Deadline for public comments on Prop. 123, school inflation funding settlement, are due Friday

DeWitArizona State Treasurer Jeff DeWit strongly opposes Governor Doug Ducey’s plan to settle the Prop. 301 school funding inflation adjustment case, Cave Creek Unified School Dist. et al v. Ducey, by raiding the state trust lands fund for K-12 education for ten years, if approved by voters at the May 2016 Special Election (Prop. 123).

DeWit insists that this change to the state trust lands fund formula for distribution requires congressional approval because it modifies the Arizona Statehood and Enabling Act. Governor Ducey, relying on the opinion of the Republican Party’s attorney, Mike Liburdi, says that Congress does not have to approve Prop. 123.

Here is what is annoying the hell out of me. The lazy media villagers in this state keep reporting this pissing match between the Governor and the State Treasurer, but despite the fact that they both claim to have a legal opinion supporting their position, no news outlet, to my knowledge, has actually published or provided a link to the legal opinion on which each man is relying (perhaps they have not released these legal opinions to the media, which begs the question, why is the media not demanding that these legal opinions be produced to the media?)

The lazy media villagers also keep referencing comments made by the Governor’s office and GOP attorney Mike Liburdi about the 1999 amendments to the Arizona Statehood and Enabling Act, but to my knowledge, they never actually publish or provide a link to the 1999 amendments to better inform the public.

The reporting on this issue is occurring in a vacuum, and the public is being poorly served and ill-informed by the media.

Here is an example form the Arizona Republic, DeWit: Ducey education plan requires congressional OK:

State Treasurer Jeff DeWit, an ardent opponent of the $3.5 billion education-funding proposal, is asking state officials to inform the public that the plan, according to a legal analysis by his attorneys, requires congressional approval.

Voters will weigh in on the school funding proposal in a May 17 special election. If approved, the proposal would resolve a long-standing lawsuit over underfunded inflation payments to schools during the recession.

One component of the plan boosts yearly distributions from state trust land to 6.9 percent from 2.5 percent. DeWit contends that would require Congress to approve changes to the 1910 Enabling Act, which allowed Arizona to become a state.

Ducey and his attorney, Mike Liburdi, have previously said a 1999 congressional change to the Enabling Act gave the state greater control over how the fund is managed and that the education proposal fits within those constraints.

Ducey’s office has said it has received two legal opinions that congressional approval is not needed; the Governor’s Office has not released those opinions, despite a public records request. The Ducey administration reiterated its position Tuesday.

So the Governor’s office is violating Arizona’s public records law is what you are telling me?

DeWit has argued the higher distribution would erode the trust’s investment power for future schoolchildren.

In a Nov. 25 letter to Arizona Legislative Council Executive Director Michael Braun, DeWit asked the council to include language in its “impartial analysis” detailing that Congress must approve revisions to the Enabling Act before additional money from the state land trust can start flowing to schools.

The council’s analysis will be sent to the Arizona Secretary of State’s Office for inclusion in the publicity pamphlet that will provide a factual explanation of the proposal for voters to assess it for themselves.

Under the Enabling Act, the federal government granted Arizona 10.5 million acres of land at statehood, with the money from sales or leases earmarked for various beneficiaries, primarily public education. It is a perpetual trust and it must be managed to the benefit of all recipients for years to come.

DeWit included in his letter a legal analysis from attorneys David Cantelme and Aaron Brown that focused on the relationship between the Enabling Act and the education funding proposal.

In that 11-page analysis, the attorneys concluded changes to the trust’s distribution formula, “if approved by the voters, cannot go into effect unless and until it also is approved by Congress.”

So why is this 11-page analysis not produced or linked in this report? We have to wait for the publicity pamphlet for Prop. 123 to come out before the public can read it? C’mon!

The Deadline for ballot arguments on K-12 funds (Prop. 123) is this Friday at 5:00 p.m. Comments must not exceed 300 words and must be accompanied by a $75 check. Arguments can be filed electronically to elections@azsos.gov but the office must have a hard copy as well, which must be postmarked by Friday.

And just how is the public supposed to make an informed comment without having seen the legal opinions from the Governor’s office and State Treasurer’s office?

I do not have access to these legal opinions, so I can’t help you with that. But from a cursory review of the laws referenced by the Governor and State Treasurer, I do not find anything in the language that would support the Governor’s position regarding a greater distribution from the state trust fund, without consideration of the legal opinions he claims to have received, which is why the Governor should have produced them to the media and the public.

