Arizona Education Network

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After another very contentious week of wrangling, the House and Senate finally passed a set of budget bills and sent the resulting package to the Governor for her review.

The budget that the sent to the Governor’s office is almost identical to the fiscal plan that Governor Brewer vetoed and declared “fatally flawed” and “devastating to education, public safety and state health services” just this past month.  Nonetheless, the legislature has adjourned until Tuesday, August 25^th in the hopes that legislative leadership will be able to convince the Governor that she should rethink her position.

In this AEN update, we are starting the Q&A with a rhetorical question of our own.  This is followed by answers to your latest legislative questions as well as updated links to the relevant legislation and recent media updates.

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So – why is this ‘budget not a budget’ in our book?

The Arizona Constitution requires a balanced budget – and this proposal simply does not meet that requirement. The non-partisan Joint Legislative Budget Committee (JLBC) was asked recently to weigh in on the impact of this budget package if it were to pass. Their resulting FY 2009 – FY2013 Balance Sheet report paints a bleak financial picture.
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The JLBC report provides the following budget shortfall estimates (with the assumption that the proposed sales tax increase does not pass):

$624,900 in FY 2010
$ (1.9) B in FY 2011
$ (3.0) B in FY 2012

$ (3.1) B in FY 2013
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These balance estimates do not reflect last year’s (FY 2009) shortfalls, which are now estimated at around $ – 474 million. This includes the $250 million in anticipated FY2009 federal stimulus money for K-12 education that is now being withheld until FY 2010. (See further details below.)

…..*The proposed sales tax idea is also dead in the water – the legislature couldn’t find enough votes to get it put on the ballot at the end of this year and it does not appear on any of the bills currently sitting on Governor Brewer’s desk.

Question:  I had heard that the legislature passed the budget bills last week. Why is it taking so long for you to send an update…and for the legislature to forward the bills to the Governor?
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There has been a lot of hurry-up-and-wait during the last couple of weeks. The vast majority of scheduled legislative meetings haven’t started on time (if at all) and very little real progress has taken place in the public eye.
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HB2011 (K-12 budget reconciliation) is an excellent example of procedural delays in action. The Bill was passed in the House and was transmitted to the Senate on July 31^st…but it didn’t make the Senate First Read until August 12^th, and wasn’t transmitted back to the House again until August 20^th. In other words, 14 business days passed during this process – and all of this for a bill that is almost identical to the K-12 bill (SB1187) that was vetoed by the Governor on July 1, 2009.

Why was the legislature dragging this out? Mainly to buy time in an effort to secure enough votes…and to try to dodge the latest unanimous Arizona Supreme Court ruling that ruled that bill transmission to the Governor must abide by the rules in the Constitution.

Question:  What’s the latest news on the state equalization tax? Didn’t we already pass the deadline to make any changes to the tax law?

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Yes – the deadline for setting the property tax rates has officially passed…but deadlines don’t mean much to our current legislature. The state’s 15 counties are all waiting until Monday (August 24^th) afternoon to see what the Governor is going to do…after that, however, most have indicated that they will have to move forward with the updated property rates.

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The state equalization property tax was enacted in 1981 at $.50 for every $100 in assessed value to fund public education. In 1990, this rate was increased to $.53 per every $100…but has since fallen every year since the TNT provisions of 1998 and with the increases in property valuation.
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During our last ‘boom’ period, our legislature wanted to repeal the tax. After negotiations with the governor’s office, it was agreed that the tax would be suspended for 2006, 2007 and 2008; and that the state’s general fund (main pool of tax revenue) would compensate the schools for any monies lost by the suspension of the tax. During those three years, the total value of the state equalization property tax was $215m, $230m, and $250 million dollars.
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If Governor Brewer does not sign the bill on Monday, the tax will automatically go back into effect and would net approximately $250 million a year specifically for education. The cost to the taxpayers is approximately $70 per $200,000 in home value and $727 for every $1 million in assessed value for businesses.

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Question:  I read that Arizona’s credit forecast was downgraded to ‘negative’ this week. What does that mean exactly?
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On August 20^th Standard & Poor’s, a leading financial research and analysis firm, revised their outlook from stable to negative in regards to Arizona’s issuer credit rating (ICR), outstanding certificates of participation (COPs) and lease revenue debt & underlying rating (SPUR).
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In their press release, S&P noted that the revised outlook was “based on our opinion of the state’s diminished financial flexibility, which is the result of softening revenue streams and reduced reserves. Additionally, the state lacks a final, full fiscal 2010 budget, which is a break from the state’s history of regular and timely budget action. Insufficient or untimely adoption of a final, full budget makes the projection and management of cash flows more challenging.”
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S&P Credit analyst Matthew Reining also expressed concern that the state’s “significant financial deterioration” and “potential prolonged budgetary inaction” could hobble the state’s ability to rebound and return to structural budgetary balance.

