The issue of fully funding inflation for K-12 is headed for another round in the courts, even though the state Supreme Court ruled in September the Legislature must make annual adjustments.
The issue for the schools now is to make sure the fiscal year 2014-15 state budget includes annual percentage adjustments that were never made and the Legislature replenishes the dollars that were never appropriated.
The cost of getting schools up to the proper level after missing out on annual adjustments could run up to $320 million. Another $1.3 billion may have to be spent on reimbursing schools for the money they lost while they weren’t getting a cost-of-living increase, according to a school funding expert and the Joint Legislative Budget Committee.
Donald Peters, the attorney who successfully argued the Supreme Court case, said he and the state, represented by the Attorney General’s Office, have a fundamental disagreement on whether the annual adjustments that were never made should be included in the next budget and whether funds should be backfilled.
“We’re going to have a fight on both of these things from the state,” Peters said. “The way we’ll have to resolve the difference is to get the judge to tell us what the answer is, so I suspect it will be a court ruling that resolves that.”
Stephanie Grisham, a spokeswoman with the Attorney General, declined comment.
Rep. John Kavanagh, House Appropriations Committee chairman, said returning to court to hash out the issues is unnecessary and futile because the Legislature can simply label all of the money appropriated to public schools as being related to inflation.
“The inflation is mandatory, the other dollars are discretionary, so we can rename the discretionary amount anything we want,” Kavanagh said.
A large retroactive inflation bill would create havoc in state government, Kavanagh said.
The economic downturn in the last decade left the Legislature looking for money anywhere it could find it.
Lawmakers decided not to fund a portion of the per-pupil annual inflation adjustments in fiscal-year 2010-11 and continued with the practice for the next two fiscal years.
School districts, the Arizona School Boards Association and Arizona Education Association, filed suit. Judge Kenneth Mangum of Maricopa County Superior Court ruled in favor of the state, but the Arizona Court of Appeals ruled in the schools’ favor in January 2013. The state Supreme Court ruled on Sept. 26 that the Legislature’s refusal to fund inflation for per-pupil costs violated the Voter Protection Act, a 1998 measure severely restricting the Legislature’s ability to amend or overturn ballot measures.
The high court remanded the case back to Superior Court for judgment in favor of the schools and further proceedings consistent with its opinion.
The case is still temporarily at the Supreme Court as the state and Peters argue over how much his clients are due in attorneys’ fees. He and co-counsel Tim Hogan are asking for $290,067, while the state is only willing to pay $59,556.
But when the case does return to Superior Court, the issue will be how much schools get.
The Legislature, in anticipation of losing at the Supreme Court, provided a 1.8-percent adjustment on the per-pupil cost for fiscal-year 2013-14, or $82 million.
Chuck Essigs, an expert on school finance and lobbyist with the Arizona Association of School Business Officials, said that was a single-year increase that didn’t take into account the cumulative adjustments from unfunded years.
He said that to make public schools whole the adjustment for fiscal-year 2014-15 has to include those unfunded years, which would result in an increase of roughly $274 per pupil, or $300 million. The JLBC estimated a $320 million increase.
Essigs said the fiscal-year 2015-2016 budget would return to normal annual increases.
Essigs said he hasn’t calculated the cost of reimbursements, but JLBC estimates it at $1.3 billion.
By the Numbers
Per-pupil base level FY 2009-13: $3,267.72
Per-pupil base level FY 2013-14: $3,326.54
Per-pupil base level if inflation adjustments had been made: $3,559.50
— Source: JLBC