Arizona Education: School Budgets and Proposition 123

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We’ll visit school districts to see how they plan to deal with the possibility that proposition 123 fails or passes by preparing two sets of budgets. Then we will talk to school officials more about those eventualities. (guests pending)

Ted Simons: coming up next on "arizona horizon" -- see how schools will be impacted on whether or not proposition 123 passes today. and we'll hear from supporters and critics of the education funding measure. that's next on "arizona horizon."

Video: "arizona horizon" is made possible by contributions from the friends of arizona pbs, members of your pbs station. thank you.

Ted Simons: good evening. welcome to "arizona horizon." i'm ted simons. voters across the state headed to the polls to decide on two ballots measures today. one asks voters to settle an education funding lawsuit. the other promises pension reform for public safety employees. there were at last report no indications of long lines or five-hour waits at polling places in maricopa county, a very different scene than the troubled presidential preference election in march.

Kenny Thames: this time it was easy, walked in, walked out. of course there were only two things on the ballot to begin with. last time i got here about 6:30, so i had about a 30-minute wait. i'm not sure i would have waited five, six, seven, eight hours. i would be hungry. it was great. i didn't have too bad a time last time because i got here early.

Becky Butcher: we walked right n. last month we were here about two and a half hours with our 10-year-old. it was a total nightmare. we had no idea it would take that long. today we walked right in. it took us maybe three minutes.

Ted Simons: turnout is expected to be in the 25 to 35% range with many voters specifically focused on proposition 123, which asks to settle a lawsuit.

Mark Klink: i voted yes on proposition 123 it's not perfect but my kids are in public schools, my wife is a public school teacher and lack of funding in arizona for public schools is abysmal. at best. so we need to do whatever we can to get more money into the schools. hopefully this will propel our legislature and our governor to permanently fix the solution but for now we need money in the schools. so that's why i voted yes.

Susan Skomer: it doesn't do what it says, what they are advertising. it gives some money to schools but much of the money will be taken away for private prisons, for other things. the legislature there's nothing to stop them from stealing it like they did the last money due the schools and we voted for that. so i think it's just wrong and it's not a good stopgap measure. it's not going to stop the lawsuit t. will stop one and start another. so it is just not worthwhile.

Ted Simons: we will have extensive analysis of the vote with two political consultants on tomorrow's edition of "arizona horizon."

Ted Simons: as mentioned earlier proposition 123 is a main focus of today's special election. it settles an education funding lawsuit by increasing the use of money distributed from the state land trust. regardless of how today's vote turns out, arizona schools will start work tomorrow final using their budgets. producer allysa adams has more.

Video: snow work problems can be a challenge for these chandler third graders where finding answer answer usually means solving for unknowns. when it comes to school district budgets in arizona there are always a lot of unknowns.

Lori Garvey: there's definitely always some uncertainty built into the budget because the legislative session does not end until may. in a typical year how much money goes into educating these desks depends on how the legislature votes. in most district they have to finalize their budgets in early june.

Video: it can be difficult. it depends on the year.

Video: lori garvey with the madison school district says they start working on their budget in the fall.

Lori Garvey: the budget process in madison actually starts well before the next school year. by october, november we're already looking at enrollment projections for the next year, things, programs, things that may extend the following year. we are gathering a lot of information and data starting in october, november. that process continues well into january.

Video: terri locke, the director of community relations with the chandler unified school district, says they are thinking about how much paper to buy, new technology, salaries and everything else way before they though what money they have from the state.

Terry Locke: we begin the process by involving our citizens in january. we have a citizens budget committee that analyzes our needs from our schools and departments and makes a recommendation to the board. simultaneously to that we're waiting for the legislature each year to pass a budget. they come together about this time for a budget.

Video: the legislature has passed the budget for this year, but there's still a big unknown for schools.

Terry Locke: this year it's all about prop 123 the reason i say that is because the legislature has approved a budget. the prop 123 will have a significant impact on chandler unified if it passes.

Video: in fact lock says the impact of proposition 123 is so big they had to come up with multiple budgets this year.

Terry Locke: it's two different budgets. depending what happens from the voters will determine what that looks like.

