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Stimulus money for schools might be gone by 2011

Any budget deal reached by Gov. Jan Brewer and the Legislature might come with a big warning label for Arizona educators – enjoy your stimulus money while it lasts, because it won’t last long.

The American Recovery and Reinvestment Act includes an $832 million stabilization fund to be used for K-12 and higher education, with discretion left up to the state on how and when to use the stimulus money.

Exactly how much of the stimulus money will be used in fiscal 2010 is an open question until Brewer and the Legislature get a budget in place, but the governor’s spokesman Paul Senseman said there’s a good chance that the entire stabilization fund will be gone by 2011.

“That is distinctly possible. I’d say likely,” Senseman said.

Senseman said the quick drawdown of the stabilization fund heightens the need for the temporary 1-cent sales tax proposed by Brewer, which the governor said will generate as much as $1 billion a year. Brewer wants voters to decide whether to implement the tax hike or keep Arizona’s sales tax at today’s 5.6 percent rate.

Chuck Essigs, of the Arizona Association of School Business Officials, also said the lack of stimulus money for education beyond 2010 would make it critical for voters to approve the sales tax increase.

“Without that for 2011 … schools and universities will be in dire straits,” Essigs said. “If the Legislature was to save more of that money for 2011, then they would have to make additional cuts in funding to schools for 2010, and I’m not sure that they would still then be able to maintain the funding at the 2006 level.”

The state will likely need additional revenue simply to meet federal requirements for the stimulus money. Among the strings attached to the stabilization fund money is a requirement that states keep their education spending at 2006 levels or higher. For Arizona, that means the state must spend about $3.5 billion on K-12 and nearly $1 billion on higher education.

But some have warned that Arizona will get ahead of itself if it burns through all of its stimulus money for education without knowing how the state will fund schools next fiscal year. A ‘no’ vote on the tax hike by the public would leave Arizona without any additional tax or stimulus dollars in 2011, which could potentially leave K-12, universities and community colleges with drastic funding cuts.

“We’ve got a cliff, and the question is does the cliff happen at the end of ’10 or does it happen at the end of ’11?” said Dennis Hoffman, a professor at Arizona State University’s W.P. Carey School of Business.

Hoffman expects a slight uptick in revenue in 2011, but not much.

“I think that we’ll be pretty much flat in 2010 on revenues, and with very modest appreciation in ’11,” Hoffman said. “I think it may be inflation induced. I think things will be starting to firm up by then, but we’re not going to backfill this hole that we’ve created.”

Continued coverage: Misunderstanding blamed for delay of K-12 stimulus money

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