Education Secretary Arne Duncan today (7/27/10) released the list of finalists for the second round of the Race to the Top federal grant program.  Arizona is one of the 19 finalists.  The other finalist are California, Colorado, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, and South Carolina.  All finalists are invited to make a presentation to the review committee the week of August 9th.  The winners will be announced in September.
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Governor Jan Brewer released a statement praising those who worked on the Arizona application.  She cited Senator Huppenthal’s SB 1040 (Teacher and Principal Evaluations), Representative McComish’s HB 2298 (Preparation Providers; Teacher Certification), and Representative Crandall’s HB 2733 (Department of Education; Data Collection) as legislation important to the Arizona application.  Brewer said, “[t]hese bills provided for the adoption of new teacher and principal evaluations, alternative teacher and principal certification, as well as an assessment of and governance for our data system.”
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On March 4, 2010, Secretary Duncan announced the sixteen finalists for the first round of the program.  Arizona’s application came in 40th out of 41 applications.  Ultimately, two states were awarded the first round of program grants.  Tennessee was awarded almost $500 million and Delaware was awarded almost $100 million.  The U.S. Department of Education later released the scores and feedback for all applicants to review.  Arizona applied for the second round of the Race to the Top in June.

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To read more, see below:

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18 States and D.C. Named as Finalists for Race to the Top, US Department of Education, ED.gov, July 27, 2010

Statement by Governor Jan Brewer, July 27, 2010

Secretary of  Education, Arne Duncan’s Remarks at the National Press Club (announcing the finalists), July 27, 2010
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What to Expect: Arizona’s Race to the Top Application, Arizona Education Network, December 17, 2009
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Arizona Doesn’t Make “Race to the Top” Cut, Arizona Education Network, March 5, 2010
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Only Two States (TN & DE)  Win Race to the Top Grants; Arizona’s Scores Released, Arizona Education Network, March 30, 2010

An analysis by the Arizona Education Network of the Arizona Learns 2008-2009 Achievement Profiles for All Schools published by the Arizona Department of Education shows that traditional public schools performed better than charter schools over the same period.

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The report lists the performance results of 463 charter schools and 1432 non-charter, traditional public schools.  Breakdowns of the schools’ performance ratings are as follows.

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When the top three categories (Excelling, Highly Performing, and Performing Plus) are aggregated, 73.04% of traditional non-charter schools are in these three categories versus 44.71% of charter schools.   Most concerning are the 5.25% of charter schools that are underperforming or failing versus 2.7% for traditional schools in these categories.

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For additional information, see below:

Arizona Learns 2008-2009 Achievement Profiles for All Schools

State’s original charter schools up for renewal, East Valley Tribune, July 2, 2010

Arizona State Board for Charter Schools

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Q and A on Public School Finance and Equalization: Charter Schools

Part II

It is recommended that you read Part I of this series before moving on to Part II.   Click here to go to that article.

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I have heard that charter schools get different funding than traditional public schools. Is this true?

Charter schools are funded using an equalization formula that is similar to that of traditional public schools. However, because charter schools do not have geographic boundaries and taxing authority, property taxes do not provide any of the funding that goes to charter schools. Charter schools get the majority[1] of their funding from the state’s general fund.
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You say the funding formulas are very similar. How is the charter school funding formula different?

Charter school funding is the total of the Base Support Level (BSL) and a funding category entitled Additional Assistance. The BSL is computed in the same way as traditional public schools–weighted student count times the statutory base level–which is discussed in Part I of this series. Additional Assistance is a per-pupil dollar amount set by the legislature and multiplied by the simple, non-weighted student count. Additional Assistance is intended to fund capital and transportation costs for charter schools. However, charter schools can use this money flexibly and are not limited to using it for capital or transportation expenditures[2].

Charters do not receive additional funds for teacher experience or performance-based compensation systems. Charters also do not qualify as isolated schools when computing their weighted student count, though they do qualify as small schools (under 600 students) when weighting the student count.
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Are there other ways in which funding for charters differs from that of traditional public schools?

Yes, because charter schools do not have a property tax structure upon which their funding is based, they do not have access to the funding mechanisms this provides to traditional public schools. Further, since charter schools are exempt from the uniform building requirements set by the School Facilities Board (SFB), they receive no funding for building renewal[3], emergency deficiency correction or school construction from this state-funded entity.
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I have heard many times that charter schools are less expensive to operate on a per- pupil level than traditional schools. Is this true?

When you compare the average dollars spent at traditional and charter public schools, it may initially appear that charters are cheaper to operate[4]. A large portion of this difference can be attributed to the fact that charter schools enroll significantly fewer special-needs students than do traditional public schools. Also, some of the state mandates that apply to traditional school districts do not apply to charter schools–the requirement to hire certified teachers does not apply to charters, for example. The absence of these mandates can, in some instances, translate into lower operating costs.
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What do special-needs students have to do with it?

For whatever reason, charter schools enroll fewer special-needs students than traditional schools. The Arizona Department of Education report entitled 10/1/2009 Federal Child Count by PEA (Public Education Agency) updated as of 2/1/2010 indicates that nearly 93% of all special needs students in the state are enrolled in traditional public schools. When calculating a simple average expenditure per student, traditional schools will average a higher cost per student than charters because they are getting more dollars for the special-needs students. If the distribution of special-needs students in traditional versus charter public schools was more even, you would expect the simple per-pupil average to be nearer to that of traditional schools.
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Outside of the special needs funding issue, do charter schools receive more or less funding than traditional schools?

Traditional schools claim charters receive more funding; charters claim traditional schools receive more funding. In reality, it is too simplistic to state that one type receives more or less funding than the other. It depends on the individual characteristics of the traditional and charter schools used for comparison. While both charter and traditional schools receive the same Base Support Level funding from the state, they each receive (or may be eligible to receive) other unique funding. Below is a simplified comparison.

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Additional funds only traditional schools can receive:

• Desegregation funds: These funds are limited to districts named in federal or state desegregation cases.
• Adjacent Ways funds: This is tax money spent on construction projects not related to education but which improve access to and/or the functionality of the school property, including street, water and sewer improvements that are adjacent to school property.

• Isolated school adjustments: A small number of rural schools in isolated areas receive funding to adjust for lost economies of scale.
• Drop-out prevention funds: A small number of at-risk schools are eligible for these funds.
• Career ladder funds: These funds are available to a limited number of districts that opted into qualified performance-based compensation programs before the state closed the program to new schools. The state is awaiting a higher court decision on a successful lawsuit that declared this system unconstitutional. If the high court upholds the lower court decision, the future of these dollars is unknown.
• Tax overrides and bonds: These funds are available only in those districts in which voters have agreed to tax themselves to fund the measures. See Part I of this series for more information on overrides and bonds.
• School Facilities Board funding for construction, building renewal (building renewal funding has been cut to zero for the past three fiscal years), and emergency deficiency corrections.
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Funds only charters can receive:

• The state general fund provides Additional Assistance to replace capital and transportation funding provided to traditional schools.
• Charters can borrow funds from lending programs dedicated to charters. For more information, see the article entitled JP Morgan Chase Creates $325 Million Funding Initiative for High-Performing Charter Schools here.
• The AZ Charter School Incentive Program provides funds to start new charter locations. This addresses the lack of funding by the State Facilities Board to which traditional public schools can turn when building schools.
• In addition to state and federal grants for charter schools, there are many national foundations (i.e. Walton, Gates, Broad and Dell) awarding grants specifically to charters.
• Buildings and land are owned by the charter. If the charter sells capital assets—including land and buildings—the proceeds belong to the owner of the charter school.
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As you can see, different schools have access to different types of funds, depending upon the schools’ individual characteristics. An apples-to-apples comparison is difficult to make, given the number of variables between schools.

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So why isn’t funding between charters and traditional schools the same?

As noted in part one in the series Q and A on Public School Finance and Equalization, access to funding between traditional public school districts is not equal. Local voter support for property taxes, desegregation agreements, the size of the school and other factors combine to determine an individual school’s access to funds. The same principle holds true when you compare funding for charter schools with traditional public schools.
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Different characteristics between schools translate into eligibility for different funding sources. Many public education stakeholders view this state of affairs as inequitable. Two lawsuits against the state—Foley v. Horne and Hobday v. Horne—are currently pending. Both cases contend that access to public education funding in the state is not equal and is therefore unconstitutional.

