School plan has less money, but funding guarantees

PHOENIX — State lawmakers are set to vote this week on a deal that would settle a 5-year-old lawsuit that would give Arizona schools hundreds of millions less than a judge ruled that they are legally entitled to get.

A trial court ruled last year that the state for years has illegally ignored a 2000 voter-approved mandate to boost aid to education annually to account for inflation. Maricopa County Superior Court Judge Katherine Cooper pegged the current shortage at about $330 million, a figure that over the next decade, with inflation, would total about $3.8 billion.

And that doesn’t include another $1.3 billion schools claim they are owed for missed payments going back to 2009.

By contrast the package awaiting legislative action has a price tag of $3.5 billion over the same period.

But the plan has the blessing of the Arizona School Boards Association for a simple reason: It guarantees an additional $225 million this school year — pending legislative and voter approval — without the risk that an appellate court could take it away.

Overall, with money lawmakers already approved for this year, that comes out to an average of about $350 per student this school year — assuming lawmakers approve the deal in special session tentatively set to begin Wednesday and voters ratify it next May.

There also is guaranteed additional money for the next decade, meaning schools won’t have to engage in an annual fight for resources.

And perhaps the most significant, the plan eliminates the risk that an appellate court could take away the dollars that Cooper ruled in 2014 the schools already won.

More to the point, it’s guaranteed. And it could be more what with inflation.

The plan leaves intact that voter-approved requirement for lawmakers to adjust state aid annually to account for increases in the cost of living, up to 2 percent a year.

In a nod to the often roller-coaster economy, the deal does permit lawmakers to suspend those additional payments in years of tepid economic growth. But it is crafted so that the schools eventually would get the inflation boost they missed when the economy improves.

There is language in the plan that could allow the extra money to go away entirely. And after 2026, under certain conditions, schools actually could have to give back some of the previously granted inflation aid.

Tim Ogle, executive director of the Arizona School Boards Association that has led the multi-year fight, said Monday he is pleased with the deal. And he said it should be no surprise schools are willing to settle the lawsuit and put the fight behind them.

His organization made an offer a year ago to drop its demand for $1.3 billion in missed aid in exchange for lawmakers agreeing to cough up the money a trial judge already ruled the schools are owed. That proposal went nowhere as Senate President Andy Biggs balked, saying he was still convinced the state can win the whole lawsuit.

In many ways, Ogle said, this new deal is pretty close to what the schools offered last year, even though it is not quite what they had hoped for when they sued in 2010.

Gov. Doug Ducey, who was instrumental in getting the deal, said he was pleased with the final product.

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“I am happy with the possibilities we have in front of us,” he said.

The governor said he recognizes he still needs to sell this to the legislators.

Republican lawmakers were still being briefed and declined to comment. But Democrats, who were left out of the negotiations, have concerns.

Most significant is that the lion’s share of the new funds comes from nearly tripling the amount of money withdrawn each year from the state land trust account for the next decade. These are the proceeds from the sale and lease of the 9.2 million acres left of what the federal government gave Arizona when it became a state in 2012, legally earmarked for education.

House Minority Leader Eric Meyer said that’s not necessary.

“We would have used dollars that are sitting in the general fund now to fund our schools,” he said. That comes close to $800 million between the cash left over from last fiscal year and what’s in the state’s “rainy day” fund.

The concern, Meyer said, is that larger withdrawals from the trust mean less money at the end of the decade, money that will be needed for students in school at that time.

Katie Hobbs, Meyer’s Senate counterpart, said her members still believe that schools need more money than is in the deal.

“This isn’t new money,” she said.

“This is paying a bill that we owe,” Hobbs said. “And it’s actually paying less than we owe.”

But with the schools satisfied with the deal, do Democrats go along?

“We’re working on that now,” Hobbs said.

Ducey conceded the plan, which has yet to be reduced to actual legislation, still has a way to go.

“We’ve got some work to do before we get it done,” he said.

And even if lawmakers go along, the plan needs voter approval because it involves changing that formula for withdrawing funds from that trust account.

In 2014 Maricopa County Superior Court Judge Katherine Cooper pegged that figure at more than $330 million a year going forward, a ruling lawmakers had appealed. A separate judge has yet to rule on the schools’ claim they also are due more than $1 billion in missed aid.