Legislation that would mark the first significant update in decades to Arizona’s K-12 public school funding formula by centering it on students rather than by type of school passed the House Appropriations Committee on Monday.

An amendment by Rep. Michelle Udall, R-Mesa, to S.B. 1269, sponsored by state Sen. Vince Leach, R-Saddlebrooke, would allow school districts, with approval from their voters, to opt into a “State Student Funding Formula,” which would be comprised of state base level support and state additional assistance. 

School districts whose voters approve the shift to the new funding system would no longer be able to ask those same voters to approve bonds and overrides or other local tax levies. 

“The time is now to fix these issues we have been talking about for years,” said Matthew Simon, vice president for government affairs and advocacy for Great Leaders Strong Schools. “This is an opportunity for school districts to have a different kind of conversation with their voters and adopt a stable, reliable source of funding for their schools; it’s an opportunity to close the glaring inequities for students simply based on where they attend school. The status quo attempts and fails to equalize funding between systems. This legislation seeks fairness for students.”

Under the current funding formula, the per-pupil funding rate can vary widely from district to district, as some districts are unable to pass bonds and overrides, while others’ voters reliably support the measures at the polls. 

“Some of the largest funding disparities are between school districts where taxpayers build and improve schools and those districts where the will or wealth to do so does not exist,” according to research released last month by A for Arizona.

According to the same report, rural school districts, such as Lake Havasu Unified School District, only received 63% of the funding per student that Phoenix Union High School District received in fiscal year 2020. Maricopa and Pima counties are the only counties in the state where voters in more than half of districts have approved override funding.

Simon pushed back against critics of the legislation who claim that poorer districts are likely to face a cut under the modernized funding model.

Simon pointed to three high-poverty urban school districts, Isaac, Balz, and Murphy Elementary, all of which are in line for funding increases. 

“Opponents of this bill will continue to proclaim that we just need to infuse a billion more dollars into an already unfair system,” he said. “However, the strike everything amendment is a fiscally prudent solution to incrementally reform our system to better reflect our state’s current realities.”

Leach, the bill sponsor, said reform to the formula has been a long time coming.

“It is time we do something. The current formula was put together when I was still a kid,” he testified during the committee hearing. “It’s time we look at it, revise it, and even things out to get the best results.”

Sean Rickert, the superintendent of Pima Unified School District in rural Graham County, said that going to his voters to approve an override is unlikely.

“In order for me to get an override, I’d have to double my local property tax because I don’t have very much assessed valuation,” he said. “You’re not going to get voters to vote for that.”

The legislation to create the new opt-in formula, however, would be a boon to districts like Rickert’s.

“This provides an alternative,” he said. “This provides a way for me to get the funding that charter schools get, and I can fund my schools at that level.”

In addition to Great Leaders Strong Schools, supporters of the bill include business community groups like the Arizona Tax Research Association, and school choice and reform groups. 

Opponents include interest groups for school system employees, as well as supporters of Proposition 208, a 2020 ballot measure to increase Arizona’s top income tax rate by 78% that was ruled to be unconstitutional earlier this month. 

The bill passed the committee on a party line vote. After some procedural steps, it can be considered by the full House and then the Senate for a final vote. 

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A for Arizona, a group focused on K-12 policy reforms to improve access to a high-quality education, recently that explores the disparities in education funding across Arizona public schools. 

Despite Arizona laws since 1980 requiring that state tax dollars broadly follow students rather than school systems, voter-approved supplementary funding from local property taxes have nonetheless created disparities in education funding between the state’s communities. 

Supplementary school funding from local property taxes varies widely from neighborhood to neighborhood depending on local property values and the number of voter-approved spending increases. 

“Some of the largest funding disparities are between school districts where taxpayers build and improve schools and those districts where the will or wealth to do so does not exist,” the report said. Total funding from local “override elections” approving supplemental funding for schools totaled nearly $700 million.

Rural school districts, such as Lake Havasu Unified School District, only received 63% of the funding per student that Phoenix Union High School District received in fiscal year 2020. Maricopa and Pima counties are the only counties in the state where voters in more than half of districts have approved “override funding.”

