PHOENIX — Any move next year to cut taxes for business could undermine voter approval of the deal to boost school funding, the head of the state teacher’s union warned legislators.
Andrew Morrill said Thursday the Arizona Education Association strongly supports the proposal to put an extra $3.5 million into schools during the coming decade.
It also has the backing of Gov. Doug Ducey and Republican lawmakers, something it gained because most of the cash would come from increasing withdrawals from the state land trust account. That leaves untouched hundreds of millions in a surplus and the state’s “rainy day” fund.
But Morrill said it would send the wrong message to voters if lawmakers turn around and use those same dollars to cut taxes for business.
“People are going to be paying attention,” he said.
The key, said Morrill, is recognizing that this deal does not resolve concerns about education funding and Arizona’s position of having among the worst per-student funding in the nation.
“This was the settlement of a court case,” he said, addressing what the schools claim — and at least one trial judge ruled — was the illegal failure of legislators to fulfill a voter-approved mandate to increase education funding annually to match inflation. Morrill said the education groups that sued five years ago decided to settle for less than what they believe they were owed to get some dollars flowing as soon as voters approve the deal in a May 17 election.
“There is no other way for this kind of money to get into the fiscal year this year, protect inflation funding going forward,” he said.
“We have capital needs, we’ve lost full-day kindergarten,” Morrill explained.
Those needs will require money, including the cash being left in the bank by funding this settlement with trust proceeds.
“I think it is reasonable to assume that folks will be watching to see what other statements are made about this state’s ability to fund education,” he said. “They’ll want to know that this state is on a path to a serious investment in education going forward.”
Morrill’s comments came as the coalition of educators, political and business interests took the first steps Thursday to start raising money to convince voters to approve Proposition 123.
Sharon Harper, chosen by Ducey to head the campaign, did not address questions about the effect a legislatively approved tax cut might have on voter attitudes. Instead, she stressed the point about getting dollars to schools without raising taxes — and, by extension, without tapping the balance in the general fund.
“So this is the start of something wonderful,” Harper said.
Concerns about a tax cut may be well founded: Ducey was elected on a platform to cut taxes every year he is in office. He made good on that last session by signing legislation to index income tax brackets, a move designed to ensure that people are not paying higher tax rates solely because their wages have increased at the rate of inflation.
Gubernatorial press aide Daniel Scarpinato sidestepped questions about whether the governor, who has said he is eager to get voter approval for the plan, is willing to disavow any interest in pushing for or signing any new tax breaks next year.
“The answer is we’re currently working on next year’s legislative priorities and the budget,” he said. “And when we have more on that, we will let you know.”
Scarpinato would say only that Ducey will have a proposal that’s “very responsible.” But he would not speculate on whether using the state’s surplus to cut taxes for business would make voters think twice about ratifying the plan.
While there is not yet any organized opposition, state Treasurer Jeff DeWit said there is a fiscal downside to what will be on the ballot.
He said the deal involves taking an additional $2.1 billion out of the fund above current withdrawals. The result, DeWit said, would be less money to reinvest and earn interest.
That means in 2026, when the extra dollars dry up, there would be less money available for state aid to schools. And DeWit said that’s not a one-time problem, saying that $2.1 billion extra for the next decade translates into schools getting $6.8 billion less in the 40 years that follow.