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How does this impact all of us? It is necessary to note that the dire forecast by S&P is just that – a forecast. Although they aren’t viewing us in an optimistic light, they haven’t actually downgraded Arizona’s actual credit rating. Yet.

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Our state’s credit rating, however, impacts how much we taxpayers pay in interest and insurance when the state has to borrow or issue bonds. A poor credit rating for our state means that Arizona pays higher interest rates – and that means that more of our tax dollars will have to be diverted simply to service higher debt fees.
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Question:  My school district received a letter last week stating that the $250 million in Federal Stimulus money that was supposed to be allocated  for our FY 2009 budgets is now being withheld. What the heck happened to this money??
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The Arizona Office of Economic Recovery (OER) sent a letter to all school districts and charter schools last week to inform them that they had “decided to move the $250 million distribution from FY2009 to FY2010.”
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The letter continues: “The OER is still working with the U.S. Department of Education, Arizona Department of Education and the Legislature to clarify additional points about the application and distribution process. As soon as those points are clarified, OER will publish the FY 2010 funding application, the draw down timeline, and other requirements.”
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What exactly does this mean? We aren’t sure. All of the school districts that we have spoken with took part in a rushed process to submit the FY 2009 application for the federal funds – a process which now appear to be null and void.

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We contacted OER director Jim Apperson on August 20^th to clarify some of the main points contained in the letter. Among our questions: The federal government guidelines show that the $250 million in FY2009 money was a “mandated restoration” for that specific fiscal year…can it be applied in 2010? Will the decision to defer FY2009 funding impact Arizona’s ability to compete for the other federal education grants (including the competitive “Race for the Top” funds)? And above all – why was the money withheld and where is it now?

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Alas, when we spoke briefly to Mr. Apperson and told him that we were doing research for a parent newsletter, we were told that he “needed to have his communications director” in the room with him before he could answer our questions.  Hmmm. After his promised return phone call never materialized, our subsequent calls and an email with our specific questions went unanswered. We will send a status update if we ever hear back from his office.

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Question:  This all sounds like bad news. Can’t you guys lighten up? Throw us a bone – there has to be some budgetary good news out there!
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All of the long-term capitol denizens we have spoken to this week say that this is by far the most unproductive governmental session that they have ever witnessed. One senior Republican told us that the atmosphere was “toxic,” and your AEN representatives have personally witnessed some very disturbing rhetoric and behavior in the public legislative sessions.
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BUT – there is always hope. Arizona certainly deserves a better option than what is on the table right now. Governor Brewer is said to be working on alternative budget options this weekend with a much wider circle of legislative representatives from both parties. There are three majority Senators – John Nelson, Barbara Leff and Jay Tibshraeny – who have reportedly been working with the Governor’s office and minority party members to negotiate a bi-partisan budgetary compromise that will actually bridge our budget deficit.

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Please consider contacting Governor Brewer once again (www.azgovernor.gov or (800) 253-0883) and insist that we need a budget based on factual and accurate information – ideology and dogma have had their day and it is time for our state to move forward.
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We have also included the contact information for the aforementioned Senators below (as well as the contact information for pro-education moderate Carolyn Allen) should you feel inspired to contact them and urge them to continue working towards a common-sense approach.
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Senator John Nelson — 602-926-5872 — jnelson@azleg.gov

Senator Barbara Leff — 602-926-4486 — bleff@azleg.gov

Senator Jay Tibshraeny — 602-926-4481 — jtibshraeny@azleg.gov

Senator Carolyn Allen – 602-926-4480 – callen@azleg.gov
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LINKS TO BUDGET & Summary of Education Related Legislation:
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SB1025 General revenues; budget reconciliation

If your  AEN team had any funding, we’d definitely offer a cool prize for anyone who could find the State Equalization Tax repeal in this latest bill version. It’s hidden neatly away on page 10, lines one and two:

Sec. 5. Repeal

Section 15-994, Arizona Revised Statutes, is repealed.
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That’s it ~ no explanation or summary that is usually provided in legislative bills (including the last bills which addressed the State Equalization Tax AND all of the other items in the current version of SB1025.) We’ll leave you to speculate why that is the case.

