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Arizona schools, legislators await court decision on inflation funding


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  • Lisa Irish/Arizona Education News Service

Inflation Funding HP

As Arizona public districts and charter schools plan budgets for the 2014-15 school year, one thing is nearly certain. They will get a legally required 1.4 percent per student funding increase to account for inflation, only the second time since the 2008-09 school year such an increase has been given. 

What remains unclear and awaits a final decision from the Maricopa County Superior Court, however, is the base level of per student funding to which that inflation factor will be applied.

Arizona schools, legislators await court decision on inflation funding InflationFundingHP

As Arizona public districts and charter schools plan budgets for the 2014-15 school year, one thing is nearly certain. They will get a legally required 1.4 percent per student funding increase to account for inflation. What remains unclear and awaits a final decision from the Maricopa County Superior Court, however, is the base level of per student funding to which that inflation factor will be applied.

Hanging in the balance of the court’s decision in Cave Creek Unified School District v. Ducey is $233 million in education funding for the coming school year, according to a Joint Legislative Budget Committee document released Jan. 24.

Cave Creek Unified School District Superintendent Dr. Debbi Burdick said she is taking a wait-and-see approach.

“We do not plan for what could be, but for what we know, so it will not affect our budget process,” Burdick said.

In September 2013, the Arizona Supreme Court ruled in favor of Cave Creek USD and the other plaintiffs, which include several other school districts and statewide education groups, saying that under Proposition 301, which voters passed in 2000, the state must adjust K‐12 base level funding annually for inflation.

The Supreme Court then sent the case back to Maricopa County Superior Court to determine the state’s financial commitment for K-12 base level inflation adjustments not made.

Arizona schools, legislators await court decision on inflation funding InflationFundingAmtChart

The percentage of inflation funding and amount in per student funding that should have been funded each year according to a document filed with the court by plaintiffs’ attorney’s Don Peters and Tim Hogan.

The base level, the starting point for determining funding for Arizona public schools, is about $3,327 per student for fiscal year 2014.

If inflation adjustments had been made each year since 2008-09 the base level would be about $3,560, about $233 per student more or $233 million cumulatively, according to the Joint Legislative Budget Committee.

Gov. Jan Brewer’s proposed budget for the coming fiscal year includes $70 million in inflation funding, a 1.4 percent increase to the 2013-14 base level.

The plaintiffs in Cave Creek v. Ducey are seeking an increase in K-12 base level to about $3,560 per pupil before any additional inflation adjustment being made for fiscal year 2015, and $1.26 billion in back payments for unfunded inflation since fiscal year 2009 to be paid out over five years starting in fiscal year 2015.

Failure to make the appropriate adjustments for inflation in one year throws off all subsequent adjustments, because they will be made from too low of a base, according to plaintiffs’ attorneys Don Peters and Tim Hogan in a document filed with the court.

Arizona schools, legislators await court decision on inflation funding Inflation-Funding-Graph

The difference between inflation funding at the legislative level  in blue and the adjusted base level in red each year. Right click on the image, then open in another tab for a larger version of the graph.

But that could severely impact Arizona’s budget, said John Arnold, budget director for the Governor’s Office.

“The impact of the Prop. 301 lawsuit would devastate Arizona’s ability to maintain a balanced budget and would result in debilitating cuts to other important programs,” Arnold said.

Resetting the K-12 base level would cost approximately $317 million in fiscal year 2015 plus back payments of another $253 million for a combined total of $569 million, according to the Joint Legislative Budget Committee document. The five‐year cumulative cost would be approximately $2.9 billion.

“We’re seeking the back payments, because that’s money that the voters who passed Proposition 301 wanted the schools to have,” said Attorney Don Peters. “The schools badly need that funding.”

Peters added that the reset to the base level is critical because it will affect the inflation adjustment every year for many years.

“Within a few years, the reset will bring school districts more additional money than will the back payments,” Peters said.

Arnold noted that the executive budget currently forecasts a fiscal year 2015 ending balance of $244 million plus approximately $508 million in the rainy day fund, but the inflation back payments would change that.

“Adding the additional $565 million in spending will take the ending balance to zero and leave only $187 million in the rainy day fund at the end of fiscal year 2015,” Arnold said. “By the end of fiscal year 2016, the rainy day fund also would be decimated, and the forecasted budget would be over $385 million in deficit. By fiscal year 2017, the deficit would exceed $700 million. ”

K-12 education spending is about $3.6 billion, or 41 percent of the state’s current $8.8 billion budget, while $2.0 billion is spent on Medicaid,  $1.1 billion on other items, $965 million on corrections, and $736 million on universities, Arnold noted.  Included in the other category are child safety services programs, public safety, social service, behavioral health, and state operations programs, Arnold said.

Since most spending in Medicaid and K-12 are protected by federal law or Prop. 105, expenditure cuts to restore base level inflation would likely come from discretionary spending in K-12, higher education, welfare programs, behavioral health programs, child safety and state operations, Arnold said.

“The recent Great Recession already reduced state spending from its FY 2008 peak of over $10 billion to the current budget of $8.8 billion,” Arnold said. “Reducing the budget an additional $700 million to $1.8 billion over the next three years will devastate all discretionary spending programs placing those vulnerable populations at risk.”

The Maricopa County Superior Court’s decision on the amount of K-12 base level inflation funding is expected in coming months.

Burdick said she believes the court’s decision represents Arizona public schools’ best chance at needed funding increases.

“I have not seen anything so far in proposals that makes me have confidence that public school districts will have increases that will help significantly,” Burdick said. “Public school districts continue to reduce services, lose quality staff due to low salaries and with the pending ACA (Affordable Care Act) requirements, I worry that we will continue to have to cut out more and more — impacting our classrooms and students.”