Education Funding Plan

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State lawmakers are in special session to consider a plan to pay $3.5 Billion owed to schools. Arizona Capitol Times editor Jim Small will give us an update.

TED SIMONS: Joining us now with the latest on the special session and the proposed settlement of the education lawsuit is "Arizona Capitol Times" editor Jim Small. There's so much to get to. Let's start with this state land trust and using the fund and the idea that you're spending money that you really already had. How is that going over at the capitol?

JIM SMALL: It's certainly one of the focal point of the discussion is this wise, is this the right way to do it? Are we really just paying schools with money that's already theirs? It's in a trust set up designed to benefit them. But the reality is that this is a deal that was agreed to by all the litigants in this lawsuit, by the school districts, by the teachers union that sued by the industry group that represents a bunch of school boards and the Republican leaders in the legislature and the governor's office brokered this deal to get everyone together to try to make this lawsuit go away. And at the end of the day they all agreed to it. So there may be some arguments that this is already money that the schools own really and that we're paying them with their own money but that doesn't really matter. Certainly, the debate is about whether this is fiscally responsible. I think that is really kind of the crux I think for a lot of these legislators.

TED SIMONS: And again for those who haven't quite kept up to speed on this and there's a lot to keep up to speed on, just in general the lawsuit was filed by schools because...

JIM SMALL: Because during the great recession the legislature decided that it was not going to pay inflation funding and proposition 301 from 2000 requires that every year, the legislature increase school funding by the amount of inflation just to make sure that a dollar today buys a dollar tomorrow. So the legislature facing, you know, multibillion dollar deficits said we're not going to do that. We can't do it in order to bridge this budget gap. We're going to forego that. Schools said okay well, we're going to sue you because you owe us this money by law. The Supreme Court said yes, you owe them this money and the issue became how much did they owe, where should this funding level be reset to? A court last year said it should be $330 million every year that the state needs to pay to education and this deal for the current year would add $300 million so three quarters of it.

TED SIMONS: And again, as far as back money owed there was like 1 million there and the deal gets it down to 625?

JIM SMALL: About $650 million, half of the money that the legislature illegally withheld from the schools will be repaid over the next 10 years under the terms of the deal.

TED SIMONS: And schools are settling for less money to get the money now? Because if they say -- well, we'll get to how many ways this could be tripped up but if the lawmakers or the Democrats or the schools all said, no, we don't want this and we're going to scuttle this, this could stay in the courts for years.

JIM SMALL: It could and you're looking at several more years before the Supreme Court would eventually weigh in and say okay here's what needs to happen but even at that point, there is a school of thought among Republican lawmakers well the court can't tell us to spend any money. There's a separation of powers issue and the courts do not have the ability to order the legislature to spend money. The authority to appropriate is given solely to the legislature. So, you know, there's some down there who would absolutely draw a line in the sand and say no more, we're not going to do this. That creates a constitutional crisis, potentially years more of litigation to try to resolve that issue. The schools looked at it and said we've been shorted this money since 2009. We need this money now, even if we get less, 70% of what we're maybe owed, we get it now and we get it guaranteed going forward.

TED SIMONS: Get it guaranteed going forward but there are triggers in this proposal that if the economy tanks to a certain degree and I guess there are specific numbers there that have to achieve below the ground and other triggers as well to where the money wouldn't necessarily have -- talk to us about that because I think a lot of Democrats and opponents are concerned about the triggers.

JIM SMALL: The trigger about the economy I think is one that everyone -- no one really has a problem with and that was one that even early on the school districts from what we've understood from the negotiations agreed that that's necessary that when the economy goes in the tank, there needs to be kind of an escape hatch for the legislature so they don't have to pay an extra $60 million a year when they have to cut $1 billion out of the budget. So that's one trigger. It's not too controversial. The one that has people's ire is the idea that education makes up 50% or more of the state's budget, that the legislature could then not pay inflation and could start cutting education, the education budget and trimming it down by double the amount of the inflation the year prior. So you know, you can be looking at a $100 million worth of cuts in that case.

TED SIMONS: And it's the 49, 50% threshold because...

JIM SMALL: Because that was what they set it at. I don't know that there's necessarily a good reason other than it's a round number.

TED SIMONS: But that sounds like it changes inflation adjustments which sounds like it changes something that was voter approved. Do voters have to approve this change?

JIM SMALL: This change is going to be a special election in May once it gets approved by the house and the Senate. It should get approval tomorrow. It's a constitutional change so it will have to be approved by the voters and it will be one ballot question that encapsulates the trust land and the changes to the inflation payments and then, you know, after tomorrow, it is truly going to be up to the people of Arizona to decide.

TED SIMONS: But I mean, they can't both be on the same ballot measure, correct? They've got to be two separate measures?

JIM SMALL: They're going to put on one ballot measure.

TED SIMONS: Is that constitutional?

JIM SMALL: They say it is!

TED SIMONS: You're supposed to have one idea aren't you?

JIM SMALL: The idea is that this is -- everything is tied together by settling the lawsuit so they can do it in one fell swoop.

TED SIMONS: So it sounds like this is going to pass.

JIM SMALL: I think all indications are right now that yeah, it's going to pass.

TED SIMONS: How soon?

JIM SMALL: Tomorrow, it looks like.

TED SIMONS: Tomorrow morning?

JIM SMALL: They're supposed to come back tomorrow morning. The Senate is done for the evening. The house isn't yet but they will be soon.

TED SIMONS: But those -- the two provisions combined into one ballot measure, that still has to pass -- if the voters say no, what happens?

JIM SMALL: We go back to square one and that really kind of upends the apple cart here and I don't know at that point. I don't know that anyone has really thought about that and I don't think it's anything that they're probably going to contemplate seriously until and unless it happens.

TED SIMONS: Real quickly, we heard from treasurer Jeff DeWitt, I know former treasurer Dean Martin testified today. I don't think Martin talked about the lawsuit idea or advancing the withdrawals, increasing the withdrawals being illegal but DeWitt has mentioned on this program and in other forums he thinks that because of -- it needs congressional approval, and if it doesn't get congressional approval because Congress basically bequeathed the land to us 100 years ago, you don't get that, someone could file suit. Has he got a point?

JIM SMALL: The governor's office says no and the legislature says no he does not have a point, that in 1999 I think it was, Congress amended the federal statute that has to do with Arizona's enabling act, Arizona and New Mexico and instead of the law basically saying anything that happens in terms of distributing this trust land money needs to be approved by Congress, they changed it to say it needs to follow this provision of the Arizona Constitution. That's what they're changing is that provision of the Arizona Constitution so their argument is well it's going to self-execute. We've changed the Constitution, the federal law says it just has to follow the Constitution, ergo anything we do to the Constitution is legal.

TED SIMONS: We should not expect to see Jeff DeWitt filing a lawsuit?

JIM SMALL: We'll see. He has -- he's been coy about whether he would actually do it and his answer when we asked him about that yesterday was well anybody in Arizona could file a lawsuit. I don't know if everybody in Arizona has access to the money or the attorneys needed to do that.

TED SIMONS: Interesting stuff. It sounds like things will be finished up tomorrow. Thank you so much for updating us, we appreciate it.

JIM SMALL: You bet.

Jim Small:Arizona Capitol Times editor

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