Extracting funds for K-12

Crandell’s overhaul of school finance plan attracts skepticism and support

It’s a puzzle that has vexed policymakers, education leaders and business groups for decades, but it’s one that Sen. Chester Crandell hopes to solve: How can the state revamp education funding to be both fair and simple?

Crandell, a Heber Republican and retired superintendent of a vocational school, has been traveling the state giving a slide-show presentation containing bullet points of his colossal task.

Critics have long complained that the tangle of formulas, tax rates and layers of taxation aren’t in line with the Arizona Constitution’s mandate of a “general and uniform public school system,” and aren’t friendly to taxpayers.

The reception to Crandell’s plan, which he hopes to begin implementing in the upcoming legislative session, has ranged from snickering laughter to avowals of support, but many say the time has come to at least begin a serious dialogue.

“It’s trite, you know, (but) the longest journey begins with the first step, and this is what that is,” said Dick Foreman, who sits on the board of directors of the Arizona Business and Education Coalition, one of the groups that has heard Crandell’s presentation. “The little bit I know of Senator Crandell, and I don’t know him very well, but I detect a little fire in his eyes.”

Crandell wants to put the state in charge of doling out the money to school districts from a single fund, which he hopes to tackle in the next legislative session.

His longer-term plans are to phase out the use of bonds and budget overrides as a finance method for school districts, close the disparity in funding between school district students and charter school students, and ask voters to continue the funding provided by Proposition 301 after the 2000 voter-approved tax hike for funding education expires in 2021. Crandell proposes raising Proposition 301’s six-tenths of a cent tax to 1-cent and redirecting funding in the measure that is currently earmarked for higher education to K-12.

Some people familiar with Crandell’s plan agree that changes to school financing are necessary and they commend him for his efforts, though they remain skeptical he can succeed because of the magnitude of the changes he is seeking and the lack of political will to make them now.

The combination of complicated public policy, changes that will result in shifting the tax burden and the specter of an election give Susan Carlson, executive director of ABEC, a dim view of Crandell’s chances next year.

“There’s no single issue that has more devils in the details than school finance, and it takes time to examine those details to see how they work together and impact other elements of the school budget,” she said.

Crandell said the skeptics may be correct, but lawmakers have been “beating this thing around” for 20 years.

“I’m saying, put your money where your mouth is,” he said. “Let’s stand up and do something about it or let’s quit and quit complaining.”

Arizona overhauled its school finance system in 1980 to its current model and the Arizona Supreme Court has concluded that the state Constitution’s “general and uniform” provision requires equalization. The idea is that a student attending a school in a district with little property wealth to tax gets as much funding as a student in a district with great property wealth.

The state makes up the difference from the general fund: School districts with less property value get more state money than districts with high property values.

Kevin McCarthy, president of the Arizona Tax Research Association, said the Legislature in recent years has created more disparities among school districts by allowing districts to tax local property owners more.

The ability of school districts to raise money with voter-approved bonds and budget overrides means there is still a disparity in public school funding. And charter schools, which are public schools, aren’t allowed to hold bond or override elections, so they get less per-pupil than districts.

“It’s getting worse instead of better, so we just need to fix it,” Crandell said.

McCarthy knows about monumental change and the groundwork that needs to be laid before embarking on it.

ATRA was the most ardent advocate of a 2013 bill reforming the state’s complicated sales tax system, an issue that had been lingering for 20 years. It helped craft and shape the bill, which passed with near-unanimous support after an acrimonious, session-long fight from the cities and their allies, which initially opposed some of the measure’s key provisions.

Though reform is necessary, McCarthy said he doubts Crandell’s plan will gain much traction in 2014.

Succeeding in such a massive undertaking would require a significant amount of the preliminary consensus-building work to be done by late November, like it was with the sales tax reform.

And even in that case, a “battle-royale” still ensued, McCarthy said.

“The (sales tax) would pale next to a school finance rewrite,” he said.

Foreman, of ABEC and a lobbyist with Southwest Gas, said one of the problems with the Crandell proposal is it would create an incredibly intricate shift in tax burden, and major taxpayers like corporations are going to have to figure out the scope of the shift and the impact on their operations.

Foreman said the battle that would arise at the Legislature would be between interests that lose money from the change and those that gain money.

Comparing school funding to the 2013 sales tax reform, Foreman said, “If you thought you had a lot of problems with 30 or 40 cities, throw in 230 school districts and you begin to see the difference. Now, you’re dealing with a statewide monumental shift, tax assessment, analysis with lots of different spokespersons from lots of different causes other than just education. You’re talking taxation.”

He doesn’t think it can be done in the next session.

“It’s going to require arduous study and smoke-filled rooms,” Foreman said.

Crandell shrugs off the skepticism, saying he’s an optimist and if he “gets slammed down,” then maybe he doesn’t belong at the Legislature.

Complicating things further is that the reforms are likely to trigger a three-fourths majority requirement in both chambers because of the sales tax increase component. The state Constitution requires the super-majority approval on legislation increasing state revenues.

He also knows he would have to convince Gov. Jan Brewer, who needed the help of Democrats and a handful of moderate Republicans to pass her Medicaid legislation last session.

“The governor may not sign it, I didn’t vote for Medicaid expansion, so the talk is she may not sign it anyway even with a two-thirds vote,” Crandell said.

Plan to overhaul K-12 funding at a glance

2014

• Create a single source of K-12 funding administered by the state.

• Eliminate bonds and overrides.

Long term

• Increase the General Fund and Proposition 301 funds.

• Eliminate the School Facilities Board.