The fact that the Arizona Legislature submitted this legislatively referred 1998 ballot measure to Congress for its approval also weighs against Governor Ducey’s  argument that congressional approval is not required.

Here are the Arizona Statehood and Enabling Act Amendments of 1999 (H.R. 747 (106th Congress) Read Text:

This bill was enacted after being signed by the President on December 7, 1999. The text of the bill below is as of Nov 30, 1999 (Passed Congress/Enrolled Bill).

H.R.747

 One Hundred Sixth Congress

of theUnited States of America

 AT THE FIRST SESSION

Begun and held at the City of Washington on Wednesday,

the sixth day of January, one thousand nine hundred and ninety-nine

An Act

To protect the permanent trust funds of the State of Arizona from erosion due to inflation and modify the basis on which distributions are made from those funds.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Arizona Statehood and Enabling Act Amendments of 1999’.

SEC. 2. PROTECTION OF TRUST FUNDS OF STATE OF ARIZONA.

(a) IN GENERAL- Section 28 of the Act of June 20, 1910 (36 Stat. 574; chapter 310), is amended in the first paragraph by adding at the end the following: ‘The trust funds (including all interest, dividends, other income, and appreciation in the market value of assets of the funds) shall be prudently invested on a total rate of return basis. Distributions from the trust funds shall be made as provided in Article 10, Section 7 of the Constitution of the State of Arizona.’ (Note 1 below)

(b) CONFORMING AMENDMENTS-

(1) Section 25 of the Act of June 20, 1910 (36 Stat. 573; chapter 310), is amended in the proviso of the second paragraph by striking ‘the income therefrom only to be used’ and inserting ‘distributions from which shall be made in accordance with the first paragraph of section 28 and shall be used’.

(2) Section 27 of the Act of June 20, 1910 (36 Stat. 574; chapter 310), is amended by striking ‘the interest of which only shall be expended’ and inserting ‘distributions from which shall be made in accordance with the first paragraph of section 28 and shall be expended’.

SEC. 3. USE OF MINERS’ HOSPITAL ENDOWMENT FUND FOR ARIZONA PIONEERS’ HOME.

(a) IN GENERAL- Section 28 of the Act of June 20, 1910 (36 Stat. 574; chapter 310), is amended in the second paragraph by inserting before the period at the end the following: ‘, except that amounts in the Miners’ Hospital Endowment Fund may be used for the benefit of the Arizona Pioneers’ Home’.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall be deemed to have taken effect on June 20, 1910.

SEC. 4. CONSENT OF CONGRESS TO AMENDMENTS TO CONSTITUTION OF STATE OF ARIZONA.

Congress consents to the amendments to the Constitution of the State of Arizona proposed by Senate Concurrent Resolution 1007 of the 43rd Legislature of the State of Arizona, Second Regulator Session, 1998, entitled ‘Senate Concurrent Resolution requesting the Secretary of State to return Senate Concurrent Resolution 1018, Forty-Third Legislature, First Regular Session, to the Legislature and submit the Proposition contained in Sections 3, 4, and 5 of this Resolution of the proposed amendments to Article IX, Section 7, Article X, Section 7, and Article XI, Section 8, Constitution of Arizona, to the voters; relating to investment of State monies’, approved by the voters of the State of Arizona on November 3, 1998. (Note 2 below)

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.

Note 1: Arizona Constitution, Article 10, Section 7:

Establishment of permanent funds; segregation, investment and distribution of monies

Section 7. A. A separate permanent fund shall be established for each of the several objects for which the said grants are made and confirmed by the enabling act to the state, and whenever any monies shall be in any manner derived from any of said lands, the same shall be deposited by the state treasurer in the permanent fund corresponding to the grant under which the particular land producing such monies was, by the enabling act, conveyed or confirmed.

B. No monies shall ever be taken from one permanent fund for deposit in any other, or for any object other than that for which the land producing the same was granted or confirmed.

C. All such monies shall be invested in safe interest-bearing securities and prudent equity securities consistent with the requirements of this section.

D. The legislature shall establish a board of investment to serve as trustees of the permanent funds. The board shall provide for the management of the assets of the funds consistent with the following conditions:

1. Not more than sixty per cent of a fund at cost may be invested in equities at any time.

2. Equities that are eligible for purchase are restricted to stocks listed on any national stock exchange or eligible for trading through the United States national association of securities dealers automated quotation system, or successor institutions, except as may be prohibited by general criteria or by a restriction on investment in a specific security adopted pursuant to this subsection.