[2] Unlike traditional public schools, charter schools are exempt from both the minimum facilities standards set by the School Facilities Board (SFB) and the requirement to provide transportation to school for their students. This gives charters maximum flexibility in spending Additional Assistance funds for non-capital and transportation purposes.

[3] Though traditional public schools are eligible to receive funding from the SFB, the state has defunded building renewal dollars for three consecutive fiscal years beginning in 2008. The traditional schools must continue to comply with the SFBs minimum building standards even in the absence of funding for such.

[4] According to the Arizona Department of Education State Superintendent’s Report, 2008-2009, traditional schools spent $2,330 more per student than charter schools.

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Q and A on Public School Finance and Equalization:

Part I: Traditional Public Schools
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To read Part II: Charter School Finance and Equalized Funding, click here.
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What does it mean when I hear that Arizona is an equalized funding state?

The Arizona state constitution calls for the legislature to “enact such laws as shall provide for the establishment and maintenance of a general and uniform public school system.” Equalization laws strive to standardize the amount of funding a school district receives to educate each student regardless of differences in property wealth between districts.

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What does property wealth have to do with school funding?

Prior to 1981, schools were funded mainly by the collection of property taxes from the residents and businesses located in the school district. Districts with high property wealth could generate lots of money to fund schools with relatively low tax rates, while districts with lower property wealth struggled to generate funds for their schools.

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Does equalization mean my property taxes no longer fund public schools?

No. Public schools are still funded by property taxes. The first funding source for public schools is local property tax collections. The next funding source is the state property tax, better known as the county equalization tax[1]. Finally schools are funded by the state’s general fund. If a school district does not receive enough money from local property taxes to fund its schools, the state’s general fund, which has been supplemented by the state equalization property tax, makes up the difference in the funding needed.

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So how is equalization different from the old system of funding schools via property taxes?

The equalization law established a formula that attempts to standardize revenues and expenditures across school districts to fund annual budgets. The law dictates how much money can be raised for annual maintenance/operations[2] and capital needs[3]. In other words, the state legislature became the body that determines how much revenue can be generated to fund school budgets instead of a school district generating as much money as the district’s property wealth could muster.

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So, how does the state decide how much money school districts will get?

The formulas used to determine this are very complicated. In the simplest terms, the state sets the Base Support Level (BSL)–or per pupil funding level–for maintenance/operations budgets. The maintenance/operations budget is the largest portion of a school’s budget. It pays for all day-to-day operations in a school year and its largest component is salaries. It also sets the base levels for unrestricted capital and soft capital funding. Capital funds are provided for expenditures on furniture, fixtures and other items that are expected to last for more than one operating year. Soft capital is provided for textbooks, software and other instructional materials used directly by students in the classroom.

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To explain this in the simplest way possible, the state takes a count of students by district. The BSL and capital funding levels are multiplied by the number of students in each district. The dollars are totaled, and this sum becomes the equalization base funding level for each school district.

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The equalized base funding level is the amount of money the state authorizes school districts to receive from property taxes and the state’s general fund.

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It doesn’t seem right that a school district receives the same amount of money for every student. Isn’t it more expensive to educate high school students, for example, than it is second graders?

The state recognizes that some students require more resources to educate than others. When computing the maintenance/operations portion of school funding, the student count in each district is actually a weighted student count[4]. A wide array of weights has been established for use in the funding formula, depending on the types of students in the mix. For example, the weight for a high school student is higher than the weight for a second grade student. The weight for a student with a learning or physical disability is higher than the weight for a student who does not have a disability. But, regardless of the weighting system, a student in any one category–a fourth grade student with a hearing disability, for example–will bring the same amount of funding to whichever district the student attends[5].

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What about teacher compensation? Some teachers have more credentials and experience than others. Wouldn’t school districts with highly skilled and experienced teachers have to pay more of their maintenance and operations dollars for salaries than others?

Yes. The state formula includes adjustments to accommodate high levels of teacher experience (in excess of the state average calculation) and those districts that participate in Career Ladder and other qualified performance-based pay systems. School districts that employ highly experienced teachers and/or who participate in these merit pay programs receive more dollars than districts that do not[6].

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If the state guarantees full funding for each student, what stops school districts from setting property tax rates really low and getting most or all of their funding from the state?

The legislature also sets the Qualifying Tax Rate (QTR). This is the tax rate the legislature uses to determine how much money a school district will get from the state, if any. The QTR is multiplied by each district’s Net Assessed Property Value (NAV). The answer to that equation determines the source(s) of a school district’s funds.

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• If the equalization base funding level is greater than QTR x NAV, local property taxes will not be adequate to fund the district’s budget. The remaining amount of funding is provided by the state’s general fund. This is called basic state aid.

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• If the equalization base is less than QTR x NAV, no basic state aid is provided and the primary property tax rate is set at the level required to generate the equalization base.

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Don’t high-wealth districts still have an advantage over lower-wealth districts? Their property tax rate can still be much lower even though both are capped at the QTR.

Yes, wealthier districts can enjoy lower rates and still fund the equalization base. However, school districts cannot assess rates lower than 50% of the QTR. If the property values in the district are such that this tax rate generates more funds than the equalization base, the excess taxes are remitted to the state to offset basic state aid for other districts. In actual experience, there are very few school districts that can fund the equalization base with a tax rate less than 50% of the QTR. The school districts that do are generally districts with high property wealth and relatively few student-aged residents.

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If the state limits the amount of money a school district can generate for its annual budget to the equalization base funding level, why is the primary property tax rate on my tax bill higher than the QTR?

Property tax rates used to fund public schools can be, and generally are, higher than the QTR. This is because the state allows school districts to budget for expenditures that are outside of the equalization base funding level. Some of these expenditures are funded by property taxes that require voter approval before they can be assessed; other expenditures are funded by property tax rates that do not require voter approval to be assessed.

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Now I’m really confused. When can a school district assess property taxes for expenditures outside of the equalization base funding level?

Let’s start with non-voter approved tax assessments. School districts operate under different conditions that make it unrealistic to standardize funding completely. For example, some school districts operate under government-mandated desegregation and civil rights agreements. Compliance with these agreements incurs unique costs in these districts. Consequently, the legislature allows the districts to generate revenues through additional property taxes that do not have to be approved by the property owners in the district.

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Another type of expenditure outside of the equalization base funding level is expenditure for adjacent ways. School districts incur costs to improve a public way that is adjacent to land owned or leased by the district. These expenses may include intersection traffic signals, sidewalks, utility lines, etc. The state allows a school district to impose a non-voter approved property tax to fund costs for specific projects.

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Other non-voter-approved expenditures include spending on transportation costs in excess of those provided by the state’s equalization formula, small school adjustments, dropout prevention, and more.

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School districts add up the amount of revenue needed for each of these expenditures and, using the NAV, determine the additional property tax rate that needs to be charged to generate this revenue. This additional property tax rate is added to the rate necessary to fund the equalization base funding level (the QTR), and the district’s primary property tax rate is determined. This is why on many property tax bills, the primary property tax rate is likely higher than the QTR set by the state.

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What are voter-approved expenditures outside of the equalization base funding level?

The state allows school districts to ask voters to approve maintenance/operations and capital budget overrides to increase funding for schools during the seven-year life of the overrides. Currently districts can ask for two types of maintenance/operations overrides: a ten-percent K-12 override and a five-percent K-3 override. School districts can also ask voters to fund a ten-percent capital budget override. Finally, a school district can sell voter-approved bonds to increase capital expenditures beyond the unrestricted capital funds provided by the state’s equalization formula[7]. School districts decide to ask for an override and/or capital bond issue, determine the tax rates required to fund the proposals and place the requests on their local ballot for voters to approve or reject. If approved, the additional tax rates are assessed and shown separately on the property tax bill as secondary property tax rates.

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What stops a school district from going crazy and levying outrageous property taxes for expenditures outside of the equalization base funding level?

