Page 10 - the NOISE MAY 2016 Edition

vote
news:
prop 123:
solution or shell game?
By cIndy cole
on May 17, Arizonans will be asked to vote yes or no on Proposition 123, a proposal that claims to solve the state’s underfunding of education without raising taxes. The initia- tive comes as a result of a lawsuit filed against the state for violating previous measures that required monies from a sales tax increase passed in 2000 to be directed to education. But is Prop 123 all its supporters say it’s cracked up to be? Or is it just another Arizona shell game that attempts to solve one problem by creating ten more?
In 2000, Arizonans passed Proposition 301 which instituted a 0.6% sales tax increase for 20 years and earmarked the proceeds for education funding. Prop 301 also requires annual in- flation adjustments. Monies distributed to schools through Prop 301 are to be spent on main- tenance and operations (including class size reduction and dropout prevention) and base pay increases and performance pay for teachers. The new sales tax went into effect on June 1, 2001. Prop 301 monies were first distributed beginning in 2002. However, everything did not go as planned in the years to come.
In 2009, during the nationwide economic recession, Arizona legislators decided not to give the inflation increases to Prop 301 funds while trying to balance Arizona’s budget. In 2010, the Arizona School Boards Association, the Arizona Education Association and others filed a lawsuit against the legislature and former Governor Jan Brewer claiming they had no legal foundation for violating the statute and withholding the inflation increase. The courts ruled in favor of the schools and determined that the state immediately owes the schools more than $300 million. There is another $1.2 billion still in dispute that the schools claim they are owed in aid that was not paid them. The state appealed the ruling and the courts sent the case to arbitration, which failed.
Last year, Governor Doug Ducey stepped in to help forge a solution to the legal impasse. Prop 123 is the result of his efforts. Prop 123 supporters, including Gov. Ducey, claim that the measure will deliver desperately needed money to schools immediately. And, they stress, it will do so without raising taxes. Prop 123 will allow the state to use money from its State Land Trust Permanent Endowment Fund to disburse $3.5 billion to schools over the next 10 years. sounds great, right? But, opponents say, there’s more than one catch to this plan.
Arizona’s state Land Trust Permanent endowment Fund was created as part of the Enabling Act that granted Arizona’s statehood in 1910. The state was given 10.9 million acres of land to hold in trust, of which Arizona currently has just over 9 million acres. There are 13 beneficiaries of that land including K-12 schools. Revenues from the sale, lease or other derived value of the land go to the beneficiaries based on parcels they are designated. Prop 123 would increase the payout to Arizona schools from the Land Trust from 2.5% of its value to 6.9% over the next 10 years. In addition, the proposition includes another $625 million to be paid from the state’s General Fund.
But opponents of Prop 123 say this is a bad move. The increased funding from the state Land Trust would come from the fund’s principal. Distributions usually come from interest and other earnings on the beneficiary’s portion of the fund. Opponents say that taking $2.2 billion (nearly half the fund’s worth today) out of the fund’s principal over 10 years will result in hundreds of millions of dollars being lost for the future funding of public education. so the state would essentially be robbing future students to pay a debt the current legislature is trying to avoid owning up to. And even though it looks like schools would receive a lump sum in the short term to help their financial struggles, Prop 123 only funds about 72% of what the courts ruled the state owes.
In addition, the funding increase from the state Land Trust would expire in 10 years and there are no provisions in Prop 123 that say what happens next. In fact, Prop 301 and another that affects school funding, Proposition 118, will both expire during the time Prop 123 is in place. so Prop 123 essentially overrides them.
Prop 118 established a formula that uses an average of the state Land Trust value for distri- bution of funds for education. Prop 118 expires in 2021 but would be replaced by Prop 123. when both expire, there are no guarantees that schools will receive monies from the state Land Trust as previously established. This raises another issue pointed out by opponents of Prop 123 — triggers.
Prop 123 contains a multitude of triggers that allow legislatures to hold back education funds. It essentially legalizes the actions the state took in 2009 when it failed to follow the provisions of Prop 301. If Arizona experiences another recession or economic growth isn’t high enough, if unemployment rises, or if the state’s tax revenue decreases, Prop 123 funding can be halted in its tracks. Current law requires the state’s legislators to fund inflation no matter what. These protections were voted into law by its citizens. Ignoring them is why educators sued the
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state in the first place.