Video: the madison school district and districts we talked to across the state are also looking at two sets of numbers.

Lori Garvey : we have actually established two budgets so we have a budget if prop 123 should pass and an alternative budget if prop 123 doesn't pass.

Video: some districts have already adopted their budgets for next year but have contingencies based on the outcome of the election. teachers who are used to having clear answers are signing contracts agreeing to a range of salaries.

Lori Garvey: in our contracts we do have language that if it does not pass this is the contract amount. if it does pass, then we would see this increase to this amount.

Video: at most schools students are looking forward to summer vacation, but administrate users and school boards won't get a break until the unknowns of the school budget process are known.

Ted Simons: our coverage of proposition 123 conditions with a look back at how both sides presented their arguments for and against the measure here on "arizona horizon." we start with state treasurer jeff dewit, who opposes the initiative and says there are other ways to address school funding. good to see you again.

Jeff DeWit: thank you.

Ted Simons: alternatives for prop 123, which takes money from the state land trust and uses that money to help reconcile a lawsuit against the legislature for not fully funding inflation adjusted education funds.

Jeff DeWit: all right.

Ted Simons: what alternative is there?

Jeff DeWit: first make sure you recognize the flaws in 123, that it's not more money, the two talking points is more money for teachers and won't raise taxes and yet it's not more money for teachers and it raises taxes. so i think we can do a lot better.

Ted Simons: how is it not more money for teachers? i'm hearing teachers are already being penciled in for raises.

Jeff DeWit: in some cases. in other cases they won't get that they were promised. i have been saying that all over the state. it was fact checked on the arizona republic. it was false. there's not one requirement anywhere in prop 123 that a single dollar goes to a single teacher yet they are selling this, we know we have a problem with teacher pay. we are 50th in the country. we have to get it up. but the deal is that this was negotiated behind closed doors in the governor's office with the school boards association. the school boards association wanted no accountability. they promote this on the website saying the great thing about proposition 123 is there's no accountability in how we spends this money. they don't want to give it to teachers.

Ted Simons: but eventually they will have to. the money will be there. they may not be promised, written in stone, that you must do x, yz, but teachers will get more for the most part, will they not?

Jeff DeWit: it remains to be seen. in many cases they will not. the entire budget of our school is $10 billion. this is an extra 300 million a year. they in ten years we fall off a cliff. how do you -- i have heard teachers say they are promised a $10,000 raise, 30% bump in pay. how do you promise 30% bump in pay when you're getting a 3% bump in your budget? someone is going to be disappointed.

Ted Simons: what is your alternative? you say you don't have to go this whole route. it's easier to do what?

Jeff DeWit: since the time that prop 123 was announced we have had a lot of extra money come into the state. since the first time they tried to raid the trust we had an extra $300 mill you, 250 million is sustainable. since then more money has come back. we're back to peak employment. the whole reason we had this funding crisis was in the downturn the state was short cash so they took the money from schools. we're back. we have over $3 billion in cash in the state's operating account. we have the highest balance post tax time any time in the state's history. 3.5 billion. just the month of april the amount of money under management in my office for the state went up by over $1 billion. we have never seen anything like this. we're over 14 billion now for the first time managing this money. we have so much cash, all we need is 300 million to solve it for the school. actually 250 million. we could lower taxes and solve this. why would we want prop 123, which raises taxes?

Ted Simons: are you talking one time money?

Jeff DeWit: continued funds.

Ted Simons: over the years the money is there over ten years.

Jeff DeWit: yes over ten years.

Ted Simons: even if there's a downturn in the economy?

Jeff DeWit: if there's a downturn in the economy prop 123 would cut the funding faster than this money would. prop 123 has trig else in it. if we see the slightest dip the legislature doesn't have to give the schools any money. that's the biggest complaint are all the triggers put in place. so this money absolutely would last longer, it would take a very, very severe downturn in the economy scholar to what we saw in the '09, '10, prior to that we hadn't seen since the great depression.

Ted Simons: but it would take a similar downturn in the economy to render those triggers.

Jeff DeWit: no, much smaller.

Ted Simons: how so?