Many of the non-voter approved expenditures outside of the equalization base are unlimited in their scope. What keeps school districts from taxing property owners indiscriminately is legislation called Truth in Taxation (TNT). Passed in the late nineties and amended several times thereafter, TNT requires taxing bodies–including school districts–to provide public notice of intent to raise taxes. If school districts taxed for revenues in an unreasonable manner, constituents could use the TNT notification to identify the parties responsible and vote them out of office. TNT laws also require the legislature to reduce the QTR and the equalization property tax rate to compensate for across-the-state increases in property values. These measures are intended to have a dampening affect on tax rates.

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It seems like the old system was a lot simpler. Why did the state decide to create an equalized funding system?

During the 1970s, a wave of litigation in the United States was decided in favor of plaintiffs who sued on the theory that funding schools based mainly on property wealth was unconstitutional. Though no lawsuit was brought in Arizona at that time, the legislature heeded the constitution’s “general and uniform” language pertaining to education and enacted the equalized funding mechanisms described in this article.

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[2] The maintenance/operations budget makes up the lion’s share of a school district’s funds and is comprised mainly of salaries for staff. It also includes student transportation costs, career ladder, teacher experience payments and other annual operating costs.

[3] The state provides funding for two types of capital expenditures. Unrestricted capital pays for a district’s capital needs – expenditures on facilities and equipment with a life span greater than one year. Soft capital is used for the purchase of materials generally used directly by students in the classroom, like textbooks, software and equipment investments that last longer than one year. There are separate base funding levels for these two types of capital expenditures.

[4] The weighting system is too complicated to describe in this article. There are Class A weights and Class B weights. The M and O calculation uses a different weighted student count than the capital calculation. Suffice to say here that the formulas attempt to adjust for different types of students when computing the amount of funding per student.

[5] Small school districts (under 600 students) and isolated school districts receive additional weight to adjust for the economies of scale that are lost under these circumstances. This is an exception to the equalized per student funding between districts.

[6] The state legislature has closed most merit pay programs to new school districts, citing questions regarding the effectiveness of the programs. Consequently, school districts that did not install programs prior to this closure do not qualify for this extra funding. The Gilbert Public School District successfully sued the Arizona Department of Education, contending the program is unconstitutional as it pertains to the “general and uniform” clause. The case is currently under appeal to a higher court. Meanwhile, the state legislature has proposed to end state funding of these performance-based systems and allow county officials to levy the property tax needed to fund this increase to a school district’s equalization base, shifting the funding from the state level to the local.

[7] Districts also sell bonds for new school construction. In 1994, the state high court ruled this method of funding school facilities to be in conflict with the “general and uniform” language of the constitution. In response to this case–Roosevelt v. Bishop–the state established the School Facilities Board (SFB) which sets uniform standards for the physical facilities of school districts and oversees the allocation of funding for construction, building renewal and deficiency correction from monies allocated by the state’s general fund. However, this legislation does not preclude a school district from selling bonds to raise capital over and above that provided by the SFB for purposes of constructing schools and improving facilities beyond the minimum standards required by the law.

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Part I: Traditional Public School Finance & Equalization Funding

Part II: Charter School Finance & Equalization Funding

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Q and A on Public School Finance and Equalization:

Part I

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What does it mean when I hear that Arizona is an equalized funding state?

The Arizona state constitution calls for the legislature to “enact such laws as shall provide for the establishment and maintenance of a general and uniform public school system.”  Equalization laws strive to standardize the amount of funding a school district receives to educate each student regardless of differences in property wealth between districts.

.

What does property wealth have to do with school funding?

Prior to 1981, schools were funded mainly by the collection of property taxes from the residents and businesses located in the school district. Districts with high property wealth could generate lots of money to fund schools with relatively low tax rates, while districts with lower property wealth struggled to generate funds for their schools.

.

Does equalization mean my property taxes no longer fund public schools?

No. Public schools are still funded by property taxes. The first funding source for public schools is local property tax collections.  The next funding source is the state property tax, better known as the county equalization tax[1]. Finally schools are funded by the state’s general fund.  If a school district does not receive enough money from local property taxes to fund its schools, the state’s general fund, which has been supplemented by the state equalization property tax, makes up the difference in the funding needed.

.

So how is equalization different from the old system of funding schools via property taxes?

The equalization law established a formula that attempts to standardize revenues and expenditures across school districts to fund annual budgets.  The law dictates how much money can be raised for annual maintenance/operations[2] and capital needs[3]. In other words, the state legislature became the body that determines how much revenue can be generated to fund school budgets instead of a school district generating as much money as the district’s property wealth could muster.

.

So, how does the state decide how much money school districts will get?

The formulas used to determine this are very complicated. In the simplest terms, the state sets the Base Support Level (BSL)–or per pupil funding level–for maintenance/operations budgets. The maintenance/operations budget is the largest portion of a school’s budget.  It pays for all day-to-day operations in a school year and its largest component is salaries. It also sets the base levels for unrestricted capital and soft capital funding. Capital funds are provided for expenditures on furniture, fixtures and other items that are expected to last for more than one operating year.  Soft capital is provided for textbooks, software and other instructional materials used directly by students in the classroom.

.

To explain this in the simplest way possible, the state takes a count of students by district.  The BSL and capital funding levels are multiplied by the number of students in each district.  The dollars are totaled, and this sum becomes the equalization base funding level for each school district.

.

The equalized base funding level is the amount of money the state authorizes school districts to receive from property taxes and the state’s general fund.

.

It doesn’t seem right that a school district receives the same amount of money for every student.  Isn’t it more expensive to educate high school students, for example, than it is second graders?

The state recognizes that some students require more resources to educate than others.  When computing the maintenance/operations portion of school funding, the student count in each district is actually a weighted student count[4]. A wide array of weights has been established for use in the funding formula, depending on the types of students in the mix. For example, the weight for a high school student is higher than the weight for a second grade student.  The weight for a student with a learning or physical disability is higher than the weight for a student who does not have a disability. But, regardless of the weighting system, a student in any one category–a fourth grade student with a hearing disability, for example–will bring the same amount of funding to whichever district the student attends[5].

.

What about teacher compensation? Some teachers have more credentials and experience than others.  Wouldn’t school districts with highly skilled and experienced teachers have to pay more of their maintenance and operations dollars for salaries than others?

Yes. The state formula includes adjustments to accommodate high levels of teacher experience (in excess of the state average calculation) and those districts that participate in Career Ladder and other qualified performance-based pay systems. School districts that employ highly experienced teachers and/or who participate in these merit pay programs receive more dollars than districts that do not[6].

.

If the state guarantees full funding for each student, what stops school districts from setting property tax rates really low and getting most or all of their funding from the state?

The legislature also sets the Qualifying Tax Rate (QTR).  This is the tax rate the legislature uses to determine how much money a school district will get from the state, if any. The QTR is multiplied by each district’s Net Assessed Property Value (NAV). The answer to that equation determines the source(s) of a school district’s funds.

.

• If the equalization base funding level is greater than QTR x NAV, local property taxes will not be adequate to fund the district’s budget. The remaining amount of funding is provided by the state’s general fund. This is called basic state aid.

.

• If the equalization base is less than QTR x NAV, no basic state aid is provided and the primary property tax rate is set at the level required to generate the equalization base.

.

Don’t high-wealth districts still have an advantage over lower-wealth districts?    Their property tax rate can still be much lower even though both are capped at the QTR.

Yes, wealthier districts can enjoy lower rates and still fund the equalization base. However, school districts cannot assess rates lower than 50% of the QTR.   If the property values in the district are such that this tax rate generates more funds than the equalization base, the excess taxes are remitted to the state to offset basic state aid for other districts.  In actual experience, there are very few school districts that can fund the equalization base with a tax rate less than 50% of the QTR.  The school districts that do are generally districts with high property wealth and relatively few student-aged residents.

.

If the state limits the amount of money a school district can generate for its annual budget to the equalization base funding level, why is the primary property tax rate on my tax bill higher than the QTR?

Property tax rates used to fund public schools can be, and generally are, higher than the QTR.  This is because the state allows school districts to budget for expenditures that are outside of the equalization base funding level. Some of these expenditures are funded by property taxes that require voter approval before they can be assessed; other expenditures are funded by property tax rates that do not require voter approval to be assessed.

.

Now I’m really confused.  When can a school district assess property taxes for expenditures outside of the equalization base funding level?

