Analysis: The Cave Creek settlement is a bad deal, motivated out of fear of getting nothing

Last Thursday, the editors of The Arizona Republican published a fluff piece singing the praises of Governor Doug Ducey that read like it was submitted by the governor’s press aide, Daniel Scarpinato. Now THIS is education leadership:

bullshitjAfter the stultifying heat of summer, there’s nothing like an open window on a cool morning to make you think about possibilities.

Gov. Doug Ducey’s willingness to listen to different ideas and retool his education-funding proposal is like that.

It’s the kind of openness necessary to bring out the best in our state.

* * *

In saying he’s open to modifying his plan by listening to and working with the education community and lawmakers, Ducey threw open the door to finding the best plan for Arizona.

We have since learned that this editorial was complete unadulterated bullshit.

From news reports about the preliminary settlement in Cave Creek Unified School District, et al. v. Ducey reached between the states’ school districts, Governor Ducey, and Tea-Publican legislative leaders late Saturday, Democrats in the legislature were never part of the settlement discussions, despite having a viable plan that The Republic’s own fact checker rated favorably, Fact Check: Democratic leadership on new K-12 funding based on their plan. Democrats learned about the preliminary settlement through media reports.

The Democratic plan was summarily dismissed by the GOPropagandist editors of The Arizona Republican. Our View: Get serious about education funding. See also the patrician prevaricator for the plutocracy, George Will’s mini-me, Robert Robb. Robb: Douglas, Dems post lame ed funding ideas.

The truth is given to the editors’  lie from The Republic’s own Linda Valdez today, Valdez: School deal came from one-party rule:

If you elected a Democrat to represent you in the state, your voice was silenced by the majority Republican Party in discussions on how to fund Arizona’s schools.

The GOP has an excuse. But it’s not good enough.

No Democrats were included in negotiations on a settlement in the five-year-old lawsuit over school funding.

Why?

Because Democrats weren’t a party to the lawsuit that had to be settled.

* * *

When Republican Gov. Doug Ducey brought together the litigants to try again for a negotiated settlement of the 2010 case, it was the GOP legislative leaders who got the invite along with representatives of the schools.

On the surface, that makes sense. Litigants only, please.

* * *

But it is also likely that settlement goes well beyond the lawsuit to involve education funding proposals previously offered separately by Ducey and GOP legislative leadership.

That means the Democrats, who offered their own plan to reform school funding, will be brought in at the back end of what is a very big deal for Arizona.

That’s not representative democracy. It’s one-party rule.

It disenfranchises Arizonans who voted to be represented in the Legislature by a member of the Democratic Party.

It means you can elect someone to represent you — and the majority party can hit the mute button and ignore the voice of your representative.

This would be insulting no matter which party did it.

But in Arizona, it’s done by the Republicans.

As  one would expect from the GOPpropagandist editors of The Arizona Republican, they are again singing the praises of Governor Ducey and the GOP only preliminary settlement agreement today. Our View: School settlement mostly a win (for our lawless Tea-Publican legislature):

A judge’s order to pay schools isn’t worth much unless Arizona’s Legislature is willing to write the check.

That hard fact helped push representatives of Arizona’s K-12 schools to settle a school-funding lawsuit for less than a judge said they were owed.

It gets worse from there. Rather than repeat the editors’ GOPropaganda talking points, let’s use the reporting from The Arizona Capitol Times (subscription required), supplemented by other reporting for analysis. Details emerge on K-12 settlement deal:

Gov. Doug Ducey, legislative Republican leaders and school groups have reached deal that would provide Arizona schools with roughly $3.5 billion more over the next 10 years to end a years-long lawsuit over education funding, according to multiple sources briefed on the matter.

The deal has five essential components, according to sources:

· Resetting the K-12 base level funding.

· Modifying how much inflation money is paid each year. [Prop. 301]

· Implementing economic and budgetary triggers for when the inflation funding would be required.

