Arizona Education and Budget

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Arizona is facing a $3 billion shortfall in next year’s budget. Education advocates are concerned about Governor Jan Brewer and state lawmakers’ proposed cuts to the state’s education system.
Dana Wolfe Naimark, CEO and President of Children’s Action Alliance, and Panfilo Contreras, Executive Director of the Arizona School Boards Association, talk about their concerns.

José Cárdenas: Governor Jan Brewer and state lawmakers face a deficit of $1.3 billion for the current fiscal year and $3 billion for next year. Education advocates are concerned the state's education budget could take the biggest hit. The governor's budget calls for cutting $180 million in soft capital used for books, technology and other teaching tools. Here to talk about the state's budget crisis and how to raise education standards are Dana Wolfe Naimark, president and CEO of the Children's Action Alliance. Also here is Panfilo Contreras, executive director for the Arizona School Boards Association. Thank you both for joining us on "Horizonte." Dana, give us kind of a thumbnail summary of what happens to far with respect to the education budget.

Dana Wolfe Naimark: Well, K-12 education has been cut. Classroom spending has been cut through what you mentioned, soft capital that pays for textbooks and supplies. There have been actually, the governor suspended payments to school districts beginning before Christmas for certain programs like preschool programs and extra support for children in kindergarten through third grade. So that funding is gone already and in her budget proposal for next year, it's eliminated permanently.

José Cárdenas: How does all of that square though, with the statements that K-12 education, and to a certain degree, universities, budgets are protected because of the stimulus funding and the maintenance of effort requirement?

Dana Wolfe Naimark: Well I think the message is they would have been cut even more if it weren't for those requirements, in exchange for us using the federal dollars thorough the RS stimulus funds, we had to agree to not reduce spending below 2006 levels and we're at the bare minimum where we can do and still use the federal dollars and I think the message is clear, if we're not able to raise revenues, K-12 and universities will be the next places to be cut.

José Cárdenas: I want to talk about revenues, but first Panfilo, how are the schools dealing with these kind of budget cuts?

Panfilo Contreras: Jose it's very, very difficult to have to deal with the laying off of staff and people's jobs are at stake here. And the benefits and services to the children in the public school system, there's over a million kids that are being affected pretty directly by not having the software that teachers need in the classrooms, the books, the electronic equipment that is current and in technology today.

José Cárdenas: There's been discussion that some of these cuts may be retroactive and you may not be able to pay for services that have already been rendered. What are we talking about there?

Panfilo Contreras: Dana mentioned some of that. We had retroactive cuts to the beginning of the year when services had been rendered. I think what's going to be more difficult, however, is a rollover. We're going to have a cash flow problem, besides not being able to pay retroactive services that have been provided, we're going to have a cash flow problem here too. Because part of the discussion has been rolling over the payments for the last couple of months and the last four months of the year.

José Cárdenas: And explain both in terms of the magnitude and just the mechanics of rollovers, what that means.

Panfilo Contreras: Well what it means is that we don't get the state aid by formula we're supposed to be getting so local districts are left to borrow from local banks and try to make payroll and we've got banks now saying no.

José Cárdenas: Now Dana we've talked before about what are the possible solutions. You hinted at one of them before - revenues. The governor's budget does have revenue aspects and one of them is the one cent sales tax. Why is that not sufficient?

Dana Wolfe Naimark: Because even with that in the budget, her proposal still has horrible devastating cuts for kids and in addition to cuts to K-12, there are cuts to services that happen to kids outside of the school day but that affect their learning and success. One example is Kid's Care health coverage. We used to cover close 60,000 kids with Kid's Care health coverage. Her proposal even with the sales tax wipes out Kids Care, so we will be increasing our rolls of uninsured kids while every other state in the country has coverage for kids and working families.

José Cárdenas: How do we, before we get into the specifics of some of these other budget cuts, how do we compare historically? How bad is this?

Dana Wolfe Naimark: Oh this is by far worse than anything I've experienced. I've been working on state budget issues for 23 years and we have the perfect storm but we did a lot of this to ourselves over the years. Part of it is certainly the economy and the nationwide and worldwide economic downturn and we've been affected very heavily by the mortgage crisis but part of it we did to ourselves by repeated tax cuts over the years, over and over again that become permanent and we've lowered and lowered and lowered our tax base while our population is growing and needs changing and it's coming home to roost. José Cárdenas: And Panfilo there's some suggestion we may be doing it to ourselves again because we have proposals right now for further tax cuts. Does that make sense?