Let’s start with non-voter approved tax assessments. School districts operate under different conditions that make it unrealistic to standardize funding completely. For example, some school districts operate under government-mandated desegregation and civil rights agreements. Compliance with these agreements incurs unique costs in these districts. Consequently, the legislature allows the districts to generate revenues through additional property taxes that do not have to be approved by the property owners in the district.

.

Another type of expenditure outside of the equalization base funding level is expenditure for adjacent ways.  School districts incur costs to improve a public way that is adjacent to land owned or leased by the district.  These expenses may include intersection traffic signals, sidewalks, utility lines, etc. The state allows a school district to impose a non-voter approved property tax to fund costs for specific projects.

.

Other non-voter-approved expenditures include spending on transportation costs in excess of those provided by the state’s equalization formula, small school adjustments, dropout prevention, and more.

.

School districts add up the amount of revenue needed for each of these expenditures and, using the NAV, determine the additional property tax rate that needs to be charged to generate this revenue. This additional property tax rate is added to the rate necessary to fund the equalization base funding level (the QTR), and the district’s primary property tax rate is determined.  This is why on many property tax bills, the primary property tax rate is likely higher than the QTR set by the state.

.

What are voter-approved expenditures outside of the equalization base funding level?

The state allows school districts to ask voters to approve maintenance/operations and capital budget overrides to increase funding for schools during the seven-year life of the overrides. Currently districts can ask for two types of maintenance/operations overrides: a ten-percent K-12 override and a five-percent K-3 override.  School districts can also ask voters to fund a ten-percent capital budget override. Finally, a school district can sell voter-approved bonds to increase capital expenditures beyond the unrestricted capital funds provided by the state’s equalization formula[7].  School districts decide to ask for an override and/or capital bond issue, determine the tax rates required to fund the proposals and place the requests on their local ballot for voters to approve or reject. If approved, the additional tax rates are assessed and shown separately on the property tax bill as secondary property tax rates.

.

What stops a school district from going crazy and levying outrageous property taxes for expenditures outside of the equalization base funding level?

Many of the non-voter approved expenditures outside of the equalization base are unlimited in their scope. What keeps school districts from taxing property owners indiscriminately is legislation called Truth in Taxation (TNT). Passed in the late nineties and amended several times thereafter, TNT requires taxing bodies–including school districts–to provide public notice of intent to raise taxes. If school districts taxed for revenues in an unreasonable manner, constituents could use the TNT notification to identify the parties responsible and vote them out of office. TNT laws also require the legislature to reduce the QTR and the equalization property tax rate to compensate for across-the-state increases in property values. These measures are intended to have a dampening affect on tax rates.

.

It seems like the old system was a lot simpler.  Why did the state decide to create an equalized funding system?

During the 1970s, a wave of litigation in the United States was decided in favor of plaintiffs who sued on the theory that funding schools based mainly on property wealth was unconstitutional.  Though no lawsuit was brought in Arizona at that time, the legislature heeded the constitution’s “general and uniform” language pertaining to education and enacted the equalized funding mechanisms described in this article.

.

{Part II on Charter School funding below}

[2] The maintenance/operations budget makes up the lion’s share of a school district’s funds and is comprised mainly of salaries for staff. It also includes student transportation costs, career ladder, teacher experience payments and other annual operating costs.

[3] The state provides funding for two types of capital expenditures. Unrestricted capital pays for a district’s capital needs – expenditures on facilities and equipment with a life span greater than one year. Soft capital is used for the purchase of materials generally used directly by students in the classroom, like textbooks, software and equipment investments that last longer than one year. There are separate base funding levels for these two types of capital expenditures.

[4] The weighting system is too complicated to describe in this article.  There are Class A weights and Class B weights.  The M and O calculation uses a different weighted student count than the capital calculation.  Suffice to say here that the formulas attempt to adjust for different types of students when computing the amount of funding per student.

[5] Small school districts (under 600 students) and isolated school districts receive additional weight to adjust for the economies of scale that are lost under these circumstances.  This is an exception to the equalized per student funding between districts.

[6] The state legislature has closed most merit pay programs to new school districts, citing questions regarding the effectiveness of the programs.  Consequently, school districts that did not install programs prior to this closure do not qualify for this extra funding. The Gilbert Public School District successfully sued the Arizona Department of Education, contending the program is unconstitutional as it pertains to the “general and uniform” clause. The case is currently under appeal to a higher court.  Meanwhile, the state legislature has proposed to end state funding of these performance-based systems and allow county officials to levy the property tax needed to fund this increase to a school district’s equalization base, shifting the funding from the state level to the local.

[7] Districts also sell bonds for new school construction.  In 1994, the state high court ruled this method of funding school facilities to be in conflict with the “general and uniform” language of the constitution.   In response to this case–Roosevelt v. Bishop–the state established the School Facilities Board (SFB) which sets uniform standards for the physical facilities of school districts and oversees the allocation of funding for construction, building renewal and deficiency correction from monies allocated by the state’s general fund.  However, this legislation does not preclude a school district from selling bonds to raise capital over and above that provided by the SFB for purposes of constructing schools and improving facilities beyond the minimum standards required by the law.

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Q and A on Public School Finance and Equalization:  Charter Schools

Part II

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I have heard that charter schools get different funding than traditional public schools.  Is this true?

Charter schools are funded using an equalization formula that is similar to that of traditional public schools.  However, because charter schools do not have geographic boundaries and taxing authority, property taxes do not provide any of the funding that goes to charter schools.  Charter schools get the majority[1] of their funding from the state’s general fund.
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You say the funding formulas are very similar.  How is the charter school funding formula different?

Charter school funding is the total of the Base Support Level (BSL) and a funding category entitled Additional Assistance.  The BSL is computed in the same way as traditional public schools–weighted student count times the statutory base level–which is discussed in Part I of this series.  Additional Assistance is a per-pupil dollar amount set by the legislature and multiplied by the simple, non-weighted student count.  Additional Assistance is intended to fund capital and transportation costs for charter schools.  However, charter schools can use this money flexibly and are not limited to using it for capital or transportation expenditures[2].

Charters do not receive additional funds for teacher experience or performance-based compensation systems.  Charters also do not qualify as isolated schools when computing their weighted student count, though they do qualify as small schools (under 600 students) when weighting the student count.
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Are there other ways in which funding for charters differs from that of traditional public schools?

Yes, because charter schools do not have a property tax structure upon which their funding is based, they do not have access to the funding mechanisms this provides to traditional public schools.  Further, since charter schools are exempt from the uniform building requirements set by the School Facilities Board (SFB), they receive no funding for building renewal[3], emergency deficiency correction or school construction from this state-funded entity.
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I have heard many times that charter schools are less expensive to operate on a per- pupil level than traditional schools.  Is this true?

When you compare the average dollars spent at traditional and charter public schools, it may initially appear that charters are cheaper to operate[4]. A large portion of this difference can be attributed to the fact that charter schools enroll significantly fewer special-needs students than do traditional public schools. Also, some of the state mandates that apply to traditional school districts do not apply to charter schools–the requirement to hire certified teachers does not apply to charters, for example.  The absence of these mandates can in some instances translate into lower operating costs.
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What do special-needs students have to do with it?

For whatever reason, charter schools enroll fewer special-needs students than traditional schools.  The Arizona Department of Education report entitled 10/1/2009 Federal Child Count by PEA (Public Education Agency) updated as of 2/1/2010 indicates that nearly 93% of all special needs students in the state are enrolled in traditional public schools.   When calculating a simple average expenditure per student, traditional schools will average a higher cost per student than charters because they are getting more dollars for the special-needs students.   If the distribution of special-needs students in traditional versus charter public schools was more even, you would expect the simple per-pupil average to be nearer to that of traditional schools.
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Outside of the special needs funding issue, do charter schools receive more or less funding than traditional schools?

Traditional schools claim charters receive more funding; charters claim traditional schools receive more funding.  In reality, it is too simplistic to state that one type receives more or less funding than the other.  It depends on the individual characteristics of the traditional and charter schools used for comparison.  While both charter and traditional schools receive the same Base Support Level funding from the state, they each receive (or may be eligible to receive) other unique funding.  Below is a simplified comparison.