Jeff DeWit: when you see thou how they are written it takes a downturn in the unemployment rate to trigger the triggers.

Ted Simons: 49% of the general fund as well.

Jeff DeWit: yes.

Ted Simons: by the time you got to that level would there not already be measures taken? the environment would be so different.

Jeff DeWit: I don't know how you think it would. we have the money to do it now and they are not giving the money to schools. what reassurance does anyone have when there's further money there they won't take the chance to hit those triggers. they are written in a very deceiving way. i encourage everyone to read the wording and you'll be very scared.

Ted Simons: we discussed the triggers a lot on this program. what we have also found is that those who say money is there, you don't need to use the land trust, you don't need to go this route, don't understand, the governor's budget director says you're unrealistic about this. other folks, chicken little, whatever the case may be, flat earth society -- but the fact is there is a political component. it would be wonderful if everyone did certain things. politicians, elected public officials sent there by us right now are saying they don't want revenue enhancements. they don't want these sorts of things, that what you're offering doesn't make political sense in this environment. do they have a point?

Jeff DeWit: yet that means tax increases net prop 123 raises property taxes.

Ted Simons: for some.

Jeff DeWit: for many.

Ted Simons: for many.

Jeff DeWit: ted, there are districts, 45 districts around the state that won't see a dollar out of the trust. all this additional trust money they won't get a dollar. the only extra revenue they will get are from the property tax. careful creek, scottsdale, all these districts, big ones, they won't get this. i have spoken to people and i have gone on debates. they say behind the scenes you know this raises taxes. yeah, we know, but all our bond measures get voted down. the only way we'll get tax increases through is to do tricky things like this.

Ted Simons: they say education isn't a priority in the state. if this gets voted down, how do you convince anyone that education is a priority when this money is there, it's a deal, it's not perfect, it's a deal, but it's 70 cents on the dollar, the best they could wrangle up. yet if voters say no as you want them to do, what kind of message does that send?

Jeff DeWit: again, the schools have more money in their hands right now from the judgment of the lawsuit. quite frankly from the schools' perspective it's one of the worst negotiations i have ever seen in my life how little they are getting on the dollar from the lawsuit they already had. i want to go back to the judge with the new information we have which is we have a lot more money in the covers and let's negotiate a better deal. we're supposed to fund the schools out of the general fund. trust money is there as a supplement. it's going to grow over time but we're never supposed touch principal. when we do it triggers a whole lot of bad things that will come on top of us from congress through the enabling act of the state.

Ted Simons: whatever the distribution has been for a while now some argue that's artificially low to begin with. i think we had you on you were talking 4.something as opposed to 6.9. 6.9 uh you think is high.

Jeff DeWit: very high.

Ted Simons: some folks think it's what too low. if you don't get the 6.9 you have to go back to the 2.5.

Jeff DeWit: 2012 they ran the measure to set it at 22.5. the old formula jumped around a lot. they said they could go from 2.5 to 3.75 then treasurer ducey fought to get to the low ends of that range. we can go higher. i will fully support going to 3.75 and with a couple small changes we can go to 5% if we put lease revenues in, tweaker how we invest the money it will always grow over time. doing 6.9 where you're hitting the principal that's where we violate the terms of the enabling act. our oversight could go to the united states attorney general. with could lose control to washington.

Ted Simons: will you pursue legal action if this thing ace proved on may 17?

Jeff DeWit: now know, i don't think i'll have to. i heard from two lawyers already that said they are going to. i think there will be a race to do this. that's why i tell the schools if this goes through this will further delay funding by three to five years. they have the judgment and we can solve it right now if prop 123 goes down wesolve it right away f. it goes through it will start a whole new lawsuit that could last another three to five years before our schools see anything.

Ted Simons: again schools get no money. is that a good thing?

Jeff DeWit: no, no, no. don't forget if you say no on 123, the spigot doesn't turn off.

Ted Simons: right but i'm talking about the additional funding.

Jeff DeWit: if they say yes then the spigot could get shut off. the state is obviously planning on the extra money coming in but new lawsuits will delay that.

Ted Simons: you think that would be good for arizona?