And, even if Prop 123 is passed, opponents believe it will not be implemented immediately
because it will be challenged — in part because it modifies Arizona’s Constitution. Prop 123 changes the Constitution to cap education funding at no more than 49% of the state’s Gen- eral Fund. That’s all that will ever be able to go to education under any circumstances ... ever. Currently, education is about 42% of Arizona’s General Fund. Under Prop 123, the cap would not only allow future legislators to deny inflation adjustments to schools but they could also reduce base funding once the cap is reached. The measure also specifically says that any mon- ies withheld do not have to be paid back at any time in the future or funded from other public monies ... ever.
even Arizona State Treasurer Jeff DeWit — yes, he’s the guy that actually handles the state’s money after all — is opposed to Prop 123. In a press conference where he introduced himself as not only the state treasurer but the “guardian” of the state Land Trust, Mr. Dewit accused the proponents of Prop 123 of outright lies. “They say it is without raising taxes but Prop 123 does, in fact, raise property taxes,” said Mr. Dewit. If Prop 123 passes, some residents of more affluent school districts will likely see tax increases. “They say it is more money for teachers but Prop
123 has no requirement that any of the money goes to teachers,” he continued. “If they were a private business, they could be sued for fraud and fraudulent advertising,” he said. Mr. Dewit stated that Prop 123 will only deliver schools the money their owed sooner. But “over the long term, Prop 123 means less money for schools.”
so what is the solution? Mr. Dewit says the state of Arizona has more money currently in its General Fund than it has ever had in its history. After tax collection this year, the state has a budget surplus of more than $400 million. “we have the money to solve the lawsuit without raiding the trust fund,” Mr. Dewit said. He proposes that monies from the General Fund surplus be used to pay the court ordered amounts owed to the schools from the legislature’s failure to follow the law and provide inflation increases as required. He said he has devised a “fiscally responsible” plan that is projected to double education trust monies every seven years. In fact, as the named defendant on the Prop 301 lawsuit, Mr. Dewit pledged to put his plan into action.
“On May 18,” Mr. Dewit said, “the day after we say no to the terrible Proposition 123 which the Arizona Republic called a con — and it is a con on Arizona — I am going to petition to the judge to accept this as the next settlement which gives the teachers and the schools more money in a sustainable fashion and saves taxpayers.” But since the parties in the lawsuit have already agreed on a settlement (Prop 123), the court may not allow this change.
so why aren’t Governor Ducey and the rest of the Arizona Legislature on board with Mr. De- wit’s plan? Two words. Tax cuts. Arizona has been implementing corporate tax cuts that were put into place in 2011, two years after the state stopped giving inflation increases to education funds. The business tax cuts also came around the same time Arizonans approved a temporary 1¢ sales tax increase that was supposed to help save education funds from being cut during the recession. The corporate tax cuts will be fully in place by 2018 at which time they will begin costing the state more than $350 million a year. Governor Ducey and his key legislators are also looking to include another $30 million in tax cuts in next year’s budget.
Proponents of Prop 123 include a laundry list of power players besides the governor himself — mayors, big business leaders, legislators and even teachers and education organizations. The campaign to Vote yes on Prop 123 has collected more than $4 million to launch slick TV
commercials and get them seen in a hurry. Two Arizona billionaires contributed $1 million each to the campaign and another $2 million came from contributions of $10,000 or more, ac- cording to disclosure records.
But the Arizona League of Women Voters called the proposition “a fraud.” And, in addition to Mr. Dewit, five former state treasurers have come out against the plan. ALwV Chair Shirley Sandelands said that lawmakers “should consider removing dramatic corporate tax cuts made over the past decade. They should also get serious about doing their job for the people of Ari- zona rather than large corporate backers to their campaign war chests.”
Arizona Republic columnist Laurie Roberts wrote “I’d like to support Prop. 123. I really would. yet every time I look at that happy bandwagon, filled with smiling children, it’s appearing more and more like a Trojan horse.”
| Cindy Cole likes the idea of catchy PR-style proposition titles. cindy@thenoise.us
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