· Implementing a version of Ducey’s proposal to increase school spending from the state land trust.

· A decade of spending largely focused on increasing teacher pay.

Senate President Andy Biggs, R-Gilbert, briefed Senate Republicans on the proposal most of the day Monday.

* * *

The plan would settle the lawsuit by paying out $249 million in the current fiscal year to reset the base level funding to $3,600 per student, a $173 increase per student. Schools are funded at $3,427 per student in fiscal year 2016.

The $249 million amounts to 72 percent of what the appellate court ruled was owed schools by the Legislature, according to the Arizona School Boards Association.

The deal must be approved by the Legislature, and portions of the proposal must also be sent to the ballot in a special election for voters’ approval.

A court last year ruled the state owed $336 million to reset the base funding, and the Legislature this year made a partial payment of $74 million. The deal would absolve lawmakers of the $1.3 billion that the court ruled were illegally withheld from public schools between 2010 and 2013.

Let’s stop here for a moment. The school districts have agreed to forgo an estimated $1.3 billion dollars in restitution that our lawless Tea-Publican legislature owes for theft from the school districts in past years, and they are agreeing to accept substantially less than the face value of the judgment they hold against our lawless Tea-Publican legislature for current inflation adjustment funding in years going forward.

Despite having already won their lawsuit, the plaintiff school districts and their lawyers are taking a defensive position on the judgment. I can only assume that the school districts fear a Prop. 204 (Healthy Arizona) result, i.e., Fogliano v. Arizona (2011), in which the Court of Appeals agreed that Proposition 204 directed the legislature to provide supplemental funding and agreed that it prohibited caps on enrollment, but held that it could not provide plaintiffs’ any relief because notwithstanding the mandatory language in the statute, the matter of funding was a political question and not subject to judicial review. The Arizona Supreme Court denied the Petition for Review, allowing the Court of Appeals decision to stand.

The other possibility is fear of a constitutional crisis in which the Arizona Supreme Court affirms a final judgment in favor of the school districts, but our lawless Tea-Publican legislature responds defiantly with “you have made your decision, now let’s see you enforce it.” This is a real possibility. It happened earlier this year in the state of Washington over a similar school funding issue. Washington state fined $100,000 per day for education funding failure. It seems to me the school districts’ defensive posture indicates their lack of confidence in the Arizona courts vis-à-vis the legislative branch to enforce a judgment. I can’t say that fear is unjustiified.

Second, the tentative deal would tweak the voter-approved law [Prop. 301] that require annual inflation increases to schools of up to 2 percent by adding mechanisms to allow lawmakers some wiggle room in future economic downturns. The triggers would exempt lawmakers from increasing funding for inflation if sales tax growth and employment growth are both less than 1 percent, and would give them the discretion to suspend increases if sales tax growth and employment growth are less than 2 percent.

The inflation funding requirement would also be suspended – and lawmakers would be allowed to cut education funding by same amount as the previous year’s inflation increase – if total K-12 general fund appropriations reach 49 percent of the total general fund revenues.

If K-12 appropriations reach 50 percent or more of revenues, lawmakers would be allowed to cut education funding by twice the previous year’s inflation increase.

These “tweaks” to Prop. 301 would mean that the inflation adjustment is no longer “automatic,” but dependent on a set of inflation triggers and the discretion of the legislature. This would entirely undermine the purpose and intent of the voter-approved Prop. 301, and should require voters to approve any such changes at the ballot. And if the voters do not agree, what then? Does the court again assume jurisdiction of this case because the voters do not approve of this settlement?

Third, Ducey’s land trust plan would be modified to a flat 6.9 percent distribution for 10 years, as opposed to the governor’s original proposal of 10 percent for the first five years and 5 percent for the following five years.

The plan would still pay out roughly $2.2 billion over the 10-year span.