See more information on the state equalization tax in the email above.
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HB2006 General appropriations; fiscal year 2009 – 2010
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This bill assigns the same lump sum reductions to education and other state services that were line-item vetoed by Governor Brewer on July 1, 2009. It repeals the “temporary” K-12 budget enacted on July 6^th.
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The bill language also assigns the State Fiscal Stabilization Fund (aka Federal stimulus dollars) “intentions” of our legislators. Although the legislature generally does not have control over federal dollar allocations, the bill language details some of the areas that they hope to ‘backfill’ corresponding fund reductions.
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…..**HB2006 also contains the amendment introduced by Jack Harper (Surprise) which was reportedly ‘traded’ for his budget vote. “On or before February 1, 2010, the number of full-time equivalent employees for every general fund supported agency, board, commission or other entity of this state shall be reduced by five per cent.”
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We have tried to contact Senator Harper to find out the specifics behind this amendment. Teachers and school staff are employees of the ‘general fund supported agencies’ on this list: Does this staff reduction apply to them? If so, does it apply to staffing numbers in FY2009? The month that the bill passes? Is it in addition to staff reductions already made in our district and charter schools?
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Aside from the ambiguous language, we have reason for concern in this area. Senator Harper lashed out at teachers, bus drivers and librarians who attended a legislative session on June 9^th, saying that they were there “begging for money” at the “public trough”.
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Senator Harper has not responded to our inquiries. Perhaps other voters may have better luck: jharper@azleg.gov (602) 926-4178.

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HB2011 / SB1027 K-12; budget reconciliation
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· “Maintains” the FY2009-2010 Base Support Level (BSL) for K-12 schools at FY2008-09 levels, which includes the $119 million reduction in BSL funding and Soft Capital monies made in January of FY2008-2009.

…..This means that they are not funding the Constitutionally mandated Prop 301 2% spending increase to education…we are unclear how this item can legally be stricken from the budget.

· Cuts an additional $175 million in soft capitol (text books, technology, library services…any items that are used directly by students).

· Cuts $5 million from charter school Additional Assistance funds.

· Adjusts the state payment plan to districts from 10 payments a year to 12.

· Completely repeals Rapid Decline funding.  (Rapid decline funding granted a temporary buffer to any district which loses 5% of its student population in any given year.  This was funded at 50% in FY07-08 and was not funded in FY08-09).

· Does not provide funding for ‘excess utilities’ ($80 million/year+ for the real cost of school gas/electric/water bills).

· Defers $603 million in K-12 payments from June to August of 2010.

· Authorizes public schools to charge tuition for Full-Day Kindergarten “if the district or charter decides not to provide free FDK due to the funding reductions proposed..and transmitted to the Governor.”  (In other words…this is another push to privatize education).
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HB2012 / SB1022 Higher Education; budget reconciliation
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Community Colleges:

· Suspends capital outlay funding for community college in FY 2009-2010.

· Beginning in FY 2010-11, funds community college district dual enrollment at 50% of the state aid the college would otherwise receive from students.

· Eliminates the ‘hold harmless’ clause and enables the state to reduce aid to colleges anytime there is a reduction in the student count.
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Universities & the AZ Board of Regents

· $100 million in reduced funding to the universities for FY2009-2010.

· Makes several designations regarding the use of state lottery revenue for university capital improvements and the Bond Fund.

· Sets new stipulations for the LEAP program fund.

· Retroactive to June 30, 2009, allows the Board of Medical Student Loans to fund less than 50% of the monies in the Medical Student Loan Fund in FY09-10 to students attending private medical schools.
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FIND OUT MORE:

–Brewer has harsh words for tax-hike foes, Arizona Daily Star, August 28, 2009

–County opts to postpone mailing property tax bills, Arizona Daily Star, August 28, 2009

–Brewer eyes 2010 run for governor, Arizona Republic, August 28, 2009

–Brewer: “Political egos” blocking sales tax referral, Arizona Guardian, August 27, 2009

–Ariz budget is again in the hands of the governor, Arizona Republic, August 26,2009

–Legislature finishes special session; bills move to Brewer, Arizona Republic, August 25, 2009

–Legislature sends budget package to governor, Arizona Republic, August 21, 2009

–Governor yet to make decision on budget, Yuma Sun, August 20, 2009

–Arizona’s credit rating downgraded to negative, East Valley Tribune, August 19, 2009

–State property tax remains in question as Arizona governor mulls proposed repeal, San Francisco Examiner, August 22, 2009

–State Fiscal Stabilization Fund Distributions to School Districts and Charter Schools, Arizona Office of Economic Recovery, James J. Apperson letter, week of August 17, 2009.

–Pima County may waste $140,000, KOLD13, August 20, 2009

–Treasurer says Arizona must enact budget this week, AP, August 20, 2009

–State put on credit watch, and you will pay the price, Arizona Daily Star, August 20, 2009

–Quality learning vital to Arizona, Arizona Republic, August 19, 2009

–Potential for bipartisan solution pitched to Brewer as she weighs her options, Arizona Guardian, August 20, 2009

–Budget finished, ball in Brewer’s court, Arizona Guardian (subscription required), August 18 2009

–Burns urges Brewer to sign budget without tax referral, Arizona Guardian (subscription required), August 17, 2009
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