Jeff DeWit: I don't think 123 is good for arizona. nothing that's happening down there right now is good for Arizona but I think we can do it better. Back room closed door deals which i'm guessing are cigar filled rooms the politicians are doing are not working out. We need to do this in an open, transparent fashion. we can craft a better deal. they are lying to Arizona. They shouldn't be telling people, won't raise taxes, more money for teachers. that false.

Ted Simons: good to see you again.

Jeff DeWit: thanks, ted.

Video: we want to hear from you. submit your questions, comments and concerns via email at :47:00:12 arizona [email protected]. 18

Ted Simons: supporters appeared as well as well as chris thomas, general council for the arizona school boards soaks. good to see you again. thanks for joining us.

Chris Thomas: thank you.

Ted Simons: treasurer debit says there are alternatives. does he have a point?

Chris Thomas: not really. we worked with the legislature on this to get as much as we could for schools. the governor served as mediator. we knew what was possible. so simple to say that there's enough money that's already in the actual general fund to settle this lawsuit, that's actually not true. you have to have a couple things, one, sustainability, the other the political will to do that and i don't think we have's of those.

Ted Simons: he says 123 assumes arizona is broke when arizona is actually flush with cash.

Chris Thomas: he has a point in the short term, not the long term. it's not a problem, something that we definitely are in favor, is that inflation builds each year, so next year you have to build on that number. if you look at the revenue projections after couple years we no longer have that general fund to absorb that funding requirement.

Ted Simons: he says again the reason for the lawsuit is no money due to the recession but he says april alone more money handled by his office than any month in arizona history. he's never seen anything like it. he's managing over $14 billion in that account. the money he says is there.

Chris Thomas: right. let's keep in mind who jeff dewit is. jeff is the treasurer. he's the banker of the state. he doesn't have a policy making role. he doesn't have a role that he can propose rate money. he can't pass the bill. he can't veto the bill. he's the defendant in name only in the lawsuit. he doesn't have a lot of power. it's one thing to say if you have skin in the game and you have a stake and a vote to say here's what we ought to do. he doesn't. he's just the banker. when i go to the bank my banker doesn't tell me whether i can have my money and how to spends it.

Ted Simons: he can certainly advise you.

Chris Thomas: he can give information certainly. again, he's not having to balance all the priorities of the state.

Ted Simons: what are some of the other priorities? because again we have done so much on proposition 123. we'll have the league of women voters on tomorrow night for equal time. but again, this settles a lawsuit that critics say shorted education. the legislature was supposed to spends this money. they didn't.

Chris Thomas: yeah.

Ted Simons: the state supreme court says you must. they didn't. granted it's on appeal. appeal could stretch out a while, but at base here is you're asking voters to approve something that will fix something that voters already approved the legislature said we don't feel like it.

Chris Thomas: i don't disagree with those critics. if i got to write proposition 123 it wouldn't look the way it does. having said that it's a fair compromise. when you look at the obligations of the legislature, when you look at how long it was going to take for us to resolve, judicial finality, our schools are starving. teachers have not received raises in four, five years. teachers are leaving the profession in droves. we needed to do something now if we could.

Ted Simons: and as far as the extra money, rainy day funds, all these things, again treasurer debit and others say could be used to settle this lawsuit once and for all, you say --

Chris Thomas: I say that it's not sustainable. it will get thrust for a year or two but pretty quickly it won't. when you look at the settlement and the mediation and discussion that we essentially one side says tax increases were not on the table. so then you start looking at what possibilities there are. that's why the trust land funds use emerged. it's the one source that's out there and this would be doing what it's supposed do, going to education.

Ted Simons: the treasurer also brought up a consume other things. he said the promise of more money for teachers is not true. there's nothing in here that requires a single dollar to teachers.

Chris Thomas: well, i definitely take issue with that. teacher salaries are the greatest need. yes, it's going to be determined at the local level but those teacher salaries will be different in every location. maybe you have a problem attracting new teachers so you want to raise your starting salary. maybe you have a problem with teachers around five, six years have not received that raise. we want to allow our local elected officials a chance to have that flexibility to work with their staff.

Ted Simons: but is there accountability? he says no accountability was negotiated into the deal.