3. Not more than five per cent of all of the funds combined at cost may be invested in equity securities issued by the same institution, agency or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States government.

E. In making investments under this section the state treasurer and trustees shall exercise the judgment and care under the prevailing circumstances that an institutional investor of ordinary prudence, discretion and intelligence exercises in managing large investments entrusted to it, not in regard to speculation, but in regard to the permanent disposition of monies, considering the probable safety of capital as well as the probable total rate of return over extended periods of time.

F. The earnings, interest, dividends and realized capital gains and losses from investment of a permanent fund, shall be credited to that fund.

G. The board of investment shall determine the amount of the annual distributions required by this section and allocate distributions pursuant to law. Beginning July 1, 2000 and except as otherwise provided in this section, the amount of the annual distribution from a permanent fund established pursuant to this section is the amount determined by multiplying the following factors:

1. The average of the annual total rate of return for the immediately preceding five complete fiscal years less the average of the annual percentage change in the GDP price deflator, or a successor index, for the immediately preceding five complete fiscal years. For the purposes of this paragraph:

(a) “Annual total rate of return” means the quotient obtained by dividing the amount credited to a fund pursuant to subsection F for a complete fiscal year, plus unrealized capital gains and losses, by the average monthly market value of the fund for that year.

(b) “GDP price deflator” means the gross domestic price deflator reported by the United States department of commerce, bureau of economic analysis, or its successor agency.

2. The average of the monthly market values of the fund for the immediately preceding five complete fiscal years.

H. Notwithstanding any other provision of this section, the annual distribution from the permanent funds for fiscal years 2012-2013 through 2020-2021 shall be two and one-half per cent of the average monthly market values of the fund for the immediately preceding five calendar years.

Note 2: Proposition 102 also known as the Amend the Constitution Relating to Investment of State Trust Funds Act, was on the November 3, 1998 election ballot, relating to investment of State monies was approved by the voters of the State of Arizona on November 3, 1998:

The language that appeared on the ballot:

Would amend the Arizona Constitution to expand investment options for State Trust funds, allowing investment in equity securities, such as stocks. The Board of Investments would manage funds under conditions set out in the Constitution; require investment according to “The Prudent Investor Rule;” permit certain payments out of permanent funds to designated state institutions.

The legislative act referring this measure to the ballot, Senate Concurrent Resolution 1007 of the 43rd Legislature of the State of Arizona, Second Regulator Session, 1998, provides:

SCR1007 – 432R – H Ver

Reference Title: public officers; transportation; technical correction

A CONCURRENT RESOLUTION
REQUESTING THE SECRETARY OF STATE TO RETURN SENATE CONCURRENT RESOLUTION 1018, FORTY-THIRD LEGISLATURE, FIRST REGULAR SESSION, TO THE LEGISLATURE AND SUBMIT THE PROPOSITION CONTAINED IN SECTIONS 3, 4 AND 5 OF THIS RESOLUTION OF THE PROPOSED AMENDMENTS TO ARTICLE IX, SECTION 7, ARTICLE X, SECTION 7 AND ARTICLE XI, SECTION 8, CONSTITUTION OF ARIZONA, TO THE VOTERS; RELATING TO INVESTMENT OF STATE MONIES.

Whereas, pursuant to Article XXI, Constitution of Arizona, the Forty-third Legislature, First Regular Session, presented Senate Concurrent Resolution 1018 to the Secretary of State for submission of an amendment of Article X, section 7, Constitution of Arizona, to the voters at the next general election; and

Whereas, no general election having occurred, the proposition has not yet been presented to the voters; and

Whereas, on further consideration, the Legislature has determined that the subject of the proposed constitutional amendment, the investment of monies in the state land trust funds, should be addressed in another manner.

Therefore

Be it resolved by the Senate of the State of Arizona, the House of Representatives concurring:

1. The Legislature of the State of Arizona respectfully requests pursuant to section 41-121, paragraph 1, Arizona Revised Statutes, that the Secretary of State return Senate Concurrent Resolution 1018, Forty-third Legislature, First Regular Session, to the Legislature.

2. The Secretary of State shall submit the proposition contained in sections 3, 4 and 5 of this Resolution to the voters at the next general election as provided by Article XXI, Constitution of Arizona, in lieu of Senate Concurrent Resolution 1018.

3. Article IX, section 7, Constitution of Arizona is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

7. Gift or loan of credit; subsidies; stock ownership; joint ownership

Section 7. Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law OR AS AUTHORIZED BY LAW SOLELY FOR INVESTMENT OF THE MONIES IN THE VARIOUS FUNDS OF THE STATE .

