Millions of dollars spent in Pima County schools, mostly for teacher raises, are in legal limbo after a federal judgeβs ruling that Gov. Doug Duceyβs signature education funding measure, Proposition 123, is unconstitutional.
The ruling shocked education leaders, who have been receiving and counting on the funds provided by the 2015 voter-approved measure to pay for things like teacher raises and new computers and textbooks.
In his ruling this week, U.S. District Judge Neil Wake said a large portion of the Prop. 123 funding β βperhaps $344 millionβ β was distributed illegally and may have to be repaid.
βWe would have zero ability to repay this right now,β Gabriel Trujillo, Tucson Unified School Districtβs superintendent, said in response to the ruling.
βThat would just kill us,β said Dan Contorno, Marana Unified School Districtβs chief financial officer.
βOur district has operated under the assumption that Prop. 123 was under sound legal footing with the Legislature and Governorβs Office conducting the proper due diligence prior to the measure going out to voters in the first place,β Victor Mercado, Sunnyside Unified School Districtβs spokesman, said in an email.
The issue is far from settled, as the state plans to appeal Wakeβs ruling.
Prop. 123 was designed as a compromise between schools and the state to end a longstanding lawsuit over state policymakersβ refusal to pay required inflation funding despite a courtβs order to do so.
The plan was twofold: It increased payouts to schools from the state land trust and added additional school funding from the state general fund.
In his ruling, Wake said that when Arizona became a state, Congress gave it federal land as a trust fund to benefit schools in perpetuity for future generations. But Prop. 123βs increased payouts from that trust shrunk the trust at a much faster rate than Congress intended when the trust was authorized.
That, Wake said, was unconstitutional and harmed future generations.
βIt does not matter that the Arizona Education Association, Arizona School Boards Association, and Arizona Association of School Business Officials supported Proposition 123. β¦ The schoolsβ current incentive to get extra money for their current needs is at odds with the interest of future Arizona students,β Wake wrote.
In a move spearheaded by Republican U.S. Sen. John McCain and Democratic U.S. Rep. Kyrsten Sinema, Congress this month consented to the changes to the land-fund distribution instituted by Prop. 123.
Wake wrote that with that, the question of legality going forward became moot and only left the question of what to do about the past $344 million in payments made from the land trust before Congress approved the change.
For the nine major school districts in Pima County, that comes out to nearly $36 million in funding that has already been spent and which they now may be on the hook to repay.
TUSD could be on the hook for about $14 million.
βI am very, very concerned. And I think this is something that will be hanging out there for a while, until the matter is addressed through legal channels,β Trujillo said.
TUSD was unique in spending the majority of its Prop. 123 money, about 60 percent, on new technology for schools that donβt have computers or Wi-Fi, rather than increasing employee salaries.
βThe purpose of that is to try to bridge the digital divide that exists between some of our schools that get millions of dollars in desegregation money or Title I money. β¦ What we were trying to do is equalize the playing field,β Trujillo said.
But the district still put millions into raises and was able to get teachers raises of about $700, while also instituting 1 percent raises for all other staff, Trujillo said.
βWeβve spent a bulk of it on capital, but we also want it known that we took a healthy chunk of our Prop. 123 monies and put it into taking care of our employees,β Trujillo said.
Thereβs no way for TUSD to repay those funds, and Trujillo argues that because the state passed an unconstitutional funding source, the burden to repay those funds should fall to lawmakers and the governor.
βIf there was an erroneous decision made β¦ the burden of repayment should fall on the institution that used the funding source, which in this case would be the state,β he said.
The Sunnyside district has used all the proceeds from Prop. 123 to increase salaries, raising average teacher pay by almost 9 percent, salaried blue-collar positions by nearly 7 percent and administrative pay by 4 percent, according to Mercado.
At the Vail Unified School District, the funds have been used for a mix of capital needs and salary increases, according to Associate Superintendent John Carruth.
Carruth provided numbers showing Vail used about a third of its initial $1.9 million lump of Prop. 123 in 2016 on laptops for teachers. The rest of that money went toward retention bonuses for employees.
With its ongoing payments, the district has given teachers a 4 percent raise, and all other staff a 3.5 percent raise.
Contorno, the chief financial officer at the Marana district, said the district used its Prop. 123 money to give teachers raises of 2 percent and to give other staff workers 1 percent raises.
Much of the funding also has been used to keep up with the rising minimum wage and to give other hourly employees raises to ensure wage compression doesnβt become a problem.
Scott Little, chief financial officer for Amphitheater Public Schools, said the district has put nearly all of its Prop. 123 funds into salaries, either as bonuses for the first year or as ongoing pay raises.
The district was able to give 3.6 percent raises in July 2016 because of Prop. 123 and another 1.4 percent raise in July 2017.
βThe issue for us, and I think every school district around the state, is weβre having a hard time attracting and retaining teachers. Yes, we have other needs β capital needs from other unfunded things the Legislature has taken away. But right now without the human capital, we canβt function. So all of it went to wages,β he said.
And Little agreed that if the ruling is upheld, the responsibility to repay the funds should fall to lawmakers and the governor, not schools, since the entire purpose of Prop. 123 was to repay inflation funds that were illegally withheld from schools.
βThe ruling as it stands does not impact the requirement for the state to pay inflation. So the issue is really β¦ is it the responsibility of the state general fund, or is it allowed to be the responsibility of the land trust?β he said.