Chris Thomas: I totally disagree with that. the accountability rests with local school board. to us local school board is the most accountable body there is. they are the government closest to the people.

Ted Simons: but again, nothing is required in the deal. is that right?

Chris Thomas: right. let's step back. why is it not required? it's not required because this was funding that was supposed to come through general operations funding. it didn't have strings attached. if it were appropriated at the time. but it wasn't. now we're coming back and redoing that. so to put strings on it now after never would have had strings was something that was a deal breaker for us.

Ted Simons: when he was here he also mentioned the campaign for 123 says it's knot going to raise taxes. he says that is not true.

Chris Thomas: right. i think that's telling a half truth if you ask me. the way our funding system works if you have enough property wealth in your school district and they raise the amount of money you can spend per student you're not going to get funding from the state. it will come directly out of local property taxpayers. that's just the way it would work. it would work even without prop 123 if you raise the amount going in it's going to be a tax increase for some people that are in that category.

Ted Simons: so no state tax increase but the possibility for some a property tax increase.

Chris Thomas: right. the alternative would be to leave those districts behind. nobody wants that.

Ted Simons: he says 45 districts around the state won't see a single dollar out of the settlement. true?

Chris Thomas: that's not true. he's using the funding system to make that argument. we don't think that that's a fair argument. again, one of the things that arizona can be proud about in its education funding system is the equity. we're all low but we're all the same. that equalization formula in place since the early '80s has served that purpose.

Ted Simons: there's concern from the treasurer and others even more so regarding these poison pills as they are described for the future of education. these triggers are written into the deal in a certain way that in the future if the economy goes one way or the other, all this money, this wonderful glad tidings goes away. are you concerned about that?

Chris Thomas: no, not at all. we vetted that. we had independent economists look at that. the recession trigger the we like to talk about, the great thing about that is even if the legislature does not need to fund us in a given year because of a recession the base still gets adjusted which means in the next year, the recession trigger is not in play the actual amount they would have to come up with is double.

Ted Simons: so if in 2019 all of a sudden lots of tax cuts and lots of revenue not coming in like it used to, education hits that 49, 50% threshold, which triggers the trigger as it were, you're saying no big deal?

Chris Thomas: no, that is not a big deal. our peak was 43% when we were paying for all day k, a bunch of other things. when you look at the obligations that the state has we're not going to be anywhere near that.

Ted Simons: but it's possible.

Chris Thomas: in the long term it could be possible and if that's a problem the voters state of the could repeal that.

Ted Simons: are you concerned over legal action regarding the enabling act or any other aspect of this provided 123 passes?

Chris Thomas: i'm not. i don't think jeff dewit has standing. he's but one of a member of the board. the board would have to approve that lawsuit. this idea that we're trading one lawsuit for another, not true. we have one lawsuit that would take three to five years to resolve, another that will be handled in a matter of weeks or months.

Ted Simons: if a lawsuit were filed by someone other than jeff dewit, who would be considered having standing, are you concerned?

Chris Thomas: well, that would be a concern but i also think that we have the facts on our side. in fact our senator did get advice that basically the enabling act does not need to be amended.

Ted Simons: you're saying the 49% threshold won't happen, even if it does it's not that big of a deal and you're not expecting any lawsuit.

Chris Thomas: i say if there's a lawsuit it will be dealt with in a prefunctory way.

Ted Simons: as an education person are you comfortable with this?

Chris Thomas: again, it's a compromise. it's not what i would want. having said that it's our best chance to move education funding forward and get to the other issues that we have to deal with, reversing the cuts of the great recession, bringing back all day kindergarten. dealing with our school facilities issues. renewal of prop 301, which only has four years left.

Ted Simons: good to have you.

Chris Thomas: appreciate it.

Video: watch sneak previews of what's coming soon. go to azpbs.org/previews today.

Ted Simons: wednesday on "arizona horizon," two political consultants will join us for analysis of today's vote on proposition 123 and we'll hear from an education representative on what's ahead for arizona schools.

Ted Simons: that is it for now. i'm ted simons. thanks for joining us. you have a great evening.

Video: members of your pbs station. thank you.

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