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Additional funds only traditional schools can receive:

• Desegregation funds: These funds are limited to districts named in federal or state desegregation cases.
• Adjacent Ways funds: This is tax money spent on construction projects not related to education but which improve access to and/or the functionality of the school property, including street, water and sewer improvements that are adjacent to school property.

• Isolated school adjustments: A small number of rural schools in isolated areas receive funding to adjust for lost economies of scale.
• Drop-out prevention funds: A small number of at-risk schools are eligible for these funds.
• Career ladder funds: These funds are available to a limited number of districts that opted into qualified performance-based compensation programs before the state closed the program to new schools. The state is awaiting a higher court decision on a successful lawsuit that declared this system unconstitutional.  If the high court upholds the lower court decision, the future on these dollars is unknown.
• Tax overrides and bonds:  These funds are available only in those districts in which voters have agreed to tax themselves to fund the measures.  See Part I of this series for more information on overrides and bonds.
• School Facilities Board funding for construction, building renewal (building renewal funding has been cut to zero for the past three fiscal years), and emergency deficiency corrections.
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Funds only charters can receive:

• The state general fund provides Additional Assistance to replace capital and transportation funding provided to traditional schools.
• Charters can borrow funds from lending programs dedicated to charters.  For more information, see the article entitled JP Morgan Chase Creates $325 Million Funding Initiative for High-Performing Charter Schools here.
• The AZ Charter School Incentive Program provides funds to start new charter locations.  This addresses the lack of funding by the State Facilities Board to which traditional public schools can turn when building schools.
• In addition to state and federal grants for charter schools, there are many national foundations (i.e. Walton, Gates, Broad and Dell) awarding grants specifically to charters.
• Buildings and land are owned by the charter. If the charter sells capital assets—including land and buildings—the proceeds belong to the owner of the charter school.
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As you can see, different schools have access to different types of funds, depending upon the schools’ individual characteristics.  An apples-to-apples comparison is difficult to complete, given the number of variables between schools.

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So why isn’t funding between charters and traditional schools the same?

As noted in part one in the series Q and A on Public School Finance and Equalization, access to funding between traditional public school districts is not equal.  Local voter support for property taxes, desegregation agreements, the size of the school and other factors combine to determine an individual school’s access to funds. The same principle holds true when you compare funding for charter schools with traditional public schools.
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Different characteristics between schools translate into eligibility for different funding sources. Many public education stakeholders view this state of affairs as inequitable.  Two lawsuits against the state—Foley v. Horne and Hobday v. Horne—are currently pending.   Both cases contend that access to public education funding in the state is not equal and is therefore unconstitutional.

[2] Unlike traditional public schools, charter schools are exempt from both the minimum facilities standards set by the School Facilities Board (SFB) and the requirement to provide transportation to school for their students.  This gives charters maximum flexibility in spending Additional Assistance funds for non-capital and transportation purposes.

[3] Though traditional public schools are eligible to receive funding from the SFB, the state has defunded building renewal dollars for three consecutive fiscal years beginning in 2008.   The traditional schools must continue to comply with the SFBs minimum building standards even in the absence of funding for such.

[4] According to the Arizona Department of Education State Superintendent’s Report, 2008-2009, traditional schools spent $2,330 more per student than charter schools.

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Monday, Secretary of Education Arnie Duncan announced that Tennessee and Delaware were the only two winners of Phase One of the Race to the Top grants.  Tennessee was awarded almost $500 million and Delaware was awarded almost $100 million.

Delaware ranked first with 454.6 out of a possible 500 rubric score; Tennessee ranked second with 444.2 points.  Arizona ranked fortieth out of forty-one applicants with a score of 240.2 out of 500.  For a complete listing of the order and scores of the states that applied, click here.

Applications for Phase Two are due June 1, 2010.  Arizona is eligible to apply for this next phase of grants.  Duncan announced that 10-15 winners were expected in the next round of the competition for the remaining $3.4 billion.

Since this is the end of Phase One of the competition, scores and comments from the unsuccessful applications were released to the public.  To read Arizona’s Technical Review Form – Tier 1, click here.  To read Arizona’s Panel Review, click here.

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For further information see below.

Delaware and Tennessee Win First Race to The Top Grants, U.S. Department of Education Press Release, March 29, 2010, ED.Gov

U.S. Names Education Grant Winners, New York Times, March 29, 2010

Identification of successful teachers is one of the key components of many new federal and state programs to improve education.  The Obama administration’s Race for the Top standards require outcome-based assessments that measure the abililty of teachers to move students successfully through a year or more of benchmarks.  While merit pay for teachers that meet high accountability standards is proposed–financial incentives may not be able to create the success needed on a large scale.  While assessing the ability of teachers to meet high achievement goals is quantitatively possible, discerning the qualities these successful teachers possess is far more difficult–and may make replication of outstanding teaching difficult to achieve.

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The New York Times has published a fascinating in-depth article that looks at efforts to identify the qualities that make successful teachers. The article points out that in a study in Tennessee, “[t]eachers working in the same building, teaching the same grade, produced very different outcomes. And the gaps were huge.  Eric Hanushek, a Stanford economist, found that while the top 5 percent of teachers were able to impart a year and a half’s worth of learning to students in one school year, as judged by standardized tests, the weakest 5 percent advanced their students only half a year of material each year.”

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The article features two education researchers, Doug Lemov and Deborah Loewenberg Ball.  Lemov has conducted a study of teachers working in high poverty areas with high student performance.  He has identified forty-nine teaching techniques that contribute to excellent student outcomes.

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Ball has focused specifically on math creating a set of standards codified as Mathematical Knowledge for Teaching (M.K.T.) representing, “[t]he idea that just knowing math was not enough to teach it….”  Ball and Heather Hill tested the theory by creating , “a multiple-choice test for teachers. The test included questions about common math, like whether zero is odd or even (it’s even), as well as questions evaluating the part of M.K.T. that is special to teachers.  Hill then cross-referenced teachers’ results with their students’ test scores. The results were impressive: students whose teacher got an above-average M.K.T. score learned about three more weeks of material over the course of a year than those whose teacher had an average score, a boost equivalent to that of coming from a middle-class family rather than a working-class one.”

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The story concludes that, “[b]y figuring out what makes the great teachers great, and passing that on to the mass of teachers in the middle…’we could ensure that the average classroom tomorrow was seeing the types of gains that the top quarter of our classrooms see today.’”

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To read the full article go to:

Building a Better Teacher, New York Times, March 2, 2010

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In January 2010, AEN reported on the widely debated topic of what makes a better teacher by featuring an article from Atlantic monthly on Teach for America.  The article, What makes a better teacher?: Teach for America may have the answer, discussed efforts by the Teach for America organization to identify characteristics using data compiled by the organization.

The Arizona Republic is running a series about the next decade in Arizona called Arizona 2020, A Framework for the Next Decade. The article focuses on six categories: Education, the Budget, the Border, the Government, the Economy and the Vision of AZ.  Two of these categories – Education and the Budget –  are of great interest to the Arizona Education Network.

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Education: “Arizona’s Great Paradox: Arizona has long been an innovator in charter schools and training teachers, but per-student funding is among the worst in the nation.”

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While Arizona has long been recognized as a pioneer in the area of school choice, public education has seen a steady decline in funding over the last 20 years.  According to the Joint Legislative Budget Committee (JLBC), Arizona, an equalized funding state,  spent 69.3% of its General Funds in the fiscal year 1978-1979 budget.  However, in fiscal year 2008-2009, this percentage has declined to 55.5% of the General Fund.  (Current appropriations to public education are estimated at about 46% of the General Fund due to recent cuts.)

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Voices: The Republic solicited opinions from five education stakeholders in answering the question, ” What would you like to see happen to improve education?”  February 12, 2010

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Action Plans: The Republic looked at three areas of potential reform.  These included,  Merit Pay: Rewarding Good Teachers Pays Dividends; Higher Standards: Standard for AIMS Test Must Be Raised;  and Data Tracking:  We Can Track Student Progress–Let’s Do it.

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News Report: Journalist Pat Kossen analyzed differences in student achievement between Arizona and Massachusetts.  While Arizona students were able to get jobs in construction, real estate, sales, retails and trade without a great deal of educational training; Massachusetts  students needed to acquire the academic skill necessary to work in research, academia, technology and medicine–the areas that have powered the Massachusetts economy.  Read the full article: All in Arizona Must Play a Role to Better Education.

