No on Prop 123 – not sustainable and not a solution

By Dianne Post

[Note from the Editor: TLDR summary- the author opposes Prop 123 and encourages you to vote NO.]

How the fight started

In 2000, the state legislature wanted to increase revenue but didn’t want to be blamed for a tax increase so they referred the question of a statewide sales tax for education to the voters. The referendum, now Prop 301, also included the 2% annual inflation adjustment for education. The voters approved Prop 301 and every year thereafter the legislature did as the voters ordered – raised education funding by at least 2% – until 2010. In 2010, they only approved an increase for the transportation support and not the base level or inflation

In October 2010, several school districts sued because any referendum is protected by the Voter Protection Act that says a referendum passed by the voters cannot be repealed and can only be amended if the amendment furthers the purpose of the law and has 75% of the legislators approval. Adopted in 1998, the VPA arose out of concerns that the legislature was abusing its power to amend and repeal voter-endorsed measures. The principal purpose of the VPA is to preclude the legislature from overriding the intent of the people. With the adoption of the VPA, voter-approved measures are now superior to enactments of the legislature in that they cannot be repealed by legislative act, and they cannot be easily amended. Yet that is what the legislature did by refusing to fund the mandatory 2% inflation increase. By not funding the base level, the legislature re-directed (stole) the money specifically earmarked for education by the voters and used it for other things. In other words, they continue to abuse their power by repealing voter-endorsed measures by their actions i.e. failure to appropriate the monies.

Their dislike of voter approved measures and their intent to eliminate them is nakedly visible with four bills introduced this session to reduce citizen powers. HCR2043 would allow a legislature to revoke a voter passed measure – exactly the reason we passed the Voter Protection Act in the first place. HCR2023 would lower the obstacles for legislators to repeal the voters’ intent and put more hurdles in the way of voters getting their wishes on the ballot in the first place. HCR2024 would require a super majority of voters to pass an initiative and HCR2047 would require 25% of the signatures to come from rural counties. Thus it is clear that the legislators fear the voters – when in fact they work for us!

What the Court Ruled

In January 2013, the appeals court ruled that the law requires the legislature to provide for annual inflationary adjustments of all components of the revenue control limit as provided in the statute. The state appealed and it went to the Arizona Supreme Court. They affirmed the Court of Appeals opinion in September 2013 and sent the case back to the Superior Court to enter a declaratory judgment for the school districts and to make other findings e.g. exactly how much money the state had to pay and when it had to pay it. Since then, in spite of two court rulings against them, the legislature refuses to follow the law and pay the money ordered by the taxpayers, enforced by the court and owed to the schools.

The parties attempted mediation to resolve the issue and that too failed. Governor Ducey then stepped in after his election and while shutting out the Democrats strong-armed the Republicans into accepting a settlement. That settlement gives the schools 72% of what they are owed and 50% of the back payments. In other words, the law violators (we can call them criminals) get away with it.

In this settlement, schools that should have received $331 million per year only get $250 million per year. That is only returning 72% of the base amount. The $1.3 billion for withheld inflation is not included. This is precisely what the voters told the legislature to pay and the legislature has refused thus violating the law.

The schools will get $50 million/year for the first five years and then $75 million/year for the next five – and then the money disappears. The $250 million will be added to the base fund instead of the $331 million that should have been so the schools are shortchanged in the long term. Sixty percent of the settlement comes from the State Land Trust and 40% from the general fund.

In a chart from Valley Interfaith Project, they show that the cuts to public education are far greater than the agreement would have us believe. If the total $1.1 billion had been paid, it would cover inflation, textbooks and technology, building maintenance, full day kindergarten, and pre-K-3 block grants. The increased distribution from the land trust and general fund will cover only inflation. All the other needs remain unaddressed. This is not a solution.

Problems with sustained funding of public schools

In 2020 the 0.6% education sales tax from Prop 301 will end and must be renewed by the voters. Sales tax is the most regressive tax hurting the poor the most – the very group education funding should help. If the voters don’t renew this tax, education funding will drop by $800 million. In ten years, the increased funding from the land trust ends taking $200 million away. If the legislature has not created an adequate and sustainable funding formula by then, Arizona will be right back where we started having invaded the trust fund and eroded voter power.

For 20 years our teacher’s salaries remained at 90% of the national average. Our pupil-teacher ratio has steadily worsened and is now 40% greater than the national average. In 1992, Arizona funded our students at 80% of the national average for state-sourced funding; today it is 55%, the worst in the country. Our state-sourced funding per teacher has dropped from 70% to 40% of the national average. With these structural problems, minimal funding is not a solution.

