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Arizona's Guide to Voting "No" on Prop 123

Arizona's Guide to Voting "No" on Prop 123

As November’s presidential election dominate the national political discussion, Arizonans have found themselves debating a much more pressing vote.  On May 17, the state will decide whether to approve Prop 123, a measure that would permanently change Arizona’s constitution and alter the state’s education funding for at least a decade.

The (Sorry) State of Education

There is exactly one thing that both sides of the Prop 123 debate agree on: the state’s K-12 schools need money, and they need it as soon as possible.  Arizona spends less on its students than almost every other state, ranking 49th in the nation.  According to a report by the Arizona Department of Education, thousands of teachers have left the state since 2010, citing low pay and lack of classroom resources.  The report warns that if the turnover rate continues, “Arizona will not be able to ensure economic prosperity for its citizens and create the workforce of tomorrow.”

The lack of qualified teachers willing to work in the state has meant a doubling of responsibilities for those willing to tough out the financial crisis.  The New York Times reported last year that in a school district east of Phoenix, “the superintendent is also a grant writer and the principal of the elementary school is also in charge of keeping the toilets running, as the district’s director of maintenance.”  With national stories like these and pressure from state residents, Arizona legislators have been desperate to fix the problem. 

The looming vote on Prop 123 will be a decisive moment in Arizona’s education funding debate.  Will Arizona schools get an immediate injection of cash, or will voters hold out for a better deal?

The Basics

Arizona’s K-12 schools are funded by the state’s land trust.  When Arizona became a state, it was trusted 9.3 million acres of federal land to be managed “for the highest and best use.”  The sale, leasing and mineral rights of these lands generate the state’s funding for primary education.  Each year, schools currently receive 2.5% of the fund’s principal.

Proposition 123 would increase the annual payout of the trust fund to 6.9% for 10 years.  The benefit of this option is clear: schools receive much-needed money for the next decade, beginning as soon as possible.  In order to understand why some groups oppose this increase, it will benefit the voter to examine the substance of their arguments one at a time.

The Principal of the Thing

Naturally, with more money coming out of the land trust each year, the principal of the trust decreases more quickly.  According to Arizona’s Joint Legislative Budget Committee (JLBC), Prop 123 will decrease the principal by 3.79% every year.  This creates what opponents describe as a “fiscal cliff”.

As of now, K-12 education receives about $177 million annually.  If Prop 123 passes, JLBC estimates the payout after its 10-year expiration date will be only $100 million annually, putting Arizona students in an even worse place than they are today.  It is for this reason that opponents sometimes call the proposition “a tax on the future”.  Characterizations like this speak to fiscal conservatives who tend to focus on long term cost-benefit analysis.

To make the fiscal cliff worse, a 20-year sales tax of six-tenths of one percent (Prop 301) was passed in 2007 for K-12 education.  This is even more funding that will disappear the same year that Prop 123 expires in 2027.

Advocates for Prop 123 do not usually argue with these assessments, but say that this is still the best option available in a very bad situation.  (When State Senator Andrea Dalessandro visited a Patagonia, AZ, town hall meeting recently in support of the proposition, she unenthusiastically called it “the best deal we could get with the leadership we have right now.”)

Illegal Precedent

Opponents of Prop 123 point out that the state of Arizona already owes its schools a great deal of money that it illegally withheld for years.  A voter-approved law passed in the year 2000 required that the amount of land trust money paid to public schools increase each year with inflation.  When the state found itself in the middle of the 2008 recession, the Republican legislature decided to ignore the law.  From the years 2009-2013 the total paid to Arizona public schools remained flat as inflation rose. 

The largest education groups in the state filed suit against the legislature, demanding the money that schools were owed.  The law suit dragged on for years, but in July of 2014, a Supreme Court judge finally ordered the state to pay K-12 schools the hundreds of millions of dollars it owed. 

If Prop 123 passes, the state will be totally off the hook for these payments.  Abraham Morgan, organizer with Vote No on Prop 123 calls this "repaying money the state stole from the schools’ piggy bank by raiding the schools’ trust fund."  The Arizona League of Women Voters is another organization that has come out against Prop 123.  Shirley Sandelands, who is currently serving as president of the organization, says that their decision is fundamentally about law and order.  "Our main concern is that this disenfranchises the voters after they approved a law," Ms. Sandelands said.  "If a proposition is approved by the voters of Arizona, and a few years later the legislature and governor just decide not to follow it, does that mean they'll not follow other voter propositions?  The legislature should pay the money.  They have the money.  They should follow the Supreme Court ruling, which ordered them to pay it."

Net Negatives

Worse yet for some voters, Prop 123 pays out less than 75% of what the Supreme Court has ordered in its ruling against the legislature.  In the view of opponents, the proposal is an easy way for lawmakers who would like to limit education funding to keep from paying what is due, while telling voters that this is the only way schools will get money at all.  (In fact, the state doesn’t have a choice but to pay what the courts have ordered it to, regardless of what voters choose on May 17.)

Arizona’s ranking in per-student funding will not be much improved if Prop 123 is passed.  If approved, the state will only rise from 49th to 46th in the nation.  In order to bring Arizona up to the national average, the state would need an additional $2.8 billion annually.  Prop 123 provides an “additional” (if you ignore that the schools should already have the money anyway) $300 per student, per year.  Rising to the national average would require an increase of ten times that amount, which is not currently within the realm of possibility.