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Six Leaders, Six Visions: The Republic asked five leaders in Arizona about the state of education and former Governor Jeb Bush to talk about the Florida vision for education.

Don Budinger: Chairman of Rodel Foundations

Arizona Needs the Will to Improve Education, February 12, 2010

Ernest Calderon: President, Arizona Board of Regents

Just As In Past, Arizona Should Set Education As Top Priority, February 12, 2010

Marjorie Kaplan: Director, Beat the Odds Institute

Principals Key to Beating Odds, February 12, 2010

Jeb Bush: Former Governor of Florida

Success in Florida Schools: Reforms, Refusal to Accept Excuses for Not Learning Play Major Roles, February 12, 2010
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Debate: President of the Arizona Education Association John Wright and school-choice proponent and former senior policy adviser to the John McCain 2008 Presidential Campaign Lisa Graham Keegan, debate the best way to educate Arizona’s kids.

A Debate on How Best to Educate Arizona’s Kids, February 23, 2010

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Budget: “Financial House Needs Repairs: The state should sharpen it’s basic financial tools.  We need a strategic plan that includes a long-term financial outlook.”

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Arizona is an equalized funding state, which means we use funding formulas to insure that our local property taxes are distributed more evenly to schools throughout the state.  State revenue (such as the percentage our schools currently receive from sales tax revenue) and local revenue (property taxes, etc) are combined to provide funding to our public schools.

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Thus, when we discuss education funding, it must be closely associated with the state budget and the general fund.  Our state is in a massive deficit, and an overhaul on our tax structure is needed to stabilize revenues.

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Voices: The Republic solicited opinions from five community members in answering the question, ” What is the most creative idea you have for the Legislature to balance the budget?”  February 19, 2010

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Action Plans: The Republic looked at three areas of interest in balancing the state budget.  These included,  Revenue & Spending: Revenue and Spending Must Line Up; Revenue Structure: Today’s Revenue Structure is Volatile;  and Rainy-Day Fund: Don’t Starve Arizona’s Rainy-Day Fund.

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News Report: Journalist Ronald Hansen gives an in-depth accounting of how Arizona has come to be at it’s largest deficit in its history, and suggestions on how to approach rectifying the shortfall.  Read the full article: Stable Arizona Budget Requires Sacrifice.

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Four Leaders, Four Visions: The Republic asked four leaders in Arizona about the state of the budget.

George Cunningham: Cunningham Consulting Group

State Budget Torn Between Two Ideologies, February 19, 2010

Mark Killian: Former House Speaker

How to Craft a Budget without Rancor, February 12, 2010

Alan Maguire: The Maguire Co.

Arizona Must Change the Way It Manages Its General Fund, February 12, 2010

Kevin McCarthy: Arizona Tax Research Association

Cuts Must Be Made Before Any Tax Hikes, February 12, 2010
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In June of 2009, Arizona Education Network published an article explaining how individual and corporate tax school tax credits worked.  (We encourage you to read this article first in order to understand the structure of the Arizona private school tax-credit program before continuing with this article.) Since then, investigative reports in the East Valley Tribune and the Arizona Republic have brought into question the efficacy of the program and the practices of the School Tuition Organizations, which act to pass through the tax credits to the private schools.  In the wake of the investigations, two house panels have held hearings into private school tax credits.

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Arizona Education Network decided to take a closer look at the private school tax credit program and its history in order to understand the evolution of the program, the issues that have been raised and the potential changes in the future.  In order to respond to the many inquiries we have received (and make this easier on the layman), we will be using the Q & A format.

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Why is there so much interest in using public tax dollars for private schools?

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There are several arguments made:

• Some believe that in areas where schools are failing, all options, including private schools, must be looked at for the benefit of the children in these areas that are poorly served by their current public schools.  This argument is most prevalent in inner-cities where the vast majority of students are at, or near, the poverty level; and in fact, this is where voucher programs were first proposed.  Milwaukee and Cleveland were some of the first cities to offer vouchers, and it was a case from Ohio – Zelman vs. Simmons-Harris (2002) – which the supreme court upheld in the use of vouchers.
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• Another argument is that private schools provide competition for public schools and that this should be encouraged.
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• Some go even further, proposing privatizing all education through a voucher system: in essence dismantling the public school system.  The best known advocate of this argument is economist Milton Friedman.
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• Finally, some of those who attend private schools argue that it is their right to decide how to use their tax money to educate their children, regardless of the performance of their public schools or their income.

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What are vouchers?

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Vouchers are payment certificates directly issued by the government to parents to pay for private school.  They have been very controversial because, historically, they have run into problems with the Establishment Clause of the First Amendment of the U.S. Constitution.  The First Amendment states that: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; and court cases regarding vouchers have centered on these clauses.

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How did vouchers wind up being upheld by the Supreme Court?

The path of vouchers in the legal system is very interesting and it all has to do with the changing interpretation of the Establishment Clause.  Here are some of the Supreme Court cases that determined the progress to federally approved vouchers.

• Everson v Board of Education (1947) – This case found that the a board of education could authorize the reimbursement of parents for fares paid for the transportation by public carrier of children attending public and Catholic school.  “In fact, the decision established the now-crucial distinction between aid provided directly to religious schools and aid provided to children or their parents…”(NeoVouchers, Kevin Wellner, p. 50).   However, Everson also held two important points; 1) “In the words of Jefferson, the clause against establishment of religion by law was intended to erect ‘a wall of separation between church and State.’” (Everson) and 2) “Prior to the adoption of the Fourteenth Amendment,  the First Amendment did not apply as a restraint against the states.” (Everson) However, Everson upheld the application of the Fourteenth Amendment’s due process clause, meaning the First Amendment applies to the states and is binding.
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• Lemon v Kurtzman (1971) – While Everson permitted direct aid to parents for their children, Lemon established the rules.  Lemon struck down “Rhode Island’s 1969 Salary Supplement Act provid[ing] for a 15% salary supplement to be paid to teachers in nonpublic schools at which the average per-pupil expenditure on secular education [was] below the average in public schools.”  And “Pennsylvania’s Nonpublic Elementary and Secondary Education Act, passed in 1968, authoriz[ing] the state Superintendent of Public Instruction to ‘purchase’ certain ‘secular educational services’ from nonpublic schools, directly reimbursing those schools solely for teachers’ salaries, textbooks, and instructional materials.” (Lemon)  Lemon found that “[b]oth statutes… involve[d]  excessive entanglement between government and religion.”  The Lemon decision laid out what came to be known as the “Lemon Test”. “A law, the court explained, violates the establishment clause if it fails any of the three parts of the following test: (1) the law must serve a secular purpose; (2) its principal or primary effect must neither advance nor inhibit religion; and (3) it must not foster an excessive entanglement with religion.” (NeoVouchers, Kevin Wellner, p.59)
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• Mueller v Allen (1983) – The first shift came in Mueller v Allen.  The Supreme Court upheld “[a]  Minnesota statute (§ 290.09, subd. 22) [that] allow[ed] state taxpayers, in computing their state income tax, to deduct expenses incurred in providing ‘tuition, textbooks and transportation’ for their children attending an elementary or secondary school.” (Mueller v Allen).  This included parents whose children attended parochial schools.  The court ruled that the law met the “Lemon Test”.
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• Aguilar v Felton (1985) – In this case the court held unconstitutional “New York City['s] use [of] federal funds received under the Title I program of the Elementary and Secondary Education Act of 1965 to pay the salaries of public school employees who teach in parochial schools in the city.” (Aguilar) The decision cited excessive entanglement under the “Lemon Test”.
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• Agostini v Felton (1997) – Agostini reversed the Aguilar case; the court ruling that, “[t]he Aguilar Court erred in concluding that New York City’s Title I program resulted in an excessive entanglement between church and state.” (Agostini) “The key modification was that entanglement alone would not result in a finding of unconstitutionality.” (NeoVouchers, Kevin Wellner, p.60)
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• Zobrest v Catalina Foothills School District (1993) – We cannot leave out Arizona’s own contribution to the evolution.  In Zobrest, the ”[p]etitioners, a deaf child and his parents, filed this suit after respondent school district refused to provide a sign language interpreter to accompany the child to classes at a Roman Catholic high school.”  The court ruled that, “Government programs that neutrally provide benefits to a broad class of citizens defined without reference to religion are not readily subject to an Establishment Clause challenge just because sectarian institutions may also receive an attenuated financial benefit.”(Zobrest)
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• Zelman v Simmons-Harris (2002) - This brings us to the case that approved vouchers on the federal level. The Zelman case ruled on the legality of the Cleveland pilot program to provide vouchers to students in a public school district that was failing on a massive scale, necessitating federal intervention and a state takeover.  In the decision, the court affirmed that, “[t]here is no dispute that the program challenged here was enacted for the valid secular purpose of providing educational assistance to poor children in a demonstrably failing public school system.”  The decision went on to say, “[t]hree times we have confronted Establishment Clause challenges to neutral government programs that provide aid directly to a broad class of individuals, who, in turn, direct the aid to religious schools or institutions of their own choosing. Three times we have rejected such challenges.”  The key phrase here is “neutral” – the “Neutral Test” has replaced the “Lemon Test“.  The Supreme Court reversed the appeals court ruling that, “ the Ohio program is entirely neutral with respect to religion. It provides benefits directly to a wide spectrum of individuals, defined only by financial need and residence in a particular school district. It permits such individuals to exercise genuine choice among options public and private, secular and religious. The program is therefore a program of true private choice. In keeping with an unbroken line of decisions rejecting challenges to similar programs, we hold that the program does not offend the Establishment Clause.”

