As the May 17 special election for Prop. 123 approaches, many Arizona public school districts are preparing two budgets: One if Prop. 123 passes and another if it doesn’t.

The top budget priority for most districts for Prop. 123 funds is supporting teachers and classrooms with salary increases and instructional resources

Prop. 123 is the result of a compromise Arizona state legislators and public school advocates agreed upon and Gov. Doug Ducey signed that would settle the inflation funding lawsuit filed on behalf of all Arizona public schools for money they did not receive during the Great Recession.

“Our school leadership teams are really challenged to make sure that they have a budget prepared for the next year that can meet any possible scenario,” said Dr. Tim Ogle, executive director of Arizona School Boards Association. “It’s just a very complicated time.”

About 85 percent of school districts’ operating expenses are employee salaries and benefits, said Chuck Essigs, executive director of Arizona Association of School Business Officials.

“School districts are creating alternate budgets depending on the outcome of Prop. 123 to determine how many people they can hire and to how much to pay them,” Essigs said.

School districts also are concerned they will lose teachers and other employees to businesses or other states that pay more, Essigs said.

“Some school districts are sending out contracts to staff in April like they usually do with contingency wording that says here is what your salary is if it passes, and here is what it is if it doesn’t,” Essigs said.

If Prop. 123 is approved by voters on May 17, it will provide Arizona public K-12 schools with about $299 million of state aid this year and $3.5 billion over 10 years by increasing from 2.5 percent to 6.9 percent for 10 years the percentage of funds public schools receive from the state land trust fund as well as additional dollars from the general fund, according to the Joint Legislative Budget Committee’s fiscal impact summary of Prop. 123 released on Feb. 23.

If voters do not approve Prop. 123, then the state and the schools will go back to court to settle the inflation funding lawsuit. Attorneys estimate it would take up to five years.

“This is one of the most important elections for schools in many, many years,” Essigs said.

If it’s approved

If voters approve Prop. 123, it will provide money that Arizona’s public school districts can use right away, Essigs said.

There are no restrictions on the money, and many districts have indicated they will use it to increase teachers’ salaries to better retain and recruit educators.

“Almost 100 percent of those we interact with say their first priority is to take care of their teachers,” Ogle said.

Arizona has been dealing with a shortage of teachers for several years now, and teachers “deserve the opportunity to have raises as time passes,” Ogle said.

The Kyrene Elementary School District plans to spend the estimated $3.4 million a year it would receive for compensation and instructional resources, said Jeremy Calles, chief financial officer for the district which serves about 17,762 Tempe and Phoenix students.

Peoria Unified would receive approximately $7.2 million in new funding if Prop. 123 is approved, said Ken Hicks, chief financial officer for the Maricopa County district that serves around 36,340 students.

“In general, the funding will be primarily used for staff compensation,” Hicks said.  “Some of the funds will be used for instructional resources, but by and large, the vast majority of funding will be used for increased compensation.”

Hicks said the district’s budget team is still working through the details of how the funding would be disbursed before presenting a report to the superintendent.

Humboldt Unified would receive an estimated $1.2 million if Prop. 123 is approved, said Dan Streeter, superintendent of the Prescott Valley district with 5,860 students.

The district’s meet and confer committee “has developed a plan to put $1 million directly into employee salaries and wages with the passage of Proposition 123,” Streeter said.

The plan “will ultimately require governing board approval, but the district administration has been working closely with certified and classified employees to bring forward an agreed-upon proposal,” Streeter said.

The remaining $200,000 would be carried over into next fiscal year to let the district plan for unknown contingencies, current year funding, increases to insurance and immediate staffing needs, Streeter said.

“This will also give us a better picture of what dollars will be available as we look to address much needed support services and educational programs for our students,” Streeter said.

Sierra Vista Unified would receive approximately $1.2 million for this school year, said Cheryl Guldenschuh, finance director for the Cochise County district with 6,028 students.

“The intent would be to earmark the funds for the maintenance and operations budget, however, the district has serious capital funding needs for roofs, facilities, technology, and transportation,” Guldenschuh said. “While we are investigating alternative means of capital funding, the leadership will most likely recommend to the board to not spend the funds until the fall of next fiscal year.”

