Arizona Education Network

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The fiscal year 2009-2010 budget cleared the House last week but it remains to be seen whether or not it can make it through a vote on the Senate floor.
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Opposition to the bill runs strong on both ideological ends of the spectrum.  Senators Ron Gould and Pamela Gorman are withholding their vote in opposition to the proposed temporary sales tax increase — and because they believe that the budget doesn’t cut deep enough into state services.
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House and Senate Minority Leaders maintain that a second budget proposal – developed during bi-partisan negotiations – does a much better job closing the structural deficit and protecting education as a fundamental economic resource within our state.  Minority party members are united in opposition to the current budget proposal being voted on today.
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Conservative Senator Carolyn Allen, who was courted heavily by Majority Leaders and the Governor during the push for more votes, had this to say during an interview with the Arizona Guardian:

…..“My party is wrong. I’m very disappointed that these other folks have caved,” she said, adding that her constituents are urging her not to support the budget. “In my opinion the governor has bought a bad package.”

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Your Arizona Education Network correspondents thank Senator Allen for her “NO” vote and for taking the time to consider the input from the people who she was elected to represent.
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We urge everyone to contact their Senators TODAY - this budget is VERY bad for education and for the future prospects of our state.  Budget details can be found below and contact information for your Senator can be found here.

Our current overall budget situation remains dire.  The Joint Legislative Budget Committee (JLBC) still estimates a $474 million shortfall for the last fiscal year (08-09); a number that is expected to come in around $229 million once federal stimulus dollars are received.

Arizona’s June revenue reports also show that the state’s overall tax revenue is down 17.7% from last year and our corporate income tax collections are down by 35.8% during the same period – their lowest collections since FY 2004.
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During last week’s budget debates, it was pointed out many times during floor and committee debates that even if the legislature passes their proposed budget plan, it will not address our entire structural deficit and will leave us with an unresolved $2-$2.5 BILLION deficit for next fiscal year.
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There is a bi-partisan budget that was being negotiated last month, which reportedly came within $300 million of closing the deficit for next year.  While your AEN representatives have not seen this budget proposal, we can say with great confidence that Arizona deserves better than the deal that is on the table right now.

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The Budget Proposals – Bills That Impact Education

Links to a full list of budget bills can be found here.
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It should go without saying that every bill passed will impact Arizona’s students to some degree, but we have chosen to examine the following bills that will have the largest fiscal and regulatory impact on the schools and students in our state .  This is meant to be a summation and not a full, comprehensive review of each bill item – for more information, please click the bill number to link directly to the legislative website.
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HB2006 /  SB1020 General appropriations; fiscal year 2009-2010

This bill reinstates the lump sum reductions and other line items that were vetoed by Governor Brewer on July 1, 2009.  It repeals the ‘temporary’ K-12 FY 2009-2010 budget enacted after the Governor’s initial veto, reduces $472 million in appropriations to the Dept. of Education “upon receipt of federal assistance,” reduces $10 million to universities if supplanted by federal monies, and stipulates the base state support level for education.

…..The bill also contains language that specifies spending for disabled children’s services, child support enforcement and other youth & family services.

…..*In a last minute amendment, Sen. Jack Harper (LD4) introduced a measure which would require “every general fund supported agency, board, commission or other entity of this state” to reduce their full time staff by five per cent.   It continues:  “To meet this requirement, an agency, board, commission or other entity may not reduce the hours of or furlough any employee.  The reductions may only be made through reduction of positions.” (p.36)
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We did not see any stipulation that waived this requirement for K-12 schools, community colleges or universities (which are all ‘general fund supported entities’).  The ambiguous language also poses many questions:  If it applies to our schools, is the 5% in addition to FY08-09 staff reductions?  Is the five percent reduction per school?  Per district?  We have emailed Senator Harper to see if he can clarify the intent of this bill.
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HB2011 / SB1027 K-12; budget reconciliation

• “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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*…..*We also could not locate any language with requires the state to repay public schools the $300 million in ‘rollover’ money that the is still due to them from the past fiscal year.
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During the House Appropriations debate, Rep. David Schapira (LD17) asked if the state would be required to pay back these funds…and was told that another special session would have to authorize the repayment of this money due to districts.
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Rep. Schapira then pointed out that this money was part of school districts’ FY2008-09 budget that was allocated by the legislature.  When the money was ‘rolled over’, many districts then had to borrow money to cover year-end bills – with the assumption being made by both the districts and their creditors that the state was going to repay the funds as promised this fiscal year.
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A decision not to repay these funds will not only be detrimental to the school districts (and to the ability of the legislature to sell the roll-over payments to voters again), but it can also adversely impact school district bond ratings.  If bond ratings go down, creditors require districts to carry larger cash balances…and larger cash balance requirements equate to higher property taxes for all of us.
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HB2012 / SB1022 Higher Education; budget reconciliation

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.

