PHOENIX — Calling other plans too little or too late, state schools chief Diane Douglas on Friday proposed using a state surplus and “rainy day” funds for an immediate $400 million cash infusion to schools.
Douglas said the top complaint she heard during a “listening tour” earlier this year was inadequate funding of public schools. Budgets approved by state lawmakers and Gov. Doug Ducey and his predecessor have left schools short of what they say they are owed under state law and need to adequately educate children.
The superintendent of public instruction pointed out that Arizona ended the last fiscal year on June 30 with $325 million in the bank. And revenues so far this budget year are running above projections.
“I believe Arizonans can no longer afford to wait to provide higher quality education to our children,” Douglas said in a prepared statement. She said there needs to be an “immediate appropriation” of $400 million, specifically earmarked either to hire more teachers or increase the pay of those already on the payroll.
That would not be a one-time infusion, with that same amount added to base funding in future years.
Douglas spokesman Charles Tack said this would be in addition to whatever courts rule the state owes public schools for failing to fully increase state aid annually to account for inflation. A trial judge has set that figure at $330 million for this year; a separate claim for more than $1 billion in missed aid is still pending.
Her plan, which would include a special legislative session this fall, is in sharp contrast with the proposal unveiled this summer by Ducey to tap into the principal of the state land trust fund to add $300 million a year.
That proposal requires voter approval. Even if lawmakers approve a special election, new dollars before next school year are practically eliminated.
Douglas is not the only Republican statewide elected official who contends the state has the money now to boost education funding and should not be digging into the trust fund.
State Treasurer Jeff DeWit on Friday pointed out that the value of the fund, which is the sole source for Ducey’s funding plan, has dropped by about $200 million — close to 4 percent — since the governor first proposed it.
Ducey’s plan assumes a 6.9 percent rate of return on the more than $5 billion in the fund.
But DeWit, who opposes Ducey’s plan, said the volatility of the stock market where 60 percent of the fund is invested shows the folly of relying on that to fund education. He also said any rate of return has to be discounted for inflation.
That brought a rebuke from gubernatorial press aide Daniel Scarpinato.
“Our projections are based on the facts and on actual historical evidence and returns, not on an arbitrary snapshot in time that has absolutely no relevance on its own,” he said.
Scarpinato defended the 6.9 percent return as “based on real projections.” But he said even using lower historical rates of return, Ducey’s plan to take an extra $2.2 billion out over 10 years still leaves the trust with more at the end of that time than it has now.
DeWit said that’s true. But he also said Ducey’s plan to raid the principal will leave the permanent fund, whose earnings are dedicated to public education, with $3.7 billion less than it would have at current rates of withdrawal.
Scarpinato was noncommittal when asked about what Douglas proposed.
“We’re willing to consider anything that gets more money into the schools,” he said. Scarpinato said the only thing Ducey would find unacceptable would be a tax increase.
House Minority Leader Eric Meyer said what Douglas wants is far superior to what Ducey has proposed. And he praised her for coming forward.
“She’s questioned the governor’s plan as not a fix but more of a gimmick, and not a solution to the challenges and the crisis, quite frankly, in our education system in Arizona,” he said.
Douglas’ plan also differs from one that Republican legislative leaders crafted in response to what the governor proposed.
It includes $100 million in new money, though not until next school year. Another $400 million would come from trust funds and raiding a voter-approved fund for early childhood development which, like the land proposal, would need voter approval.
Douglas called the delay unacceptable.
“We have more than $9 billion in the general fund and revenues are increasing,” she said. “If not now, then when?”
There was no immediate response from either Senate President Andy Biggs or House Speaker David Gowan.
But Biggs has said the “cash carry forward” — he will not call it a surplus — cannot be counted on in future years.
Andrew Morrill, president of the Arizona Education Association, said he was happy by what Douglas unveiled.
“You have to applaud the superintendent for coming out, identifying a priority area — teacher shortage, lost positions — which impact class size, and saying these are areas that have to be addressed, and then further saying it’s going to take money to address them,” he said.
Tack said the announcement has nothing to do with the recall drive against his boss.
“This is something we felt was really important to get out as soon as possible,” he said. “Every day that our schools and teachers and students are forced to wait for more funding, those are resources that they can’t get back.”