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Why doesn’t Arizona use vouchers?

Even though federal law now permits vouchers, the use of vouchers is not permitted under the Arizona state constitution.  This is because the Arizona constitution contains a “Blaine Amendment Clause“.  The Blaine amendment was a constitutional amendment proposed by then Congressman James Blaine in 1875 to ban the use of  revenue raised by taxation for private schools; specifically religious schools. While the amendment to the constitution failed, many states (including Arizona) adopted a version of the amendment into the state constitution. The Arizona constitution article IX, Section 10.  reads:

“No tax shall be laid or appropriation of public money made in aid of any church, or private or sectarian school, or any public service corporation.”

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Thus, Arizona lawmakers needed sought to find another way to to fund private school: tax-credits.

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How do tax-credits avoid the “Blaine Amendment” prohibition?

Tax-credits are not refunds; they are “credits.” The funds never make their way into the state general fund, but they come back as a credit OUT of the state’s general fund. The tax-credit money must be paid to a middle-man, a school tuition organization (STO), which then distributes the funds to students through “tax-credit scholarships”.   Because the funds are not received by the state directly and are not paid out by the state, they are not subject to the Blaine Amendment.

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Was the private tuition tax-credit challenged in court?

Yes, it was challenged in Kotterman v Killian (1999) and went to the  Arizona State Supreme Court.
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The State Supreme Court found that, “schools are no more than indirect recipients of taxpayer contributions, with the final destination of these funds being determined by individual parents.” (Kotterman).  The final conclusion affirmed that, ”[w]e hold that the tuition tax credit is a neutral adjustment mechanism for equalizing tax burdens and encouraging educational expenditures.” (Kotterman).  The Supreme Court declined to hear an appeal of the case.

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It is interesting that in the decision, the Arizona Supreme Court brings up the religious discrimination issue as it pertains to the “Blaine Amendment”.   The opinion states that, “[t]he Blaine amendment was a clear manifestation of religious bigotry, part of a crusade manufactured by the contemporary Protestant establishment to counter what was perceived as a growing ‘Catholic menace’.”  It goes on to find that while there is “… no recorded history directly linking the amendment with Arizona’s constitutional convention…we would be hard pressed to divorce the amendment’s language from the insidious discriminatory intent that prompted it.” (Kotterman) Some in the pro-voucher movement have suggested that there may be a potential federal case in the offing challenging the states which have a “Blaine Amendment” on discrimination grounds.  It is debatable as to whether such a case would succeed. However, if it did and the Blaine Amendment was thrown out, Arizona would be free to offer vouchers.

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Are there any other cases that may affect tax-credits in the future?

There is currently a case working its way through the federal appeals court. On October 21, 2009,  the full 9th U.S. Circuit Court of Appeals affirmed its April 2009 decision that the Arizona School Tuition Organizations Program for private schools is unconstitutional.

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In the case of Winn v Arizona Christian School Tuition Organization, the court supported  “Plaintiffs argue[ment], however, that Section 1089 violates the Establishment Clause precisely choices available under the program serve to restrict parents’ opportunities to select secular educational options for their school-age children, skewing parents’ incentives to send their children to religious schools. As such, the program is not ‘neutral in all respects toward religion’ and, concomitantly, is not a ‘program of true private choice.’”  This returns the argument to the Establishment Clause and the Zellman case’s neutrality test.  It will be interesting to see how the Supreme court applies these issues to tax-credits vs. vouchers.

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Interestingly, “[a]n analysis of 2008 scholarships by The Arizona Republic showed religious schools received 93 percent of the $54 million given to school-tuition organizations that year.  The Republic went on to report that, “If the U.S. Supreme Court decides not to review the case, it will go back to the Arizona’s U.S. District Court for a full hearing. If the Supreme Court decides to review the case, the justices would ask for further legal and oral arguments from attorneys on both sides. The court could reverse the Appeals Court decision and end the case or uphold the Appeals Court decision to send the case to a lower court for a full trial.”

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How does Arizona’s tax-credit specifics compare to those of other states?

Arizona pioneered the use of tax-credits to circumnavigate the restrictions of the “Blaine Amendment”.  Several other states have implemented tax-credit programs following the Arizona model.  Click here to see a chart that compares Arizona tax-credits to those available in Pennsylvania, Florida, Iowa, Rhode Island and Georgia.

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In Order to adopt best tax-credit practices, which state should Arizona emulate?

Arizona’s individual tuition tax-credit plan should adopt that same standards as Arizona’s corporate tuition tax credit plan.

• While the individual tuition tax-credit program is not means tested, the corporate tuition tax-credit plan is limited to families with 185% of the income required to receive free & reduced lunch
• While the individual tuition tax-credit program allows earmarking of donation if not for a dependent, the corporate tuition tax-credit plan allows no earmarking at all
• While the individual tuition tax-credit program has no restrictions requiring prior public school attendance, the corporate tuition tax-credit plan mandates that students must start off in public school or be in Kindergarten to apply
• Although the individual program has no cap, the corporate plan is capped at $17.3 million (although that is permitted to grow at 20% per year)

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Do tax-credits save the state money?

Proponents of tax-credits argue that tax-credits issued on behalf of students attending private school save the state money because the tax-credit is less than the per-pupil funding level allocated by the state for a student in public school.   However, the state saves money only if the benefitted students start out in public school.  When tax credits support students who are already in private school and would have chosen private school anyway, there is no savings to the general fund.  The Arizona Republic article points out that out of the 50,000 private school students, only 7,530 students have been added since the tax-credit program started. Moreover, if public school students switch from public to private schools they only receive a partial subsidy of their private school tuition, leaving the families to make up the difference between the subsidy and the full cost of private school tuition.  Therefore, there is a cost-shift from public payment for education to private, individual payment for education.  Is that the best way to build an educated work force?  How will low income students be able to afford to subsidize their education?

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Why publicly financed education?

Parents have the choice of sending their children to a public school or a private school at their own expense.  More importantly, choice is now available under the public school umbrella; among traditional public schools and charter schools.
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Universal public education in the United States is a cornerstone of our democracy.  While citizens of the United States pay taxes for a variety of services, none has had a greater economic impact on the United States than the investment in public education.
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Reforms in public education are moving to outcome-based models.  By shifting tax funds to private schools, lawmakers risk sending funds to institutions with no accountability for how funds are spent or any test of outcome of their education model.  In a time of tight budgets and cuts to public education, allowing tax-credits to private schools, without any accountability for spending or assessment of success does not appear to be a sound public policy decision.