Trigger Warning

Some of the most controversial parts of the bill are the permanent changes that will be made to the state’s constitution.  These come in the form of several “triggers” that leave the future of education funding subject to other circumstances in the state. 

Eager to prevent the state from having to pay inflation rates during any future recession, the first major constitutional amendment creates a trigger that will allow the state to stop inflation increases in the event of an economic downturn.  In the view of opponents, Prop 123 not only prevents the state from paying what it currently owes to schools, but creates a permanent legal framework for not having to pay in the future. 

Public education currently comprises 42% of the state’s budget.  Prop 123 also amends the constitution to allow the state to cap spending on schools at 49%.  This effectively prevents Arizona from ever reaching the national average of per-student funding. 

Opponents of the proposition also point out that the Republican legislature is actively attempting to reduce budget spending across the board.  As other parts of the budget are reduced, the percentage consumed by education necessarily grows.  It is conceivable that education could eventually grow to 49% of the state budget without ever receiving any extra money.

Wealth Redistribution? 

There is much conversation about the potential effects of Prop 123 on public schools.  Less talked about are its effects on their growing entanglement with private schools through the Empowerment Scholarship Account (ESA) program. 

The ESA is a program that was originally started in 2011.  It essentially redirected public (land trust) funds to cover private school tuition for special needs students.  In 2014, ESA was expanded to cover students who are attending “poorly performing schools”.  Earlier this year, however, a study by the Arizona Republic found that about 75% of the public funds appropriated by the program were used by students leaving high-performing schools in wealthier districts. 

Republican legislators have recently been pushing to expand the program to all of the state’s 1.1 million school children by the year 2020, a move that critics say would essentially dismantle the public education system.  This is not paranoia; a bill that would allow this massive shift passed the Senate this year in a 17-13 vote, but stalled without receiving the necessary majority in the House. 

Opponents of Prop 123 point out that if it passes, some of the funds provided by the initiative will already be taken from public schools.  In a future legislative session, it is possible that all future money from the land trust could be swept into the coffers of private enterprise.

Manufactured Crisis

In interviews with local and state media, Governor Doug Ducey continues to insist that “Prop 123 is plan A, B and C,” suggesting that a “yes” vote is the only option the state has.  In reality, Arizona is sitting on a budget surplus that is more than able to cover what the state owes public schools without dipping into the trust fund principal or changing the constitution.  This is exactly what State Superintendent of Public Instruction, Diane Douglas, has been demanding since last year.

As the year 2014 neared a close, Mr. Ducey had just been elected governor and Arizona was doing its best to prepare for a projected $132 million budget deficit.  Citing financial straits, Mr. Ducey cut $100 million from state universities.  The deficit was an accidental hoax.  The state ended up with more than $250 million in surplus, with a rainy day fund of $460 million to boot.  Prop 123 allows Mr. Ducey to appear proactive on education funding after his cuts, avoid paying more than 25% of what the state already owes its schools and still be able to truthfully claim to his conservative voter base that he never raised taxes for education – all while putting measures in place that would prevent the state from having to pay the inflationary costs in the future that voters approved years ago.

Given all of this, Morgan Abraham of Vote No on Prop 123 agrees with State Superintendent Diane Douglas:

“When the AEA and other education associations were negotiating this deal, we didn't realize we had this huge budget surplus.  Fast forward a year now, and we're kind of stuck with a deal that was meant for a much worse economic situation than we thought Arizona was in.  So all my group's saying is, isn't it more logical to use the money that's sitting in the general fund, than really putting the future at risk 10 years from now?”

Along with Mr. Abraham and Ms. Douglas, State Treasurer Jeff DeWitt also strongly opposes Prop 123.  Mr. Dewitt is Arizona’s lead asset manager, banker and financier, making his opposition an especially troubling problem for advocates of Prop 123.  Mr. Dewitt calls into question the very constitutionality of the proposal and says that voters may be initiating a string of legal challenges by approving the measure. 

While the majority of every annual land trust payout goes to education, DeWitt says he would also be forced to proportionally increase the payout to other beneficiaries of the trust, including the state prison system.  This does not sit well with considerable portions of the voter base who were already displeased with Mr. Ducey’s handout of $100 million to prisons in the same budget that slashed $100 million from state universities.  Even strongly Republican districts of the state openly called into question the financial priorities of the legislature concerning the disparity of these two financial adjustments.

"Overwhelming Force"

The officials that have set to work convincing Arizonans to vote yes on Prop 123 are pulling no punches.   Former State Superintendent and current lobbyist Jaime Molera decribes the strategy as employing "the Powell doctrine", a reference to Colin Powell's advocacy of "overwhelming force" in the second Gulf war. 

The income generated by well-connected advocates for Prop 123 has been astonishing: $25,000 from William Post, $50,000 from the Arizona Cardinals Football Club; $100,000 from the founder of Fulton Homes, $100,000 from Helios Education Foundation; and $220,000 from Greater Phoenix Leadership, just to name a few.  Desperate for immediate funds, some education groups have also advocated for Prop 123 to prevent the immediate loss of more teachers and further decaying infrastructure. 

These advocates have a simple, media-friendly message to get out: Vote yes, and schools get money.  In contrast, opponents of Prop 123 have a much more complicated task in explaining the historical context and pitfalls of the proposition.  No one wants to appear careless toward a crumbling school system.  It remains to be seen whether the public will have all of the information necessary to make an informed choice.  If so, will they take the quick cash, or force the state to pay what it owes?