  If some of it is used, it should only be for “one-time” expenditures – not committed for ongoing spending obligations.

Would the State have the money if we had not cut taxes? No – probably not.  The recession hit Arizona harder than every other state in the country percentage-wise.  The state cut taxes to spur the economy and as a result it sent a strong message to businesses that Arizona is a business-friendly state, increasing overall revenues!  It’s incredibly simplistic to compare raw tax cut numbers to the revenues they have generated as a result of a better business tax environment.  Repealing them would send a confusing message to companies and put the progress we’ve made in our economy in reverse.

But Prop. 123 raids the State Lands Trust! Public schools are the SLT’s main beneficiary of Prop. 123 – only to a greater degree for 10 years. Criticisms that it would “raid” the Trust are not accurate.  The overwhelming majority of the funds will still go to Arizona’s K-12 schools which, many believe, should have received higher fund dispersements over the years from the Trust’s interest as the rate has been too low – essentially underfunding schools over the years.

Prop. 123 works because it doesn’t diminish the Trust’s principle.  It stands at about $5 billion now and even with Prop. 123, the corpus is expected to grow to $6 billion in a decade, even factoring in inflation.  Would it grow faster if the interest from the Trust were not distributed at the higher rate?  Yes it would – but there is still opportunity for the trust’s principle to grow significantly for future generations when more of the 9.2 million acres in unsold trust land is sold.  The land is worth over $70 billion.

Will the triggers work?  Yes.  They are spelled out in the initiative.  If the economy tanks or if the Trust principle is endangered by unforeseen circumstances, the outlays from both the general fund and the interest from the Trust stop – and don’t have to be repaid to the schools.

Bottom line for me?  This is a lot of money, but about 30% less than what taxpayers would be ordered to pay if/when the state loses the case in court.  Money doesn’t necessary correlate to better student performance, but it is clear that teachers are leaving for greener pastures.   Every single Republican in the Legislature supported Prop. 123 as a solution to the lawsuit – even Senate President Andy Biggs and others whose conservative credentials are solid.  Finally, continuing the lawsuit is also counterproductive when we’re attempting to make the case for education reforms – including expanding school choice.

 

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Comments

One Response to “Prop. 123 – Beyond the talking points”
  1. Carol Russell says:

    Thanks, Nancy….that clarifed a lot for me. Most times we don’t get the “whole picture”….only snippets.

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