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Schools, lawmakers argue in court over repayment of illegal budget cuts

MCalling it fiscally “impossible,” an attorney for lawmakers told a judge on Monday she should reject a bid by schools to get back the money the state illegally withheld from them for years.

Bill Richards did not dispute that the Arizona Supreme Court concluded last year it was illegal for the Legislature and the governor to ignore a voter-approved mandate to boost state aid each year to account for inflation. Schools peg the amount they were denied in excess of $1 billion.

But Richards told Maricopa County Superior Court Judge Katherine Cooper the money just isn’t there.

He pointed out to Cooper that she already has ruled the state needs to adjust aid to schools going forward by more than $330 million a year.

If that figure is not slashed on appeal, Richards said that adjustment, coupled with other financial problems, will cause “administrative and economic turmoil” by putting Arizona $1 billion in the red by next budget year. And Richards said that will thrust the state back in the hole from which it has been trying to emerge since the Great Recession began.

But Don Peters, representing the schools that sued in 2010 when lawmakers began shorting the schools, scoffed at that claim of “impossibility.” He said it comes as the state is poised to implement previously approved tax cuts, largely for corporations, to the point where, by 2018, the lost revenues will total more than $200 million a year.

Peter Gentala, staff attorney for House Republicans, did not dispute that.

But he said Cooper has to take into account not only the state’s current finances but also the argument that the tax cuts were part of a plan by Gov. Jan Brewer and the Republican legislative majority to improve the state’s finances down the road. He said what Cooper decides on that $1 billion question will determine “whether that foundation will be completely broken up.”

However, Peters told Cooper that he will present testimony by David Jankofsky, a budget director for former Gov. Janet Napolitano, who will detail for her ways the state can find the funds it needs.

“They may not like them all,” he said.

“But the question is not whether they’re fond of doing what it takes to comply with the court’s order,” Peters continued. “I think you will find it’s clearly possible.”

Anyway, Peters said outside court, lawmakers did have a choice starting four years ago when they knowingly ignored the inflation mandate.

“We’re asking the judge to make the Legislature do what they were required to do by their oaths of office and under the Constitution when people give them the direction,” he explained. “They’re not free to say, ‘We’d rather do something else.’“

The 2000 ballot measure hiked the state sales tax by six-tenths of a cent, to 5.6 percent, through June 30, 2021. It also requires the Legislature to forever increase funding for schools by either 2 percent or the change in a key inflation indicator, whichever is less.

Yet, beginning in 2010, the Legislature approved – and Brewer signed – a series of budgets which were “balanced” at least in part by a decision not to fully fund the inflation formula.

In arguing for the missed funds, Peters told Cooper that lawmakers knew withhold the cash was wrong, citing a written opinion by the Attorney General’s Office that the 2000 inflation mandate, having been approved by voters, could not be ignored. But Richards said lawmakers had a contrary opinion by the Legislative Council which advises lawmakers.

What Cooper orders could hang on that issue of whether lawmakers acted in good faith.

It was easier for Cooper to decide that lawmakers did not fund the formula and ordered them to reset state aid to schools to where it would have been had they obeyed the law all along. That takes care of costs going forward.

But the question of what was not paid for years presents different problems.

Richards pointed out the money was supposed to be used for things like teacher pay. But he said there’s obviously no way giving the schools an extra $1 billion now can be used for retroactive pay hikes.

Peters countered that, while lawmakers were refusing to fund inflation, they also cut funds for schools for capital expenses, everything from roof repairs to computer equipment.

“Schools have extensive accumulated needs that far exceed anything they might receive from this award of back money,” he said.

“During the hard times, the schools basically made it a priority to put teachers in the classroom and keep people employed,” Peters explained. “And if they had to let the air conditioning system slide, they did it.”

Now, after years of neglect, he said the schools cannot wait any longer.

To make his point, Peters solicited testimony from Kenneth Hicks, the business manager for the Peoria Unified School District.

Hicks said some of the needs the state used to fund were made up by local taxpayers approving bonds and overrides. But Hicks, whose district would get $34.4 million of the total, told the judge there are other unmet needs that have not been funded, everything from computer equipment to replacing 14-year-old marching band uniforms.

Richards told Cooper, though, that lawmakers did the best they could, given the circumstances. In fact, he said, they actually made education funding a priority, including getting voters to adopt a temporary one-cent sales tax that expired in 2012.

He also cited figures that school funding was 41 percent of the state budget before the recession – and is still 41 percent, even as cuts were made elsewhere.

But Peters told the judge it’s not like the schools are asking lawmakers, who have just a $9.2 billion budget this year, to cough up all the money at once. He said options remain for paying it out over a number of years and perhaps even getting some lower figure.

And he said the money is owed – and the schools need it now.

Testimony is expected to continue for the rest of the week.

One comment

  1. Education is the number one issue for Arizona and for a constituency we serve–Latinos. Latino children represent over 42% of enrollment in public schools and soon they will be the majority. Any decisions made by legislators will impact or diminish the future of our children. When the legislature cuts or does not fully fund education, you diminish the future of Arizona and its children. This election marks whether we go forward with our children as assets into the future or whether we decide that prisons deserve funding or that more corporate tax cuts need to be made. The AZ Treasurer has the responsibility of overseeing Arizona’s investment portfolio. Much of that portfolio is K-12 Education funding. How was that portfolio managed and what investments were made? Did we lose or did we gain? The past treasurer would say we gained. If so, why are we at such a huge deficit in our funding education? Businesses keep asking for tax cuts to fund their growth. We have not seen but limited growth? Was our giving corporations a tax cut a good investment? We must change the thinking and priorities of this next legislature or diminish the future of our state and the future of our children.

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