The passage on 22 February 2016 of empowerment scholarships (SB 1279, HB 2482) makes it clear that the legislature intends to continue to defund the public schools. From 2000-2012, private school tuition credits claimed increased 287%. During the same time, state appropriations per public school student decreased 10%. As Senator Farley said in debate, “This is the end of public education in Arizona” calling it “an abomination.” Given these serious structural problems of long standing and the legislature’s track record of underfunding education, their solution to funding public education appears to be to eliminate public schools all together.

Why is it on the Ballot?

This “agreement” has to be approved by the voters because remember a voter- approved referendum cannot be repealed or amended and paying only a portion of the earmarked money is an amendment that did not further the initial intent of the law. So now the Governor and legislature is asking voters to revoke what they said in 2000 regarding the statewide sales tax going to schools and allow the legislature to re-allocate that money –to corporate welfare they call business tax cuts that for 30 years now have brought no value to Arizona’s economy.

In addition to that, the state trust land permanent fund for education would be raided for ten years. The monies taken from the trust would be 6.9% of the average market values rather than the existing 2.5%. While it is impossible to accurately predict the economy in the next ten years, it is highly unlikely that the fund would earn 6.9% or more annually to offset the outflow so the principal may well be attacked as well as the earnings.

The state treasurer who is to protect the state trust land fund for education has made it clear that before it can be raided, the federal legislature has to approve this law as well since it was the federal government that granted the land to Arizona for the purpose of funding education. Ducey’s team of lawyers say no but that only means we are in for another lengthy and expensive lawsuit before one dime is paid for education. So there will be no immediate influx of monies into classrooms contrary to the hype.

The money does not have to be paid!

What else the proponents of Prop 123 have not made clear is that if the state trust fund were negatively impacted by the 6.9% withdrawals, the legislature could reduce the percentage to the current 2.5% and the funds would not be replaced by any other funds nor would it have to be paid back to the schools. How will they determine this? Every February 1, they will compare the average monthly market values of the fund for the last five years to the average monthly market values for the preceding years 6-10. And if the most recent five-year period averages are lower than the previous five-year averages, they can reduce the amount of the distribution back to 2.5%. Economic experts estimate that we will have another recession in three years. That will set off the “triggers” and the rate of withdrawal will be reduced to 2.5%. Also remember that prior to 2008, in the 6-10 year period, we had an extremely high stock market in the run up to the Great Depression. Sixty percent of the funds are in stocks. So comparing the value in the previous five years when Arizona has not rebounded from the Great Repression to 2008 and earlier may in fact show a decrease. So the legislature by a simple bill could completely gut the funding in any of the ten years. Further, the legislature can continue to cut education funding out of the general fund, which they are trying to do with SB1125 that would eliminate existing desegregation funding, stripping $200 million away from schools – the classic give with one hand; take away with the other.

The Proposition specifically says that the lost money does not have to be repaid in any subsequent year or distributed from any other public monies. That would nullify the legislative mandate in the Arizona Constitution (Article XI (10)) that the legislature has a duty to tax in order to fund our constitutionally mandated education. This gives the legislature a complete pass from funding education from the general fund as they should. Remember passage of this proposition modifies the Constitution so it is permanent.

In addition to this ability to stop the funding, the Proposition has several “triggers” to cause other reductions. If growth in sales tax and employment are each less than 2% in a year, the legislature may suspend the inflation adjustment. If growth in each is less than 1%, the legislature must suspend the inflation adjustment.

Starting in year 2024-2025, if K-12 funding is 49% of the state general fund the inflation adjustment may be suspended and the base level reduced. If K-12 is 50% of the general fund, the inflation adjustment may be suspended and the base level reduced by twice the inflation adjustment. None of the lost money has to be paid back and the legislature cannot be sued. Yet education is not only mandated in the Arizona Constitution (Article XI (1) & (6)) but has been found to be a fundamental right in Arizona. It is well researched common knowledge that the best way to improve the state’s economy is to have well educated people. So what if education is 50% of the general fund – that is what the state is supposed to do according to the Constitution. No provision in the Constitution requires that the legislature give money to for-profit prisons, dole out welfare to large corporations, or give tax breaks to the richest citizens.

If one can struggle through the actual words of the Proposition, it first removes the formula for determining the amount of the annual distribution. For fiscal year 2015-2016 through 2024-2025 the annual distribution shall be 6.9% of the average monthly market values for the preceding five years. The first thing to notice is that the amount is not set except for 2015-2016 ($259, 266, 200 or 72% of the money owed). So the annual amount will vary depending on the market. Many experts are predicting another market crash within the next few years based on the failure of Congress to make the necessary corrections after the last crash.

Even every dime of the money won’t improve Arizona’s education crisis

A separate piece of legislation already passed that would go into effect if Prop 123 passes would increase the base level funding from $3,426.74 to $3,600. According to the National Center for Education Statistics, the national average is $12,401 per public school student enrolled in the fall (in constant 2013–14 dollars, based on the Consumer Price Index). Arizona’s base level is at a third of the national average and remains in the bottom of the states.