4. Article X, section 7, Constitution of Arizona is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

7. Establishment of permanent funds; segregation, investment and distribution of monies

Section 7. A. A separate PERMANENT fund shall be established for each of the several objects for which the said grants are made and confirmed by the said enabling act to the state, and whenever any moneys MONIES shall be in any manner derived from any of said lands, the same shall be deposited by the state treasurer in the PERMANENT fund corresponding to the grant under which the particular land producing such moneys MONIES was, by said THE enabling act, conveyed or confirmed.

B. No moneys MONIES shall ever be taken from one PERMANENT fund for deposit in any other, or for any object other than that for which the land producing the same was granted or confirmed. The state treasurer shall keep all such moneys invested in safe, interest-bearing securities, which securities shall be approved by the governor and secretary of state, and shall at all times be under a good and sufficient bond or bonds conditioned for the faithful performance of his duties in regard thereto.

C. ALL SUCH MONIES SHALL BE INVESTED IN SAFE INTEREST-BEARING SECURITIES AND PRUDENT EQUITY SECURITIES CONSISTENT WITH THE REQUIREMENTS OF THIS SECTION.

D. THE LEGISLATURE SHALL ESTABLISH A BOARD OF INVESTMENT TO SERVE AS TRUSTEES OF THE PERMANENT FUNDS. THE BOARD SHALL PROVIDE FOR THE MANAGEMENT OF THE ASSETS OF THE FUNDS CONSISTENT WITH THE FOLLOWING CONDITIONS:

1. NOT MORE THAN SIXTY PER CENT OF A FUND AT COST MAY BE INVESTED IN EQUITIES AT ANY TIME.

2. EQUITIES THAT ARE ELIGIBLE FOR PURCHASE ARE RESTRICTED TO STOCKS LISTED ON ANY NATIONAL STOCK EXCHANGE OR ELIGIBLE FOR TRADING THROUGH THE UNITED STATES NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM, OR SUCCESSOR INSTITUTIONS, EXCEPT AS MAY BE PROHIBITED BY GENERAL CRITERIA OR BY A RESTRICTION ON INVESTMENT IN A SPECIFIC SECURITY ADOPTED PURSUANT TO THIS SUBSECTION.

3. NOT MORE THAN FIVE PER CENT OF ALL OF THE FUNDS COMBINED AT COST MAY BE INVESTED IN EQUITY SECURITIES ISSUED BY THE SAME INSTITUTION, AGENCY OR CORPORATION, OTHER THAN SECURITIES ISSUED AS DIRECT OBLIGATIONS OF AND FULLY GUARANTEED BY THE UNITED STATES GOVERNMENT.

E. IN MAKING INVESTMENTS UNDER THIS SECTION THE STATE TREASURER AND TRUSTEES SHALL EXERCISE THE JUDGMENT AND CARE UNDER THE PREVAILING CIRCUMSTANCES THAT AN INSTITUTIONAL INVESTOR OF ORDINARY PRUDENCE, DISCRETION AND INTELLIGENCE EXERCISES IN MANAGING LARGE INVESTMENTS ENTRUSTED TO IT, NOT IN REGARD TO SPECULATION, BUT IN REGARD TO THE PERMANENT DISPOSITION OF MONIES, CONSIDERING THE PROBABLE SAFETY OF CAPITAL AS WELL AS THE PROBABLE TOTAL RATE OF RETURN OVER EXTENDED PERIODS OF TIME.

F. THE EARNINGS, INTEREST, DIVIDENDS AND REALIZED CAPITAL GAINS AND LOSSES FROM INVESTMENT OF A PERMANENT FUND, SHALL BE CREDITED TO THAT FUND.

G. THE BOARD OF INVESTMENT SHALL DETERMINE THE AMOUNT OF THE ANNUAL DISTRIBUTIONS REQUIRED BY THIS SECTION AND ALLOCATE DISTRIBUTIONS PURSUANT TO LAW. BEGINNING JULY 1, 2000 AND EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, THE AMOUNT OF THE ANNUAL DISTRIBUTION FROM A PERMANENT FUND ESTABLISHED PURSUANT TO THIS SECTION IS THE AMOUNT DETERMINED BY MULTIPLYING THE FOLLOWING FACTORS:

1. THE AVERAGE OF THE ANNUAL TOTAL RATE OF RETURN FOR THE IMMEDIATELY PRECEDING FIVE COMPLETE FISCAL YEARS LESS THE AVERAGE OF THE ANNUAL PERCENTAGE CHANGE IN THE GDP PRICE DEFLATOR, OR A SUCCESSOR INDEX, FOR THE IMMEDIATELY PRECEDING FIVE COMPLETE FISCAL YEARS. FOR PURPOSES OF THIS PARAGRAPH:

(a) “ANNUAL TOTAL RATE OF RETURN” MEANS THE QUOTIENT OBTAINED BY DIVIDING THE AMOUNT CREDITED TO A FUND PURSUANT TO SUBSECTION F FOR A COMPLETE FISCAL YEAR, PLUS UNREALIZED CAPITAL GAINS AND LOSSES, BY THE AVERAGE MONTHLY MARKET VALUE OF THE FUND FOR THAT YEAR.

(b) “GDP PRICE DEFLATOR” MEANS THE GROSS DOMESTIC PRICE DEFLATOR REPORTED BY THE UNITED STATES DEPARTMENT OF COMMERCE, BUREAU OF ECONOMIC ANALYSIS, OR ITS SUCCESSOR AGENCY.

2. THE AVERAGE OF THE MONTHLY MARKET VALUES OF THE FUND FOR THE IMMEDIATELY PRECEDING FIVE COMPLETE FISCAL YEARS.

H. NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, THE ANNUAL DISTRIBUTION FROM THE PERMANENT FUNDS FOR FISCAL YEARS 1999-2000 THROUGH 2002-2003 SHALL BE AS FOLLOWS:

1. FOR FISCAL YEAR 1999-2000, THE GREATER OF FIVE PER CENT OF THE AVERAGE OF THE MONTHLY MARKET VALUES OF THE FUNDS FOR FISCAL YEARS 1994-1995 THROUGH 1998-1999 OR THE AVERAGE OF ACTUAL ANNUAL DISTRIBUTIONS FOR FISCAL YEARS 1994-1995 THROUGH 1998-1999.

2. FOR FISCAL YEARS 2000-2001 THROUGH 2002-2003, THE GREATER OF THE AVERAGE OF THE ACTUAL ANNUAL DISTRIBUTIONS FOR THE IMMEDIATELY PRECEDING FIVE COMPLETE FISCAL YEARS OR THE AMOUNT OF THE DISTRIBUTION REQUIRED BY SUBSECTION G.

5. Article XI, section 8, Constitution of Arizona is proposed to be amended as follows if approved by the voters and on proclamation of the Governor:

8. Permanent state school fund; source; apportionment of state funds

Section 8. A. A permanent state school fund for the use of the common schools shall be derived from the sale of public school lands or other public lands specified in the enabling act approved June 20, 1910; from all estates or distributive shares of estates that may escheat to the state; from all unclaimed shares and dividends of any corporation incorporated under the laws of Arizona; and from all gifts, devises, or bequests made to the state for general educational purposes.

B. The income derived from the investment of the permanent state school fund, and from the rental derived from school lands, with such other funds as may be provided by law shall be apportioned only for common and high school education in Arizona, and in such manner as may be prescribed by law.

5 responses to “Deadline for public comments on Prop. 123, school inflation funding settlement, are due Friday

  1. Several Legislators, including me, had the announcement on Face Book on December 2.

    • How many state legislators paid their $75 and submitted statements opposing Prop. 123 for the reasons stated? I am guessing few, if any.

  2. I find it unbelievable that the deadline for comments is so soon. The election will not be held until May, 2016. Early ballots will go out in mid April. It would take a couple of weeks to proof read comments and get to the printer.
    So, the deadline so probably be in early March, not early December.
    Most people are just starting to analyze the deal, here in Tucson we are starting to hear opinions from folks like Bruce Wheeler and Randy Friese.
    I don’t know if the League of Women Voters is still a functioning entity, but they should be raising holy hell about this ridiculous attempt to stifle voter information on this important issue.

  3. “It wasn’t on our radar.” – SoS spokesman.
    “It is written in the state law.” – a spokesman for the campaign for Proposition 123.
    These are the horse-s^%t excuses for not advising the public of the opportunity for input via the publicity pamphlet. No media coverage. No announcement from SoS. I’m sending in my argument with the $75 (aka first amendment tax) and then waiting to have it bounced back (because it may not make the Green Valley postal deadline of today). Then Duce and his minions can claim 100% public support – 3/3.

  4. Frances Perkins

    All legitimate questions. I guess Ducey will have to get his legal opinion from the brains at the ALEC conference in Phoenix this week. He can’t have a thought without them.