Additionally, despite Arizona being on the leading edge of education innovation, Arizona students attending public charter schools often receive less state funding than their peers attending traditional public schools. 

According to A for Arizona, public charter schools in fiscal year 2020 received $1,308 less per student than public school districts, on average.

“Our kids need us now more than ever to create the best conditions for their future, and that requires changing how we fund students and demanding high quality education for all,” said A for Arizona Founder and CEO Emily Anne Gullickson. “Every child in rural, urban, and suburban Arizona deserves an education that sets them up for success.” 

The report recommends non-voter-approved base funding for schools to be standardized among charter and district schools. Base funding for schools is appropriated by the state, however, disparities remain between public charter and public district schools. For example, charter schools receive no funding for facilities, while district schools 

The paper also recommends that the state offer a new opt-in funding formula that accounts for disparities in overall funding between school districts and charter schools and among different school districts in the state. The report recommends that Arizona incorporate results-based funding into the funding formula. Schools would be rewarded for achieving better results by ensuring the money goes directly to the school rather than a governing board. This funding would continue to recognize results at the state’s low-income schools by providing increased tiered funding based economic indicators.

Lastly, the report recommends the state reassess transportation funding and create a more flexible model. Currently, not all funding allocated for transportation is required to fund transportation. Districts with reduced need for transportation funding still receive the same funding they previously received under the “Transportation Revenue Control Limit”, which now totals nearly  $200 million.

 
The state Senate last week to modernize K-12 student transportation and give educational providers greater flexibility in the vehicles in their fleets.

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Arizona is flush with cash, more than anyone could have imagined a year ago at the height of the Covid-19 disruptions. Now, lawmakers are talking about what to do with a $1 billion rainy day fund and a $1 billion-plus surplus.

Currently, negotiating is underway at the state Capitol to put together a budget for next fiscal year. Among the proposals for funding are major income tax cuts, tax credits for lower-income working families and funding for infrastructure, education and other projects. 

“We have so many resources available, it’s unprecedented. Last year, a little before this time in March, the predictions were pretty dire. We were (projecting) a billion plus in deficits. Then it was adjusted, adjusted and adjusted. Now, it looks like it’s going to be a multi-billion dollar surplus,” said House Majority Leader Ben Toma (R-Peoria), who is among those leading efforts to implement up to $1 billion in income tax cuts over the next four years. 

Toma and Senator Sean Bowie (D-Chandler) spoke about the budget negotiations and the proposals during a event last week, entitled What’s Next for Arizona’s Tax Climate? Other speakers were Kevin DeMenna of DeMenna Public Affairs, and Jared Van Arsdale, a board member of the Arizona Society of Certified Public Accounts.  

Why does the state have so much money? 

There are several reasons for the surplus. Arizona already had a $1 billion rainy day fund heading into the pandemic. Governor Doug Ducey then took a measured approach to constraints on business operations during the pandemic, unlike states like California that were fully shut down for months on end. As a result, the state is seeing one of the fastest recoveries in the nation.

Arizona is also receiving more than $16 billion from the latest federal relief package, the American Rescue Plan. Of that amount, the state government will receive $12.2 billion. 

Arizona already got $38 billion from previous federal relief payouts from the CARES Act, which included funds for things like protective gear for K-12 schools, increased unemployment benefits for the jobless, stimulus checks for citizens, and forgivable loans for businesses. 

The state also has enjoyed a windfall in taxes during the pandemic from the “Wayfair” legislation signed by Gov. Ducey in late 2019. The legislation requires online, or remote, sellers and marketplace facilitators to file and pay transaction privilege tax.

Plenty for tax cuts, new infrastructure and more 

With all the money at hand, budget negotiations are taking longer and are more complex than years past, both Bowie and Toma said.  

With the Republicans in control of both houses, the budget moving forward includes Governor Ducey’s sought after goal to implement a $1 billion tax cut over the next few years.  