You will recall that State Treasurer Jeff DeWit was vehemently opposed to Governor Ducey’s original plan to raid the state land trust for to find funds to settle this lawsuit. Treasurer blasts Ducey’s education plan. Howard Fischer reports, GOP plan would give AZ schools $3.5B increase:

State Treasurer Jeff DeWit has been critical of Ducey’s original proposal to withdraw additional funds from the State Land Trust. The current withdrawal is 2.5 percent. He said he hadn’t seen the most recent plan in writing, but was concerned about what he’d heard.

“There is a hard-and-fast line we cannot cross. We cannot spend principle,” he said. “We can go up to 3.75, but that’s the best number everyone agrees we can do without spending principle. That’s the safe number.”

So I have to assume that DeWit is still opposed to the Governor’s plan.

The Arizona Republican on Monday published an op-ed from attorney Grady Gammage, Jr. on Governor Ducey’s state trust land proposal that should also raise red flags about that initial 6.9 percent distribution for the first five years. My Turn: 3 ideas to boost Doug Ducey’s school plan:

[T]hough the Constitution and statutes are far from a model of clarity, there is a clear sense in case law that, in trust terms, a “corpus” in the state trust was to be treated as an endowment and preserved over time. The “corpus” of the state trust consists of both the remaining state trust land and the money received in exchange for sales of land.

Protection of the “corpus” should include some hedge against inflation, probably in the 2 percent range annually, to maintain the equivalent buying power over time.

Paying out too much money risks being held to be an invasion of the corpus, and is likely to be met with significant legal challenges.

Practices of similar funds, of university endowments and foundations all suggest that annual distributions from endowments can be in the 4 to 5 percent annual range without depleting the corpus.

In this case, there should be land sales every year adding to the fund, so a distribution of 5 percent annually is probably sustainable.

The proposed 6.9 percent distribution formula in the first five years is too high, and the proposed five percent distribution formula in the next five years tickles the outer limit, and may also be too high. The State Treasurer needs to prepare an analysis and take a position.

Moreover, any change to the distribution formula from the state trust lands requires voter approval at the ballot. And if the voters do not agree — as voters have frequently done in the past regarding state trust lands measures — what then? Does the court again assume jurisdiction of this case because the voters do not approve of the settlement?

Finally, the plan would commit lawmakers to additional general fund appropriations for education for the next 10 years. Under the settlement, lawmakers would agree to $50 million per year through 2020 and $75 million of additional funding from 2021 through 2026. That money would not be included in the annual calculations for inflation.

This amounts to a pittance, and will do little to raise Arizona’s education funding from the bottom of state education funding. The proposed increase to $3,600 per student would still leave the state far below the 2013 nationwide average of $5,650. Arizona competes for ‘worst in the nation’ in support of public education (June 2015):

The Arizona Capitol Times (subscription required) reports that a new U.S. Census Bureau Survey says Arizona is dead last in state support for K-12:

GarrisonKeillorA new report from the U.S. Census Bureau (.pdf) affirmed public school advocates’ lament that Arizona is near or at the bottom among the states when it to comes K-12 funding.

The report, which uses fiscal 2013 figures, shows that Arizona spends $7,208 per pupil. In comparison, the US on average allocates $10,700 per pupil.

Arizona lags behind on every major spending breakdown, including wages and benefits, and support services, the report says.

It gets worse: Arizona is No. 48 among the states when it comes to K-12 revenues, and dead last when it comes to spending.

The figures include revenues from all sources, but a breakdown shows that in fiscal 2013, the money available from the state was only $3,116 per student, which puts Arizona at No. 50.

Finally, “plaintiffs in Cave Creek v. Ducey would agree to drop both the back payments and base funding reset portions of the lawsuit.”

Reaching a deal that provides a portion of court-ordered funds meets schools’ desire to stabilize and sustain funding, according to a statement released by the Arizona School Boards Association, a plaintiff in the case.