Panfilo Contreras: It makes no sense. It's absolutely irresponsible to be talking tax cuts at the moment of most despair in the state in terms of revenue. There are opportunities to raise revenues very, very quickly. Tax credit programs that could be stopped or eliminated or just waived for a year or two. We're spending over $50 million in tax credits to private schools that aren't part of the public system.

José Cárdenas: Well let's talk about some of the tax cuts, and then I do want to talk about the tax credits. Can you describe, I think it's speaker Adams presented a package of tax cuts?

Panfilo Contreras: The tax cuts that were presented were across the board - reduction in income taxes, reduction in property taxes, across the board. At the time, when we really need to be focusing and looking at how do we increase revenues.

José Cárdenas: But as I understand it, Dana, those tax cuts don't go into effect right away.

Dana Wolfe Naimark: Under the bill that passed the house, they would start in fiscal year 2012, which is really right around the corner, and if we do get the temporary sales tax increase the legislators vote on this week, but the voters have to vote on as well, that's a three-year temporary sales tax. The tax cuts would begin in the second year of that sales tax. So we'd be asking people to vote to pay more at the cash register but their not getting all of that back in services and assets because probably a third of that in that second year is going to tax cuts in other areas. So what will the voters be buying for the tax increase?

José Cárdenas: And Panfilo the suggestion is that the proposal regarding tax credits make the situation worse. How so?

Panfilo Contreras: Well there was a proposal just this week to triple the individual tax credit to private schools from $1,000 to $3,000. That's tripling the amount of money going to the STO's in the 10% limits for those that honor the 10% limit of administrative cost. So while we have a controversy about how these private companies are not following the rules, we're giving them more money not to follow the rules with.

José Cárdenas: And there's some litigation pending on several aspects of this. Can you give us a summary as to what the status of that is?

Panfilo Contreras: Yes, the Arizona School Board Association in conjunction with several other educational organizations filed a lawsuit several years ago on the individual tax credit. It's called the Coterman (SP?) cast. It's a case that's pending in the U.S. Federal District Court in San Francisco. And more recently --

José Cárdenas: That would be the ninth circuit. On appeal now?

Panfilo Contreras: The ninth circuit. The state legislature a few years ago signed and passed a corporate tax credit that we've rendered -- has been rendered unconstitutional but is on appeal also in district courts here in Arizona.

José Cárdenas: Dana, what's the solution? You pointed out a lot of this is factors out of our control. The economy in the dumps, Arizona's been particularly hard hit. What choices does the governor have?

Dana Wolfe Naimark: Not only the governor but all of us as voters and taxpayers, the solution is to add additional revenue to our tax base, and we really have to be thinking not only about surviving this downturn that, hopefully won't last too many more years, but positioning ourselves for the long term. And I think, at the legislature, a lot of times things get positioned as kids versus business, or education versus jobs. Which really is ludicrous because we all need a strong economy and families and kids need good jobs, and we know for businesses, the number one priority is a skilled workforce, that's the number one thing we look at. We cannot offer that if we keep deteriorating what we have in our public schools and what happens to kids before school starts and after school.

José Cárdenas: You talked about increasing revenues. What about bond overrides?

Dana Wolfe Naimark: It's an option that many school districts are pursuing. I think we'll see more bond elections, I think in March and again in May for some school districts. That's a partial solution for some districts and that depends on voter improvement.

José Cárdenas: Panfilo, what happens to school quality if these cuts are enacted?

Panfilo Contreras: Well if these cuts are enacted, obviously, schools can't be maintained as they used to be and we'll be back into the old situation with the Roosevelt V. Bishop case, our schools were unsafe for children to be in many kids to be in, and as they cut, the easiest place to cut are those that don't affect individuals, which are maintenance dollars. Those have been cut for a long, long time. We've been operating with less than half of those revenues and for the last couple years no revenues for continuing maintenance on buildings. It makes the places unsafe and we'll be right back in the Roosevelt V. Bishop lawsuits before we know it.

José Cárdenas: Dana last question, how can people make their voices be heard?

Dana Wolfe Naimark: We invite them to visit our website at azchildren.org and give them really easy tools to speak out to the legislature.

José Cárdenas: On that note, we'll end our interview. Thank you both for being here. I know these are difficult times and I know you're both very busy and involved.

Dana Wolfe Naimark:CEO and President of Children's Action Alliance;Panfilo Contreras: Executive Director of the Arizona School Boards Association;

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