The whole point of the tax cut proposal is to push the economy into overdrive, Rep. Toma said. Reducing income tax rates will make Arizona a more desirable location for industry.  

“When we’re talking about tax reform and tax cuts in the House, I’m looking at this and I’m pushing it as an investment in the economic and competitive future of Arizona,” he said. “I would argue with anyone that if we do this right, come three years from now, when we fully implement a massive tax cut, it will result in even more revenue.”

Toma laid out some of the details for tax reforms and cuts he and others are weighing in the budget negotiations:

• Cut income taxes by up to $1 billion over the next several years. One proposal to accomplish that would be to implement a flat tax of 2.5 percent across the board over the next three years. Currently, Arizona income tax rates vary by class, ranging from 2.59 percent for the lowest income tax bracket on to 8 percent for high income earners. 
• Lessen the blow on small businesses impacted by the high income tax from the Invest In Ed measure, Proposition 208. While it was intended to tax the wealthy, it impacts successful small businesses in the state who file their taxes under the individual tax code, known as “pass-through” filing. Under Prop. 208, these companies are paying higher rates than large corporate filers. A bill currently in the Legislature would create a special category for small businesses to avoid the tax hike. Other funds would be used to offset any losses to Prop. 208. 
• Reduce commercial property tax assessment ratio from 18 to 17 percent over the next two years to make it more equitable with residential property taxes, which is 10 percent.

Tax credit for lower income brackets, education funding, affordable housing 

Senator Bowie, a member of the Senate Appropriations, Finance and Commerce Committees, also spoke about his wish list for the budget including a tax credit for low-income working families.   

Bowie introduced a bill to provide an Earned Income Tax Credit (EITC) that would amount to 5 percent of the federal EITC. The credit, which has been successful in other states, would amount to about $300 for a family of four earning $50,000. 

“The cost is relatively small, about $75 million a year, but these would be dollars going directly to working families, dollars that are more likely to be spent going back into our economy.” Bowie said. 

In the rush to provide tax cuts and credits, however, important items like infrastructure, affordable housing and higher education cannot be ignored, he said. 

“There are some investments we need to make as a state and these are not luxury items. These are core functions of government that we really have not been funding for many, many years. To mention a few, our state universities. Our state has cut more from universities than any other state since 2008,” Bowie said. 

Included in budget talks is funding for the , an initiative by the state’s three public universities to lure high quality industry and high paying jobs to the state to raise per capita income here.  

“This is not just a blank check,” Bowie said. “It’s dollars for specific projects around the state at our three universities to invest in fields like engineering and health care and biodesign that are going to create jobs in districts like mine and all throughout the state.”

Community colleges statewide also deserve some aid, he said. They typically do not receive state funding but are requesting some this year for STEM workforce development projects. Again, it would be money well spent to create good jobs, Bowie said. Other budget items under discussion include infrastructure projects like widening the highway from Casa Grande to Phoenix and funding for affordable housing, he said. 

“I’m open to tax reform but we still need the revenues in place for some of these critical investments across the state.”

Can it get done?

Whether a major tax cut will survive the budget negotiations is still an unknown. There are legal challenges that could mire some of the tax reform issues. 

But that said, there is enough funding to pay for tax cuts, infrastructure, higher education, and more, Toma said. 

“Â鶹´«Ă˝Ół»­sed to be that great state with a great climate on the way to California,” he said. “All of that’s changing. The amount of money that sits in the general fund right now gives us an opportunity to recast the tax system that will make us no longer the stop over state but the destination state.”

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A bill to provide transportation for students to attend public schools outside of their assigned campus cleared its first hurdle at the Arizona Senate. 

The Senate Education Committee approved the bill, Senate Bill 1683, which would establish a $10 million fund to provide grants to public schools and municipalities to provide safe and reliable transportation for open enrollment and charter school students. Parents also could receive monthly stipends for driving and mass transit costs. 

Ensuring every student gets the best educational fit possible regardless of their “zip code or economic status” is the intent, said a proponent of the bill, Emily Anne Gullickson, president and founder of the education advocacy group, . 

