Members of the Legislature unwrapped the education-funding package Tuesday and revealed an unsightly gift.
It’s such a convoluted contraption I can’t help but wonder if this is really the best we can give our schools, kids and teachers.
The Arizona Republic’s Mary Jo Pitzl quoted one observer looking over the proposal for the first time Tuesday as saying it “looks like it was written on three different napkins, from different bars.” Indeed.
This package, as you may know, is a set of proposals that would resolve a five-year-old lawsuit by school districts against the Legislature. The schools have argued, and Arizona’s courts have agreed, that the schools are owed additional inflation funding that would add up to $336 million or so this year alone and keeps growing every year with inflation.
For the Legislature, holding out seems to have worked. The deal would let them slither out of obligations that we the voters made to the schools in 2000 when we passed a sales-tax increase of six-tenths of a cent to go to schools. The proposition included an inflation-funding mandate, which the Legislature stopped paying in 2009 after the recession hit.
There’s a lot to wonder at in the proposal: It would allow the Legislature to stop paying inflation increases if K-12 education ever equals 49 percent of the state general fund, for example. Why that percentage? Is there something to be ashamed of in paying half our general fund to schools?
It also would allow the Legislature to skip inflation funding if state sales tax revenue doesn’t increase by 2 percent in a given year and job growth also stalls. These are big give-backs.
What’s most startling to me is the deal would use increased withdrawals from the state’s land trust to pay for most of the inflation increases that the deal agrees to. Legally, the state land trust may only be used to pay for schools and other, much smaller purposes.
You see where I’m going? The schools are being paid the inflation funding they are owed with money that is already theirs. It’s like taking money out of their bank account, handing it to them and saying, “Here’s that money we owe you.”
When Gov. Doug Ducey first proposed his plan to increase withdrawals from the state land trust to pay for education, he proposed it as $2.2 billion that would be separate from the settlement of the inflation suit. Now they’re all bundled together as one unholy apparatus.
I say “unholy” advisedly, though not as a Biblical scholar, because the level of withdrawals proposed is worrisome.
Previously, Ducey proposed withdrawing between 5 percent and 10 percent of the trust every year for 10 years. While Ducey is the former state treasurer and informed on this subject, he ran into an unmovable obstacle in current treasurer Jeff DeWit, who said Ducey’s plan was financially unwise because it proposed withdrawing too much from the trust.
I talked to DeWit on Tuesday, and he said the withdrawals in the plan revealed Tuesday — a proposed 6.9 percent-per-year rate — would add up to almost the exact same amount as under Ducey’s plan. He and the state Board of Investment maintain that 3.75 percent per year is the maximum financially responsible amount, he said. Right now, withdrawals are capped at 2.5 percent, so that’s 1.25 percentage points of wiggle room right now.
Like legislative Democrats, DeWit, a conservative Republican, would instead use the state’s budget surplus to pay for the required inflation increases. He noted that, because the plaintiffs in the suit were willing to accept about 70 cents on the judicially approved dollar of inflation funding, the Legislature could simply tap the surplus to pay for it now.
“This is like we just agreed to let them burgle our house, steal our money, then give back 70 percent of it,” state Sen. Steve Farley, D-Tucson, told me. “Then we agreed not to press charges because the trial would take too long.”
Instead, they are relying on voters approving two separate ballot issues — one to increase withdrawals from the state land trust and the other to alter the inflation-funding terms of Prop. 301.
“Why would we not just jump on that, solve this thing and finish it on Friday?” DeWit asked. The governor, he said, “can still accomplish his goals, solve the schools’ lawsuit, and have money to spare without touching the schools’ trust.”
Unspecified in that critique was one of the governor’s key stated goals — cutting taxes every year of his term. It bears keeping that in mind because it is the only way to understand why the Legislature and plaintiffs would agree to such a deal when we could just pay our bill straight up, though we might need to cut some existing tax loopholes or credits while tapping the surplus.
Why instead agree to this complicated deal? From the Legislature’s and governor’s perspective, it allows them to not only avoid any appearance of raising taxes but also perhaps to cut them more.
And from the plaintiffs’ perspective? I asked Tim Hogan, one of the plaintiffs’ lead attorneys, and he essentially said there was no alternative.
“The point is to get money to schools now, compared to the risk of going forward and the risk of litigation,” he said.
It would probably have taken two more years to resolve the case, he said. The land trust funds “are what were on the table.”
“Here’s my interest: Getting money in the classrooms as quickly as possible,” Hogan added. “I’m convinced that balanced against the risk we face, against the delay, this is a good deal.”
But against the alternative of actually paying our bills straightforwardly, without gimmicks or complications, this is a real stinker.