Prop. 301 revenues trend up, raising concerns about its 2021 expiration
The state budget passed by the House and Senate yesterday and now awaiting the signature of Gov. Jan Brewer has many in the education community feeling shortchanged, but the fiscal picture isn’t all bleak for Arizona’s public schools.
Last week, the Joint Legislative Budget Committee announced that districts and charter schools will collect an estimated $295 per student for the 2014-2015 school year for teacher base pay, performance pay and classroom spending generated through Prop. 301, a six-tenths of a cent sales tax passed by voters in 2000.
While that amount is $15 per student less than last year, there has been a general trending upwards in recent years. The total amount estimated to be distributed statewide in fiscal year 2015 is $391,045,500.
“After 2008, the budget capacity went down, but now it is recovering,” said Chuck Essigs, director of governmental relations for Arizona Association of School Business Officials. “We’re not quite back up to the peak, but we’re moving in that direction.”
Because sales taxes revenues are affected by the health of the economy and fluctuate accordingly, so do the money schools receive each year. Public schools received approximately $401 per student in fiscal year 2008, and just $120 per student in fiscal years 2011 and 2012.
“The majority of it is for the compensation of teachers,” Essigs said. “There is a little bit of it the district can use for program enhancements, but the vast majority is used for teacher salaries and benefits.”
Prop. 301, the ballot referendum that included a sales tax with a 20-year lifespan among many other permanent school finance provisions, requires that 20 percent of the sales tax revenues go to teachers’ base pay, 40 percent to teachers’ performance pay and 40 percent into a site fund that can be used for maintenance and operation.
While sales tax revenues from Prop. 301 are just one funding source for district and charter schools, which also receive federal, state and local dollars, they have become increasingly important, Essigs noted.
“It’s less than 10 percent of day-to-day operating expenses for school districts, but it has a significant impact on teacher compensation,” he said.
That leaves Essigs and others already contemplating the renewal of the sales tax portion of the proposition. The tax expires in 2021.
“At that point, does the revenue just disappear or does the state put it back out for re-authorization?” Essigs said. “Most people think it would go back to the voters again.”
What led to Prop. 301
Financing school capital construction and Gov. Jane Hull’s plan to get more money into classrooms led legislators to refer Prop. 301 to voters, said Jaime Molera, who was Hull’s education policy advisor and Prop. 301 campaign coordinator.
“The Supreme Court back in the ‘90s said we had an unconstitutional system of financing school capital construction,” said Molera, an Arizona State Board of Education member and former Superintendent of Public Instruction. “In order to fix it, we had to build a capital deficiency fund.”
“We knew, based on our analysis, that it was going to be at least $1 billion worth of school construction, and we needed to be prepared,” Molera said.
At the same time, Gov. Hull “felt we needed to have a much stronger emphasis on getting money to the classroom, trying to get more dollars to keep teachers in our state, and allowing it to be more competitive,” Molera said.
So Hull asked voters for a tax increase to provide money for teachers pay and create a 20-year revenue bond to fund the school improvement capital deficiency fund, Molera said.
Prop. 301 also required the Legislature to increase per student base level funding annually by the rate of inflation or 2 percent, whichever is less.
“When we were talking about the time frame, (then Superintendent of Public Instruction) Lisa Keegan suggested to the governor that we should have a generation of kids that benefit from this,” Molera said. “But the practical reason was, we did that 20-year bond to pay for the school deficiencies.”
Passage of the measure wasn’t easy. Molera said the key to Prop. 301’s success was strong business community support from the start.
When the administration went to the legislature, “we already had significant business community support, and more than that, we had commitments that if we did get it on the ballot that they would help us finance the campaign,” Molera said.
“They helped us lobby it in the special session to get it done,” Molera said. “It was very contentious. Leadership on both sides of the aisle were against it.”
Lessons learned from Prop. 204’s loss
Ann-Eve Pedersen, who led the unsuccessful effort in 2012 to pass Prop. 204, a permanent 1-cent sales tax for education, transportation infrastructure projects and human services programs, predicts that renewal of the Prop. 301 sales tax will be difficult as well.
Many issues led to Prop. 204’s defeat, said Pedersen, president of the Arizona Education Network.
“We had an executive branch in Arizona that was opposed and used their positions, unfortunately, to help undermine Prop. 204,” Pedersen said.
While the Greater Phoenix Leadership Council, Southern Arizona Leadership in Tucson and the Flagstaff Forty supported Prop. 204, the Arizona Chamber of Commerce opposed it, Pedersen said.
Pedersen said advocates of privatizing education also did their part to undermine Prop. 204. She expressed concern that such groups could derail efforts to renew the Prop. 301 sales tax or attempt to significantly change how such future revenues are allocated.
“If you have an assured source of funding that the Legislature can’t touch, that’s a real threat to privatization advocates,” Pedersen said. “Some school privatization advocates are already eyeing Prop. 301. They would like to take it back to voters, but revamp the way those monies are distributed.”
Pedersen said she believes 2014 elections will have a significant impact on the outcomes.
“A lot depends on who we elect as governor, who we elect as secretary of state, and whether we have true champions for public education in those posts,” Pedersen said.
For his part, Molera said he is confident that the renewal issue, in one form or another, will come before voters in the coming years.
“I’m hoping that at some point, we will look at how we can reform the entire structure of our school finance system so that lower-income districts are able to benefit more,” Molera said. “At the same time, how do we get more money into the classroom? And quite frankly, how do we get Arizona to a level that allows us to hire and maintain the best quality (teachers) possible?”