“While this should not be viewed as solving Arizona’s long-term or short-term funding needs, or as a replacement for local funding mechanisms such as bonds and overrides, it is an acknowledgement of the fact that those needs cannot wait,” the statement said.

In my opinion, this is a bad settlement, motivated out of fear that the courts will not enforce a judgment against our lawless Tea-Publican legislature.  Our legislators will continue to violate the law with impunity because no one has been held accountable.

The major portion of this proposed settlement comes from the state trust lands fund. Once again, our lawless Tea-Publican legislature and Governor has devised a “robbing Peter to pay Paul ” plan to avoid their constitutionally prescribed duty to raise taxes to pay for public education and the (judgment) debts of this state.

In effect, our  lawless Tea-Publican legislature and Governor propose to steal from the trust lands fund set aside for future generations of Arizona students to pay only a partial amount of the restitution that they owe to the present generation of Arizona students from whom they have stolen education funds. I believe Tea-Publicans refer to this as “generational theft.” The amount they propose to steal from the state trust lands fund may deplete the corpus, and thus violate the trustee’s duty to the beneficiaries, resulting in additional litigation.

This settlement will also leave Arizona students near the bottom of education funding in the United States. Inflation adjustment funding would be subject to the discretion of the legislature and inflation triggers based on economic circumstances. And the minimally increased funding is only temporary,  for a period 10 years, with a fiscal cliff in 2016 (earlier if Prop. 301 is not renewed by voters in 2021).

Finally, the GOPropagandist editors of The Arizona Republican will shamelessly try to sell you this load of crap as a good settlement, because it allows their boy Doug Ducey to maintain his pledge not to raise taxes during his term of office. And that’s what really matters to them,  doesn’t it?

13 responses to “Analysis: The Cave Creek settlement is a bad deal, motivated out of fear of getting nothing

  1. Here’s how the GOTeaP works.

    First, let go of a bunch of teachers. You still need a janitor, a principal, and a school admin. But now you have less teachers, so the ratio of teachers to administrative staff changes.

    So you claim that administrative costs have risen. Because, you know, math. And you defund/underfund schools and then when the schools perform poorly you say “see, government doesn’t work”.

    Next you say the fix is to run government like a business. But there’s a problem with this.

    Corporations, by law, are required to provide the least for the most. That’s how you get profits.

    Government needs to do the most with the least. It’s all overhead, providing services (courts, cops, military, and yeah, schools).

    So you can take some business best practices and use them in government, but the end goals are 180 degrees from each other.

    Luckily for the GOTeaP, they can count on their base to avoid critical thinking like the plague, and thanks to years of conditioning them on Fox Fake News, AM radio hate talk, and the right wing blogosphere, telling people that government is the problem and that “libtards are going to give the country to the UN via Agenda 21″, they do.

    Funny how these are the same people who love to brag that they’re not “sheeple”.

    So they privatize prisons, schools, utilities, and now you’re taking money from me, and giving it to some Wall Street CEO to buy a bigger yacht, and I can lose my home/freedom if I don’t pay.

    Yeah, Wall Street is pushing into charter schools big time, and owns lots of stock in the prisons.

    So an extortion racket is born. Government takes my money and GUARANTEES profits to charter schools, APS, the private prisons, etc..

    And now these businesses have no reason to actually run like a business, to innovate, manage costs, because they’re guaranteed profits.

    Privatization actually stifles innovation and corrupts capitalism, the very opposite of the selling points they use to justify privatizing.

    A business has a right to do three things, make money, break even, or lose money.

    But you have removed the risk of losing money and you no longer have capitalism.

    I wish GOTeaP folks would spend more time on the financial pages and less time with Glen Beck and learn how the real world works.

    Profits are not bad, but guaranteed profits taken from my paycheck are pure evil.

    For the record, I have no school age children at this time, but I do have an interest in my property values (good schools make them go up), and since I love Arizona, I’d like the state to have a good future.