The board will make that decision, Guldenschuh said.

What happens if Prop. 123 fails

If Prop. 123 fails, it would have an immediate effect on employees’ salaries, Guldenschuh said.

“Forty percent of employees who received a one-year salary increase for 2015-2016 will be returned to their FY 2015 salary rate,” Guldenschuh said. “All other employees will not receive a raise.”

In November, Peoria voters renewed an override and increased funding that would bring back all-day kindergarten and increase compensation to all staff, but “without Prop. 123, the salary increases will be less,” Hicks said.

“I can’t speak for the decisions the governing board would make, but most likely we will reduce compensation from the amount that will be in everyone’s signed contract and cancel our textbook adoption,” Calles said.

If the plan does not pass, “employee salaries and wages will remain as they are and we will not be able to look at the restoration of educational programs,” Streeter said.

Without those funds, capital dollars would run out, essential support services would remain on hold, and valuable educational programs would continue to be offered but with substantial limitations, Streeter said.

The first step

“Prop. 123 is a settlement to a lawsuit,” Guldenschuh said. “It does not fix public education funding.”

It is a first step toward meeting Arizona’s education funding needs, Streeter said.

“For the first time in many years, we are having conversations about raising salaries and wages and conversations about what support services and programs our students need and deserve,” Streeter said.

The $1.2 million does not address all the district’s needs, but it “allows us to make up for one of six years of frozen salaries and wages,” Streeter said.

“The fact that we have Prop. 123 under consideration, hopefully, history will show that this was a real positive turn of events as the first step towards helping teaching and learning in our state for a long, long time to come,” Ogle said.

What’s the next step after May 17?

Whether or not Prop. 123 passes, public school leaders say public education in Arizona needs additional support through the state’s general fund.

Arizona’s leaders need to make an investment in children and place a priority on education funding at the legislative level through the state budget, Streeter said.

“State leaders need to recognize that investments are required in funding for our classrooms, support services for our most needy students, and capital expenses for aging buildings throughout Arizona,” Streeter said.

For Humboldt Unified, that would mean adding counselors/social workers and assistant principals at the K-8 level, and having adequate funding for software licenses, lease agreements, and physical improvements needed for schools, Streeter said.

“There is significant field of research that shows that support services and educational programs such as career and technical programs, mentorships, and social workers can improve student achievement by improving the conditions by which we ask our students to learn in,” Streeter said.

The Legislature needs to look at cuts they made during the Great Recession, and “restore some of those reductions to school districts,” Essigs said.

For example, the capital funding formula for schools has been cut by $352 million, and most of the large districts in the state, are receiving “about 15 percent of what the formula says they should be receiving,” Essigs said.

Growing capital needs across school districts need to be resolved, Hicks said.

“The capital reductions have created an intense amount of pressure within our systems,” Hicks said. “We have furniture that is 25 years old, we have curriculum needs that are in excess of $20 million.  We have facilities that are in dire of need repair and to that our community passed a bond in 2012 to address a lot of these issues, but it wasn’t enough to address them all.”

Capital funding must be addressed with budget allocations that are appropriate and permanent, and not on an emergency basis through the School Facilities Board, Guldenschuh said.

“The State has backed away from all capital funding for school districts and our facilities are in dire need of repair or replacement all across the state,” Guldenschuh said.

Calles suggested the Legislature’s next step be “to adopt the district plan for how all of public education can be on a single funding system.”

The renewal of Prop. 301 also should be addressed, Hicks said. The 2000 referendum approved by voters included a 0.6 of a cent sales tax, but the sales tax portion of Prop. 301 expires in 2021.

Arizona needs to continue to provide more funding, resources and more opportunities for improving public education, Hicks said.

“Our teachers continue to do amazing things despite the challenges that we have given them, and I think that we need to make sure that we recognize their hard work and dedication,” Hicks said.

“We need Arizona to readjust priorities in a way that allows us to focus on learning conditions, focus on whole child supports, focus on teacher development, move to an assessment system based on diagnosis rather than judging and punishing,” Streeter said. “We need to expand learning opportunities for our students.”