Issue link: http://digital.copcomm.com/i/654069
12 ADVOCATE | SPRING 2016 at the capitol Does Prop. 123 provide any new money, i.e. isn't this just the money that was owed to schools? Actually Prop. 123 provides $625 million of new money: $50 million per year for the first five years and $75 million per year for the next five years. This is on top of the inflationary increases that are mandated to be paid based on a new, higher, reset base level of student funding. While one could argue that the $625 million is in consideration for the unpaid inflation, no court has ordered "back pay." Even if there was a court order for back pay, that order would have to go through the appellate process and would be decided on pure equity grounds, where no back pay was awarded. Won't Prop. 123 eat into the corpus of the permanent fund (State Trust Land sale proceeds) because the draw is greater than the investment proceeds? The truth is there are no multiple funds (one which constitutes proceeds from investments and another that constitutes the "cor- pus" of the Trust). There is only one fund. Prop. 123 proposes to increase that annual draw from that fund from 2.5% to 6.9%, an increase of 4.4% which will be used - in part, along with an on-going General Fund obligation – to pay for the inflationary increases. The 6.9% is limited to ten years, and it is based on a five-year average to smooth out fluctuations occurring in the investment of the trust land proceeds. It can be decreased if the trust does not produce the expected return. It is important to note that the value of the land trust has increased exponentially from $1 billion to its current value of $5.2 billion over the last 16 years – a period of stagnated, and then dramatically decreased, funding for K-12 education. The state land trust is still projected to have over $6 billion in it after 10 years with the increased distribution. Is it true that Prop. 123 sets in stone the use of Trust Lands funding and sunsets the requirement to provide inflation after 10 years? Not true. Prop. 123 increases the trust distribution to 6.9% for only 10 years, but the requirement to fund inflation exists in perpetuity. Does Prop. 123 limit the state's ability to increase education funding in the future? There is a provision of Prop. 123 that limits overall K-12 spending to no more than 49% of the state general fund budget. This provision only goes into effect after ten years. However, it is worth noting several points about this. First, the 49% figure only applies to General Fund appropriations made through the Department of Education's budget – it does not apply to Classroom Site Fund monies (Prop. 301 sales tax + 2.5% original draw on permanent fund) nor state capital expenditures through the School Facilities Board nor the funding from the Governor's Office of Education. Also, it is critical to give the 49% figure context: in FY2007 the "peak" of recent year K-12 funding, Arizona spent 43% of its General Fund budget on K-12 education – and this included state funding of all-day kindergarten and full funding for soft capital expenses. In order to get to the 49% figure, Arizona would have to cut more than $700 million from other programs in the current budget and increaseK-12 funding by $700 million to bump up against that ceiling. Lastly, keep in mind that the 49% figure is a result of a compromise that gets badly needed dollars to schools today. If the voters do not believe in this restriction, they can repeal it. 1 In addition to the Base Level funding, Arizona also paid an additional $74,394,000 in "additional funding," $54.31 per student, to be used as if it were in the base, but the legislature specifically indicated that this additional funding was not part of the base level and that it would not be subject to inflation. 2 The Arizona Supreme Court did not rule on what the base level should be or whether the Plaintiffs were entitled to any back pay. 3 The estimated Base Level increase statewide for this school year (FY16) is about $248 million, plus $50 million in the Additional Funds. However, that new Base Level includes the $74,394,000 that was not originally part of the base for FY16. The total new money for FY16 is about $224 million. 4 As part of the settlement, the $74,394,000 in "additional funding," became a permanent, guaranteed part of the Base Level that would be adjusted by inflation in future years. n ABOVE: Deer Valley Education Association members grading papers on February 13, 2016, at Arrowhead Town Centre. RIGHT: Tucson Education Association member Emily Freed grades papers on February 13, 2016, at Century Park Place 20.