  2. A lot of Republicans say that government should be run like a business. I don’t agree with that for a number of reasons but let’s just suppose that for a minite. If that’s case and then when its expenses are above its revenues it MUST raise revenue. That’s what a business does. In this case that means that government is providing services below cost, terefore it must raise the rates it charges for those services, therefore it must increase taxes. Arizona has some of the lower overall tax rates in the nation, meaning a combination of income, sales, and property/other taxes. The best way to raise taxes is to raise income taxes, because that is the one tax that we have that is progressive instead of regressive.

    I submit that what Republicans hate most is that tax progressivity. They really don’t mind it if the taxes are sales taxes. Because they know that sales taxes don’t hit the wealthy nearly as much as they hit the poor. They also hate that government provides services to the poor and to all of us. And they hate the EPA, Fish and Wildlife, and other environmental wings of government because they protect lands that Republicans want to exploit for free via the 1872 Mining Law and other old laws that give away America’s treasures to the first company that can claim it.. What they really want is a government that provides freebies to corporations and rich people and nothing for the rest of us.

    Now I am not saying that all Republicans feel this way. Many Republican voters don’t understand that is what they are voting for. But the Republican leadership does feel this way. All you have to do is look at what they want to get rid of — Social Security, Medicare, Medicaid, Obamacare, all social programs for the poor, the EPA, Fish and Wildlife, and they want the Forest Service and Park Service to give away public lands for exploitation by corporations.

  3. The Democrats are expected to capitulate… because the ASBA has taken on the role of abused spouse. Please just stop beating us and we’ll promise not to prosecute.

    It’s GOP oppression, plain and simple.

  4. Frances Perkins

    Steve complains about raising taxes where Laughter (sic) curve proponents, which are every Republican, believe all economic problems can be solved by cutting more taxes. But as your hero Reagan, and now Brownback, and his protégés, Ducey and Biggs, etc., have really proved, cutting taxes does not set the economy to boil. In truth taxes in Arizona are very low. Property taxes are low, income taxes are a joke. The legislature could start by junking all the tax credits, and deductions for every one of their buds, under the sun. The same State bunch that complains about the Federal code should start with their own house. They do make sure tax revenues pay for their private schools, whether religious or charters. Just don’t let Ducey tout economic development while cutting universities 90 mill, CTE 30 mill, and letting K-12 be 50th. Remember all this does is tread water for Arizona Schools. It does not even move us to 45th. Ducey can shout, “we is 49th, and proud of it.”

    • I object to taxes in general because I have never met a liberal who didn’t think a tax increase was THE answer for any problem, whether real or imagined. However, I am not looking for tax decreases. Government needs funding to perform it’s necessary functions…I just don’t think it’s functions are as wide and varied as your average liberal. Taking care of you from cradle to grave is NOT a function of government.

  5. American Vendetta

    And when they kill the state income tax we will always be in a depressed economy. This is nothing but a joke.

    • How do you account for all of the states that don’t have state income taxes and do just fine?

      • Last I looked, there were 9 states that have no state income tax. They’re not all doing “just fine” and in most cases there are reasons they can forgo the revenue from a state income tax while other states can’t. For example, Delaware is the winner of the race to the bottom for corporate formations. With the franchise taxes it receives from corporate America it can provide services to its small population without levying an income tax. Alaska takes in so much royalty income it not only can do without an income tax, it effectively has a negative income tax, as it distributes dividends to its citizens. But check out the states that lead us in public education, and you see the states that do impose income taxes. Maryland and Massachusetts come to mind on that front.

  6. You know, I don’t which upsets you worse…the low funding for schools, or the fact the legislature just won’t raise taxes. You demand that the raising of taxes be done on EVERYTHING to the point that it appears raising taxes is really your end game. I’m not surprised because you are an extreme leftist who thinks all money belongs to the government, but it is interesting to read the thoughts of someone who genuinely believes all problems can be solved by simply raising taxes.

