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Proposition 123 ­ It isn’t a mirage, it’s a big improvement

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Is Proposition 123 a “mirage? To some it may seem that way, but looking at the facts and figures, I welcome what it will do as a first step to improving the finances of our public schools in Arizona. Here is why.

The State Enabling Act of 1910 and subsequent legislation set aside 11 million acres of State Trust Land. The Arizona State Land Department (ASLD) was established to auction that land for the benefit of public education and 13 other beneficiaries.

ASLD prepares an annual report each year that highlights the land sales and distributions to all beneficiaries. The fiscal 2015 report cites the following:

Willis, Rogercmyk

Roger Willis

1. Since its inception, ASLD has auctioned approximately 2 million acres of the original 11 million acres of State Trust Land.

2. In 2015, ASLD deposited $133.6 million in the Permanent Fund for K-12 public education, distributed $134.8 million from that fund to public education, and ended the year with a $4.8 billion balance in the fund.

3. There are still roughly 8 million acres of unsold State Trust Land for the benefit of public education.

4. While ASLD does not publish an estimate of the value of the 8 million acres, some sources put the value of those sales at
$70 billion, or $8,750 per acre.

Proposition 123, which will be on the ballot in a special election May 17, calls for an additional $3.5 billion in distributions from the Permanent Fund over the next 10 years. Add that to the actual annual distribution of
$135 million in 2015, and we get roughly $500 million in annual distributions to education over the life of Prop 123.

Realistically, ASLD will not sell all remaining 8 million acres during the next
10 years. History tells us that they have averaged total sales of about 20,000 acres per year across all 14 beneficiaries. The current inventory would last well over 200 years at that rate.

If ASLD increases education land sales to 100,000 acres per year, the inventory will still last 80 years. At a reasonable
$5,000 per acre, that would generate an average of $500 million in annual deposits to the Permanent Fund for education, enough to cover the current distributions plus those from Prop. 123. At the end of the 10 year period, the balance in the Permanent Fund would be approximately the same as it is now, PLUS whatever investment returns the fund manager at ASLD is able to generate.

Taking it a step further, there would be 70 years of inventory remaining AFTER Prop. 123 has expired. Without touching the principal balance in the Permanent Fund, ASLD could still generate $500 million per year in annual deposits for at least 70 years and retain the same $500 million annual distribution level. And all the while, the balance in the Permanent Fund would continue to increase by whatever investment returns are realized.

Yes, there are several assumptions built into this very high-level analysis. But those assumptions are purposely conservative. There are several other scenarios based on more optimistic assumptions that paint an even better picture for funding our schools from sales of State Trust Land AFTER Prop. 123 expires. But I leave those scenarios to the financial planners in ASLD and the state education department.

Is Prop. 123 a perfect panacea for long-term financial health of our education system. No – there are still many unknowns. Is increased funding from Prop. 123 going to improve the quality of our education system. Not by itself. But the reality is improving the quality of education will require more money than we spend in Arizona today.

So what is the bottom line. Proposition 123 is a big improvement over the current situation. I urge voters to approve it, but to also get involved with your schools to make sure they utilize the additional funding for the benefit of the school-aged children of Arizona.

Rogers Willis lives in Anthem.

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