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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HB2015 / SB1029 Taxes; budget stabilization

• State Equalization Tax. This tax was specifically established to help fund K-12 education.  It was temporarily repealed for three years during Arizona’s last economic upswing and is scheduled to continue again this fiscal year.

If the legislature took no action on this item, the tax would generate approximately $250 million in revenue for education during the next fiscal year.

• Individual Income Tax Reductions. Personal income tax revenue represents 36% of our state’s general fund revenue.  This bill is seeking to reduce the personal income tax rates – currently 2.59% to 4.54% – to 2.42% to 4.24%.  This fiscal impact of this reduction is approximately $200 million less in revenue to the general fund each year.

• Corporate Income Tax Reductions.  The corporate tax rate is currently 6.968%.  This bill will bring the level down to 4.86%, with an estimated cost to our general fund of approximately $200 million dollars.

• Temporary Sales Tax Increase.  Despite implications by leadership that the proposed temporary sales tax increase would be dedicated to education, health, social services and public safety; there in no language in the bill that requires that this revenue be used to increase existing funds…in other words, although monies from the tax increase might be formally allocated to education, monies equal to or greater than this amount could be deducted from education from other sources at the same time.

Governor Brewer originally proposed a temporary 1-cent sales tax for three years.  After negotiations with legislative leadership, a deal was struck to lower the proposed temporary tax increase to 1-cent for the first year, ¾ cent for year two and ½ cent for year three.  If this bill passes, the sales tax (transaction privilege tax) increase will be placed on the ballot for voters to review in a November special election this year.
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• Ballot Initiative to repeal the Voter Protection Act (Prop 105).  If passed by the voters, the repeal would allow legislators to cut voter-protected funds, mainly impacting education ($3 billion), healthcare ($1 billion), First Things First early childhood programs ($300 million) and the Land Conservation Fund ($20 million).
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During the Senate Appropriations meeting, Sen. Ron Gould (LD3) asked pointedly:  If the Voter Protection Act was repealed “are there any limitations of what we could go after”? The answer:  when it comes to funding, no – anything could be cut.
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FIND OUT MORE:

Senate GOP searching for votes while Gray cruises the Caribbean (Mary K. Reinhart), Arizona Guardian, August 4, 2009

Enough already; Stop wrangling, pass the budget (Editorial), Arizona Republic, August 2, 2009

The Next Money Pits (Jeremy Herb), Newsweek, August 1, 2009

Three holdouts not budging on budget (AZ Policy Wonk), AZ Capitol Times, August 3, 2009

Lawmakers leave for now without a state budget deal (Howard Fischer), Arizona Daily Star, August 1, 2009

Overnight push to adopt Arizona budget falters (Matthew Benson), Arizona Republic, July 31, 2009

Budget stalled by Republican senators (Howard Fischer), East Valley Tribune, July 31, 2009

Arizona House OKs Republican budget-balancing plan (Paul Davenport), Arizona Daily Star, July 31, 2009

5:30am UPDATE – Budget may be dead(Paul Giblin & Dennis Welch), Arizona Guardian, July 30, 3009

Desperate state may sell Capitol buildings, others (Matthew Benson and JJ Hensley), Arizona Republic, July 29, 2009

Senate sidelines budget package that GOP leaders pitch as economic recovery(Paul Giblin), Arizona Guardian, July 29, 2009

Breakthrough in Arizona State Budget (Fox News 10), July 29, 2009

Horizon Videowith journalists Mary Jo Pitzl (Arizona Republic), Daniel Scarpinato (Arizona Daily Star) and Howard Fischer (Capitol Media Services).  Three leading journalist explain what happened during the budget negotiations on July 30 and 31st.
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