    • If raising taxes as an end game is a crime, as you imply, I’m guilty as charged. And so is Thomas Piketty and a host of other economists. On countless occasions, Steve, you’ve acknowledged that economic inequality in America is a problem. But inequality exists because our economic system naturally concentrates money and wealth at the top. Taxes are needed to counteract that. When income and wealth are concentrating, as they have been for 35 years, it means our level of tax at the top is insufficient. People point to the ’50’s to demonstrate that our economy can function well despite high tax rates. I’d go a step further and say it functioned well because of high tax rates. If you really believe inequality needs to be addressed, I suggest you should change your mindset on taxes. From your comment, it’s clear that you believe fiscal needs should drive the decision on tax policy. Most Americans share that view. And it’s how our system has run for the past 3+ decades. But it hasn’t worked. Tax policy, at least at the top-end, should be driven by what is required to prevent wealth and income concentration.

      • (sigh) Bob, you are like that little angel that sits on your shoulder whispering in your ear. I have opposed taxes all of my life. It is sort of like my default setting. But months ago you started changing that position because of the simple math on where the wealth was going. In my heart, I realize taxes must be raised, particularly on the wealthiest percentage at the top. At the same time we need to eliminate the exemptions that allows them to avoid taxes. But my heart conflicts with my head that is still stuck in the anti-tax response. So I slam out a couple of strongly worded anti-tax screeds and you come along with your calm logic and point out once again that I am being foolish. That stings and is gonna’ leave a mark. ;o)

  7. You are making excellent points; however, the Democratic leadership’s plan for education funding is only a short term solution. The Ariz. Republic’s Fact Check article on that plan noted:

    “The JLBC’s best guess is that $250 million can be allocated per year to an ongoing initiative such as the Democrats’ education plan. However, the committee adds a couple of important caveats.

    “First, economic conditions in Arizona and elsewhere are hard to predict and can go through large, unforeseen swings. For example, the extra $378 million the state collected in fiscal 2015 revenue underscores the uncertainty of such projections.

    “Looking beyond 2018, if tax revenue is 1 percent more or less than the JLBC’s projections, it will have missed the mark by more than $600 million over three years, enough to blow a hole in the Democrats’ plan or leave the state with a big surplus.

    “The other caveat is that the JLBC projections don’t account for downturns, and many economists expect such an event. The current economic expansion, which began with the end of the recession in 2009 has lasted 75 months, longer than the post-World War II average. The longest post-war expansion was 120 months (2001-2007).

    “If the current expansion lasts that long, the next recession would begin in 2019. The Democrats’ plan expands funding through 2026 – a period that, based on historical trends, would likely include an economic downturn that could make the $250 million figure unsustainable.”
    http://www.azcentral.com/story/news/politics/fact-check/2015/10/23/arizona-democrat-leadership-school-revenue-plan-fact-check/73938154/

    I think we Democrats need to go to the people with a long term plan that restores funding for education by restoring the tax rates & funding levels for public education before we had the reckless tax cuts of the last two decades. The ASU Morrission Institute’s 2011 study on our state’s structurally unbalanced budget is an eye-opener:

    https://morrisoninstitute.asu.edu/products/structurally-unbalanced-cyclical-and-structural-deficits-arizona

    The simple truth is that our state needs more revenue (i.e., taxes) to take care of basic needs, such as education. I realize that in the past few years the public voted down an extension of the 1 cent per dollar sales tax to fund education, but I think Arizona’s budget crisis is more apparent now and people will be ready to reconsider the need for more state revenue.

    The Democratic leadership’s plan for education funding is only a short term solution, and it stands no chance of passing the state legislative.
    We need a bolder approach, a bolder plan that the people of Arizona decide what they want for education in Arizona. We need to propose an initiative that increases state revenue to solve our state’s long term educational needs.