“We know that transportation barriers are real and, although we have a robust set of options for families, you really don’t have a choice unless you can get there. So this bill is all about access to public learning opportunities that will benefit each individual child,” said Gullickson, who testified at the hearing.

Sponsored by Senate Education Chair Sen. Paul Boyer, the bill also includes a component for schools and cities to receive grants to do data analysis to find more efficient ways to transport those students who need it.

What the bill provides

The bill would create the Transportation Support for Enrollment Options Grant program, which would:

-Allow a parent to apply for a stipend of up to $80 per month for driving or mass transit costs for their student to attend a public district or charter school. Parents would be eligible for the funding if they need financial support to transport their child from home to school and back or if they live within 20 miles of the school district boundary of the selected school but a bus is not available in their neighborhood. 

– Require at least 25 percent of the grants support rural and remote  proposals from districts, municipalities and parents.

-Provide modernization grants to municipalities to improve bus routes to transport students more efficiently and safely to their chosen school.  

Modernization grants would support innovation in transportation 

The bill includes modernization grants to support the development of innovations in public school transportation including:

-Transportation resource sharing with school district and charter schools.

-Developing or contracting with rideshare programs.

-Planning and construction of bus stops in front of low-income and multi-family housing or at locations where there are high numbers of open enrollment students.  

-To reevaluate bus routes to eliminate ride time for students.

Supporters say options should be available to all, not just affluent

Arizona has one of the most robust open enrollment systems in the nation.

Gullickson said it’s important that families of all incomes, not just the affluent, have access to transportation to attend the schools of their choice.  

“SB 1683 is all about expanding transportation options for students and families that are utilizing public school options, whether that’s through open enrollment in their existing schools districts or a neighboring school district or a public charter school,” she said.   

Organizations that support the bill 

A number of organizations support the legislation including:

Arizona Charter Schools Association 

Excellence in Education 

Yes, Every Kid

Stand For Children

Americans for Prosperity 

Arizona Â鶹´«Ă˝Ół»­ of Commerce & Industry 

To read the text of the bill, visit: . 

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State budget analysts brought heartening news to citizens, businesses and schools in the governor’s proposed budget for fiscal 2022. 

First and foremost, there will not be a budget deficit as predicted earlier this year when the pandemic caused a spike in unemployment and disruptions to commerce statewide.

Governor Doug Ducey also wants income tax cuts amounting to $600 million over the next three years, state budget analysts said during a press conference revealing the proposed budget on Friday. 

In fact, Arizona is doing so well, revenues are projected to provide a healthy surplus. Arizona’s healthy economic standing means there will be $389 million to help students who have suffered pandemic-induced learning losses to catch up.

“Arizona is resilient, and we continue to move forward in the face of hardship, loss and disruption,” Governor Doug Ducey said. “Our budget will keep us moving in the right direction, and it makes strategic investments in our greatest areas of need — K-12 education, forestry management, public health and much more.

“Kids have missed out on important learning opportunities and classroom time, and we need to use our resources to help students in need catch up and ensure students, regardless of background, stay on the path to success.”

Keeping Arizona competitive on world stage

The governor’s plan includes funding for education and school choice,  workforce training, wildfire prevention, high speed internet for rural areas, covid relief for businesses and healthcare providers, highway and prison infrastructure, and much more. 

To keep Arizona competitive on the world stage, the budget calls for $600 million in cuts to income taxes “across the board” for citizens and small businesses over the next three years. 

Business groups including the Greater Phoenix Â鶹´«Ă˝Ół»­ of Commerce and Arizona Â鶹´«Ă˝Ół»­ of Commerce and Industry applauded the proposed plan. 

“This budget is not only fiscally responsible, but it is loaded with meaningful reform,” said Glenn Hamer, president and CEO of the Arizona Â鶹´«Ă˝Ół»­ of Commerce and Industry that represents thousands of employers across the state. “Arizona is now spending more from all sources on a per-pupil basis than at any time in the state’s history.

“The governor’s education initiatives will help our students make up for any pandemic-induced learning loss and will help parents, including those with limited transportation options, find the best educational fit for their kids, something that has become even more important during the last several months of educational disruptions.”