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MaryLee Moulton, Arizona Education Network

MaryLee Moulton can be contacted at marylee@arizonaeducationnetwork.com

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Referenced articles:

Tax credit sponsor’s vision unrealized, East Valley Tribune, June 15, 2010

Researcher: Tax credits cost state millions, Livewire Blog, AZ Central.com, February 8, 2010

Tax Credits & STOs: Overview, Arizona Education Network, June 6, 2009

Rigged Privileged, East Valley Tribune, August 1, 2009

‘Republic’ analysis: Tuition tax credits drain state money, Arizona Republic, October 14, 2009

Public Schools: Make Them Private, Milton Friedman, Cato Institute, June 23, 1995

Attorneys to ask high court to review Ariz. tuition tax credits, Arizona Republic, October 22, 2009

Referenced Book:

Wellman, Kevin, G., NeoVouchers, New York: Rowman & Littlefield , 2008.

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Tucson Unified School District is responding by offering the First Choice Schools program, which offers options including; OMA Gold schools (Opening Minds through the Arts), International Baccalaureate schools, artful learning schools, Montessori schools, and Reggio Emilia schools

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Sunnyside School District is using technology to encourage students to remain in the district.  They are utilizing $213,300  to keep eighth-graders from leaving by loaning laptops this summer to qualifying students and enrolling them in a college-prep program.

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Districts are even moving into the charter school arena.  Vail Unified already runs two charter school in their district; Vail High and Civano Community School. Mesa Public Schools recently announced that they received state approval to establish  charter schools in their district using a non-profit group created by the Mesa Unified School District.

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For additional information, see below:

Sunnyside, TUSD work to counter charters’ lure, Arizona Daily Star, Jan. 24, 2010

Searchable database of private, charter and magnet schools (Tucson Area), Arizona Daily Star, January 23, 2010

Mesa district nonprofit group gets OK to run charter schools, East Valley Tribune, January 25, 2010

Arizona Charter Schools Association

The recent issue of  The Atlantic looks into the hotly debated question of what makes a good teacher.  Proposals in the new Race to the Top standards will require teacher compensation tied to student performance.  Under this teacher accountability model, identifying teacher excellence will be even more important.  The article points out that; “[s]tates must try to identify great teachers, figure out how they got that way, and then create more of them.” 

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Reporter Amanda Ripley was given access to the extensive records of the organization “Teach for America” to try to identify these aswers.  Teach for America is a non-profit organization started 20 years ago and works to place outstanding graduates in low-income areas with  a minimum commitment of two years.  What make this organization unique is that, “the organization tracks test-score data, linked to each teacher, for 85 percent to 90 percent of those kids. Almost all of those students are poor and African American or Latino.”  In addition,  Teach for America keeps an unusual amount of data about its 7,300 teachers—a pool almost twice the size of the D.C. system’s teacher corps.”  What is really astounding about the organization is it’s success among minorities.  “In 2007, 24 percent of  Teach for America teachers moved their students one and a half or more years ahead,” according to the organization’s internal reports. In 2009, that number was up to 44 percent.

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Using this data, and Teach for America’s own studies, Ripley reported several factors that seem to indicate success for a potential teacher.  These include:

•  history of perseverence  and long term goals by the candidate
• achievment of big measurable goals in college
• GPA in the final two years of college
• majoring in the subject taught

Interestingly, the data shows that a master’s degree in education seems to have no impact on classroom effectiveness.

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To read the article in full, see the link below.

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“What Makes a Good Teacher?”  Amanda Ripley, The Atlantic, January/February 2010

Teach for America

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Looking at test scores, the new structure of the public school system seems to be succeeding.  “New Orleans’ school district’s performance score — a tally of test scores and other performance measures — jumped from 56.9 pre-Katrina to 66.4 last year, according to state Department of Education figures. Statewide, the average during that same period stayed roughly the same: 87.4 pre-Katrina and 87.2 last year.” (USA Today).

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The experiment with charter schools in the city is not without it’s critics.  Some have noted  that charter schools do not have the same percentage of special need students; “[t]he average special education population in traditional schools is 12 percent, but at charter schools, it’s less than 8 percent.” (PBS Newshour).  This has led to charges that charters discriminate among the students they accept.

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To read more about this unique situation.  See the articles below.

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Charter Schools Rise in New Orleans After Hurricane Katrina, U.S. News & World Report, Jan. 5, 2010

High marks for New Orleans’ charter schools, USA Today, Aug. 27, 2009

New Orleans Charter Schools Produce Mixed Results, PBS NewsHour, Originally Aired May 6, 2009
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The Governor, in conjunction with Dr. Duvall and the P-20 Council on Education, have created a plan to apply for the Race to the Top grant.  The stated goal of the plan is to make sure that, “[b]y 2020, Arizona’s students will be ranked in the top 5 in the country and among the best globally.”
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In creating the plan, four areas of reform were identified:

• Standards and Assessments
• Statewide Longitudinal Data Systems
• Great Teacher, Great Leaders
• Supporting Struggling Schools
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Race to the Top is a competitive grant that all 50 states can apply for.  In order to apply for a Race to the Top grant, local education agencies (LEA’s)– public school districts and charter schools–have to fill out a participation agreement outlining specific actions to be taken under the four reform areas, as well as a memorandum of understanding.  Arizona plans on meeting the January 15, 2010 federal deadline for funding.  The winning states will be announced in April and if Arizona is chosen, school districts and charter schools would have to submit a written plan within 90 days.  Implementation would take place in August/September 2010.  If Arizona is not chosen in the first round, the state can reapply in June, 2010.
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Dr. Duvall’s presentation, as well as a recording of the full presentation along with the Q & A,  can be found on the AASBO web site.
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.The following are some key points made by Dr. Duvall during the Question and Answer section of the webinar:

• Race for the Top (RTTT) funds will not replace funding cuts by the state.
• RTTT funding is not dependent on an increase in education funding by the Arizona legislature.
• Funding is not assured but AZ can expect to receive approximately $150-$250 million over 4 years if it is one of approximately 10 states that is chosen.
• The RTTT grant money will be split 50% to the LEA’s and 50% to the Arizona Department of Education.
• Only Title 1 schools or those eligible for Title 1 funds will receive RTTT LEA grants; however, LEA’s that don’t qualify may receive money through the portion of the funds that go directly to the state.
• For-profit charters are not expected to be eligible for RTTT money.
• Arizona has joined 48 other states (all except AK and TX) in an agreement to adopt common academic standards, which Dr. Duvall expects to adopt whether or not AZ receives a RTTT grant.
• Arizona parent stakeholders have not been involved in the formation of the plan, though they have been present during informational meetings.
• As part of the proposed data gathering process, students and teachers would receive an ID number for tracking performance and information in the data warehouse, which would be shared by LEA’s and higher education partners to track student performance and teacher effectiveness.
• Social promotion would be controlled at transition points (i.e. end of  3rd grade).

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View Arizona’s Race to the Top application, submitted on January 15, 2010.
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Find out more about Race to the Top:

Arizona seeks $250 million in federal stimulus funds for education grants, San Francisco Examiner, January 20, 2010

State on track to receive education funding, Yuma Sun, December 1, 2009

Arizona may have leg up in race for education funds, Arizona Republic, November 30, 2009

Race to the Top, Ted Simons interview with Dr. Debra Duvall and Rep. Rich Crandall, PBS Channel 8, September 16, 2009

Duncan Sets High Bar for Race to the Top, Coverge, November 16, 2009

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1) Seniority (tenure) will no longer be a factor in laying off teachers.

2) Deadline for contracts have been eliminated.

3) Provisions restricting salary changes have been eliminated.

The AEA argues that because the special session was called to address the budget deficit, these rule changes should be dissallowed. 

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For additional information, see the articles below:

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Arizona Educators Seek to Throw Out Bill, KSAZ Fox News 10, 11/23

New Law Strips Teachers of Some Protections, Arizona Daily Star, 11/24/09

AEA Sues State for Coloring Outside the Lines, AZ Central.com, 11/23/09

The Bill and Melinda Gates Foundation has announced that they will take a more active role in decisions regarding how federal stimulus money will be spent on school reform.  The Foundation has spent over $200 million dollars on school reform ideas and is interested in finding innovative solutions to reform public education.  To read more, click below.

Gates Foundation going all-out to influence education policy, Arizona Star, Oct. 26, 2009

Bill & Melinda Gates Education Strategy

After Complaints, Gates Foundation Opens Education Aid Offer to All States, New York Time, Oct. 27, 2009

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