Arizona has a new education budget. But does it solve our long-term underfunding problem? –

From a $50 million boost in special education funding through the state budget to millions in federal dollars for COVID-19 recovery funds, Arizona’s chronically underfunded school system may see more money this year than it has in decades.

But even as school districts are newly able to afford a much-needed reading specialist or an air-conditioner upgrade, education experts are sounding the alarm about the state’s fiscal future.

In particular, they worry Arizona could in just a few years fall off an education funding cliff when a current additional funding stream expires in 2025. And they say the likelihood of this is higher because of tax cuts like those passed in the last legislative session.

“The concerns about the funding for next year in the formula is overshadowed about the concern of where we are going to go in the future,” said Chuck Essigs, the director of governmental relations at the Arizona Association of School Business Officials. “People say, ‘Hey, we fixed everything. We are fully funding the capital formula.’ But what about the many, many years that you didn’t?”

That sharp drop in revenue is expected to come up in 2025, when the education funding from Proposition 123 expires. The 2016 measure increased the money the state took from the state land trust to fund education and, in particular, teacher salaries.

That cutoff may feel particularly harsh because 2024 is the deadline for schools to spend their federal COVID-19 rescue money. The fate of Proposition 208, an education measure that imposed a 3.5% tax surcharge on higher income earners that would start in 2022, and is currently being challenged in court, could contribute to that cliff.

In the next few years, Arizona schools could face a big question about how to continue funding schools, paying teachers and repairing school buildings.

Longtime education funding experts say the latest budget session, like many before, didn’t do enough to consider the the future.

“We think it’s premature to cut revenue” to the extent that the state did, said Mark Joraanstad, executive director of the Arizona School Administrators.

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How we got here

Today, Arizona ranks among the bottom states in education funding. In fiscal year 2019, the most recent date for which information is available, the U.S. Census Bureau ranked Arizona 49th in the nation for per pupil school spending. Arizona spends about $10,000 per student, compared to the national average of $15,700.

But that wasn’t always the case. In the 1980s and early 1990s, the state funded schools at around the national average.

But in the 1990s, the state began minimizing the state’s contribution to education by cutting state taxes. In the next decades, student funding didn’t keep up with inflation, or the growing cost of labor and materials for schools.

The introduction of charter schools in 1995 meant both district and charter schools competed for students and the dollars that went with them because schools receive state funds based on enrollment.

Individual districts then had to pass bonds or overrides to meet staff or building needs.

Then came the 2008 recession. To save money, the state cut billions of dollars from public education, money that experts say was not later restored.

Some educational needs felt those cuts especially hard. The state stopped specially funding special education services, which means state funding only pays schools a fraction of what they need to support the counselors, aides and other services, so schools and districts often borrow from other programs to close the gap.

Funding for full-day kindergarten was eliminated in 2011. Capital funding also took a hit. The Arizona School Boards Association estimated schools in the state lost $4.56 billion in revenue.

Today, districts all around the state depend on funding overrides and selling bonds to meet funding needs for kindergarten, teacher salaries and fixing school buses.

How to fill the funding gap

In total, Proposition 123 is expected to increase funding to education in Arizona by $3.5 billion over the course of 10 years.

Filling that gap, then, is no small feat.

Advocates have looked to both long-term and short-term solutions to fill the state’s fiscal hole.

One was this year’s budget, which had a surplus estimated to range between $2 billion and $4 billion. While the final budget made some changes to how funding is allocated for gifted students and upped the base level of per-pupil funding, Democratic legislators and public education advocates said the budget missed an opportunity to meet the biggest needs for Arizona students — and close the funding cliff.

“We had a chance, and you blew it,” said Rep. Kelli Butler, D-Phoenix, at the final vote on the floor. “We still have teacher pay that is among the lowest in the nation. We still have class sizes that are among the largest. This budget is such a disappointment.”

The long-term solution to the funding cliff, experts say, would be first and foremost to make sure that money continued to flow into the funding formula.

That could mean shifting the funding formula, changing how much money flows into it, or finding new sources of revenue for the education budget.

In a discussion several years ago of what happens after Proposition 123 expires, state Superintendent Kathy Hoffman said: “The next step our state must take is finding a sustainable revenue source that will fully restore education funding to pre-recession levels.”

It would also mean fewer tax cuts, which make it more difficult to find revenue, said Essigs at the Arizona Association of School Business Officials. He is concerned long term not just about how much money goes into the state’s per-pupil formula, but what the state will need to do to survive a future recession.

“What we learned from the last recession, which was a very severe recession, is the funds were decimated,” Essigs said. “No one wants to set aside dollars that will be available when we hit the next recession.”

School funding sources

A boost in funding could also come through two legal measures, though both are tied up in court.

One is Proposition 208, the voter-approved measure to raise the income tax on high earners to pay for education that is winding its way through the state Supreme Court after being challenged by critics. It is projected to raise about $900 million a year, but the creation of a new income-tax category for small business that is awaiting the governor’s signature could cut that by more than a third.

The other is a lawsuit by several school districts against the state and the School Facilities Board over what they claim is an unequal system for helping schools whose buildings are in disrepair.

The lawsuit, which alleges that the state’s school finance system doesn’t give enough money for building repairs, is still creeping through the legal process, but the plaintiffs hope to inject more money into funding for capital needs.

But there could still be other barriers. For example, the Arizona Constitution also includes a cap on how much money can be spent on schools, a limit some experts say could be reached in the next few years.

And if the Legislature, which currently has a Republican majority in both chambers, continues cutting state taxes, that could still mean less revenue for education.

Sen. T.J. Shope, R-Coolidge, who served on the Coolidge Unified School District Governing Board for eight years, said schools short on funds should look to their governing boards, rather than the state government, to find cost-cutting measures to meet their funding needs. Arizona has a system of bonds and overrides, which are voter-approved initiatives that school districts use to raise additional money.

“I think the Legislature overall has done a good job of prioritizing the education issue,” he said. “I believe the Legislature has a responsibility to provide the base level funding, and we do that.”

Shope also says he expects Proposition 123 could be back on the ballot.

But others, like Marisol Garcia of the Arizona Education Association, say they shouldn’t have to get school funding to come through voter-approved ballot measures.

“Time and time again, we go to the voters and we ask them to support education, and they do,” she said.

That should be a sign, Garcia argued, that voters want more funding directly, and regularly, from the state.

“We shouldn’t have to deal with this by constantly going to court and going to the ballots.”

Republic reporter Mary Jo Pitzl contributed to this article.

Reach the reporter at [email protected] and follow her on Twitter @yanazure.