The $12.6 billion plan is the largest in the state’s history. Now, the governor and state Legislature will begin negotiations to produce a final spending plan before the conclusion of the fiscal year on June 30. 

Federal CARES Act relief helped state stay the course 

Arizona is in a stronger fiscal position than many states around the country with 97 percent of jobs lost during the pandemic now recovered, budget analysts from the Governor’s Office of Strategic Planning and Budgeting (OSPB) reported. 

About $38 billion in pandemic relief from the federal CARES Act this past year is one reason the state is faring well. Arizona’s healthy pre-pandemic economy and a $1 billion rainy day fund also saved the day, they said. 

Here’s are some of the highlights:

Income tax cuts 

The budget proposal includes $200 million in income tax cuts for fiscal 2022, which begins July 1. Ducey, who will be termed out of office this year, wants to extend his legacy of lowering taxes by including plans to extend the $200 million tax cut another two years. 

While details will be hammered out over the next few months, the tax cuts will help taxpayers “across the board,” the governor said. 

Education, school choice, civics education, rural broadband

In addition to $389 million to help students catch up, the budget includes an additional $250 million for K-12 education above and beyond inflation. 

Funding is targeted for programs to provide COVID-19 relief, rural broadband, early literacy, and additional civics education programs. 

Among the biggest ticket items for K-12 education are: 

• $119 million for school building renewal grants

• $52.6 million to complete two schools already under construction and start construction on five new schools

• $10 million to inform families about education options and support transportation innovations that expand school choice

Wildfire prevention with inmates helping out

The proposed budget includes $24 million for the Arizona Healthy Forest Initiative, a joint program between the Departments of Forestry and Fire Management and Corrections, Rehabilitation & Reentry. 

The Healthy Forest Initiative expands opportunities for state inmates to learn crucial job skills for post-sentence employment by treating our state’s land and wildlife, putting a greater focus on fire prevention.  

Health and welfare

Ducey’s budget also includes money to help Arizona’s most vulnerable citizens including children and the elderly with funding allocated for long-term care surveyors to address high caseloads and backlog. 

Items in the proposed budget with health and safety in mind include:

• $92.7 million in FY 21 supplemental funding for the stabilization of child care centers and to further support providers during the pandemic

• $25 million for the implementation of the Family First Prevention Services Act, focused on keeping children safely with their families

• $18 million to fund the continuation of the Child Care Waitlist and for a new pilot program that provides child care to children of parents pursuing education and nursing degrees

Higher education 

Arizona’s three public universities have been on the front line of research and action to address COVID-19 issues in the state. CARES Act and state funding to help reimburse them and  continue to produce an educated workforce includes:

• $115 million in COVID-19 relief, provided via CARES Act funding

• $35 million to support the public universities’ workforce development for the New Economy initiative

Public safety 

Prison construction including revamping outdated infrastructure is part of the budget including $54 million to address building renewal needs across the Arizona Department of Corrections, Rehabilitation and Reentry (ADCRR), including $25 million for critical safety projects at the Eyman Complex in Florence. 

The budget includes funding to recruit and retain Department of Public Safety (DPS) employees, equip DPS officers with body cameras and necessary support for video and IT management, and update the statewide land mobile radio network. 

Highway infrastructure, online portal for new businesses

Other items in the budget are the launch of a “hoteling pilot program” to increase options for government workers to continue to work remotely and a new online portal where new businesses can complete all state paperwork requirements. 

It also allocates $33.1 million to fund a major expansion of the I-40 West broadband corridor, in addition to $40 million in Federal CARES Act funding for the I-19 and I-17 broadband corridors.

Rainy day fund still holding near $1 billion 

Another positive feature of the budget is Arizona’s $1 billion rainy day fund. It remains almost fully intact at $954.4 million. While many states used these funds to address shortfalls in response to the pandemic, Arizona last year used $55 million to address one-time public health expenses, not shortfalls, budget analysts said. 

To see a complete list of details in the budget, go to:

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