In spite of serious underfunding (Arizona’s adjusted per-pupil expenditure of $7,620 in 2013 ranked 50th) and constant attacks on teachers, Arizona student scores stayed level from 2013-2015 but Arizona still got a D+ for the second year in a row and was ranked 45th in the annual ranking of Education Week.

The monies from the land trust would do nothing to improve Arizona’s standing in education funding. We would remain 48th or worse in the nation. The alleged funding, none of which is new money, is absolutely not stable. It can be reduced in many different ways and count on it – it will be reduced to give tax cuts to corporations. It is simply not worth it to destroy our permanent fund and to destroy the protection the voters gave to education funding for a short-term fix.

The analysis above is only for K-12. The situation is equally dire at the university level. The amount invested per student is now less than the 1970s (Grand Canyon Institute, Feb 1, 2016) and is only about one-third of the cost of university education. In 2002, Arizona spent 40% more from the general fund on universities than it did on incarceration; in 2016 Arizona will spend almost 60% more on prisons than universities. Businesses don’t come to a state because they have lots of prisons.

Conclusion

While several well-meaning groups and individuals have opined that voters should approve Prop. 123 as the beginning of improving the state education system, without a change in the personnel sitting in the legislature, Prop 123 will be the end. Restoring minimal, partial funding that was legally mandated by voters is not a substitute for real discussion, structural change and investment in education. The current leadership and membership has shown time and time again they would rather fund corporate tax breaks and for-profit prisons than education. Our schools are struggling, but this is blackmail.

While it seems harsh to deny schools the much needed influx of money, to do so under this proposal will only continue the structural underfunding another ten years and destroy the power of voters to force the legislature to do their bidding as they should. Since there will be a lawsuit about whether Congress needs to approve the deal, an immediate influx of monies into the class room is not guaranteed. Yes, our schools desperately need funding. No, they don’t need ill-conceived plans that will rob the trust fund, diminish voter power, still underfund schools leaving Arizona at 48th and result in no long-term solution. One such solution is electing legislators and a governor who support funding education not by empty words but by actual deeds.

8 Responses to No on Prop 123 – not sustainable and not a solution

  1. The fight can not be in November, it must happen in August, by every single education advocate registering to vote in the R primary. In many districts the winners of the R primary run unopposed in the general. If there is even a chance that your district will be an R district, you must spend your primary vote wisely in the R primary — vote how you like in the general (if you even have a D on your ballot).

  2. Well I couldn’t do it. Hold my nose and vote for 123. But at least we get more unneeded tax cut and useless laws that just bring more law suits. When does it stop?

  3. John Huppenthal

    Using the Ed Week ranking of 45th for 2015 is a complete deception. The 2015 National Assessment of Educational Progress ranked Arizona Blacks, Whites and Hispanics as 1st, 6th and 11th in Math scores and 14th, 7th and 29th in Reading.

    As you state, our scores were flat from 2013 to 2015, but the nation plunged, so staying flat was actually a great accomplishment in the disastrous chaos of federally driven “Common Core.”

    From 2011 to 2015, our combined math and reading gains were the highest in the nation from 4th grade in 2011 to 8th grade in 2015.

    This four year comparison is critical because 4th graders in 2011 were 8th graders in 2015 and this comparison represents the best apples to apples comparison you can extract from NAEP data.

    Also, if you expect our treasurer to lead the charge for education funding upon the defeat of 123, you are likely smoking some combination of crack and heroin.

    Years will likely go by.

  4. One thing Dianne didn’t mention is no court ever ordered the back pay be paid. That was negotiated by the plaintiffs. Also, only 60% of the $3.5B comes out of the State Lands Trust, the rest comes from the AZ General Budget.

    I think ALL of us agree that the only REAL solution is to kick the TEA-publicans out of office and elect pro-public education candidates in November. I’m voted yes on Prop 123 because our schools are in crisis and I want to help our teachers and their students NOW!!

  5. This is a great article that really lays it all out. Does anybody have the money to pay to run it as an Open Letter in the Star? Or as an Op Ed in The Weekly? Not to mention any other newspapers in Arizona? Surely the smaller ones can’t cost all that much. I’d contribute to a fund to run it this weekend! Somebody want to arrange that? I’m no good at such things but I can contribute ….

  6. Tamar Rala Kreiswirth

    Thank you very much for this fabulous summation of the beginning & middle of prop 123 and the end of public education.
    There is no step 4,5,6 that will improve funding for our schools.
    Though there are clearly steps 456….lower income taxes to further reduce the state’s coffers, yank more money away with the scholarship empowerment accts, provide extra funding to only those schools that are the elite of the elite with the ‘classrooms first initiative’ and continue to promote the privatization of schools with the charter school business.
    When did our education leaders stop connecting the dots? This is a mess and when 123 gets defeated, we will continue this momentum to the polls in November.