Unsettled strife over Prop. 123 clouds future of education funding

It’s hard to set a course for the future of public education in Arizona when school officials and lawmakers are still feuding about the past.

Public school advocates want to talk about steps four, five and six – their unofficial catchphrase for the next funding developments that Gov. Doug Ducey promised when urging voters to approve Proposition 123 last year. The ballot measure will infuse K-12 schools with $3.5 billion over a decade.

Some lawmakers still doubt that Prop. 123 did anything other than end a series of court battles the state repeatedly lost. And by not admitting wrongdoing on their part – illegally withholding voter-mandated funds for K-12 schools, an act that prompted schools to sue in the first place – they’ve frustrated the education community and hampered the process of moving forward.

The clash boils down to an oft-repeated talking point of “and” versus “or,” simple words that have become the rallying cry for lawmakers who disagree with a series of court rulings that went as high as the Arizona Supreme Court.

Proposition 301, passed by voters in 2000, orders the Legislature to increase the base level or other components of the revenue control limit by 2 per cent. But the same bill that put the measure on the ballot required the secretary of state to put before voters the question of “inflation adjustments in the state aid to education base level and other components of the revenue control limit.” The Legislature funded the base level and the other components until the economy crashed in 2008, then withheld inflation funding for some components during the Great Recession.

The justices settled that debate when they ruled that the Legislature, from 2009 to 2014, illegally withheld some inflation funding from schools, and schools were owed hundreds of millions, or even potentially billions, of dollars.

All that was left in court was a fight over exactly how much was owed, a part of the case that dragged on for another two years.

Still, the “and or” question has been parroted before and after the passage of Prop. 123, by everyone from the governor to Sen. Debbie Lesko.

In his 2015 State of the State address, Ducey pleaded with lawmakers to end Cave Creek v. Ducey and implored Attorney General Mark Brnovich to settle the case by invoking the part of the legal battle no longer in dispute.

“Dust off your dictionary and help us out here,” Ducey told Brnovich during his speech. “The words of the statute are clear. ‘And’ means ‘and;’ ‘or’ means ‘or.’”

To this day, some at the Capitol still embrace the logic and reject a Court of Appeals ruling that determined that a plain reading of the law wasn’t satisfactory.

Lesko, a Peoria Republican, disputed the court’s ruling in a House Education Committee hearing on March 21, and suggested that the question of “and” and “or” remains up for debate. As Rep. Reginald Bolding pressured Lesko to acknowledge that Prop. 123 was the result of a settlement of the Legislature’s illegal actions, and thus a payment of dollars schools were already owed, Lesko took an agree-to-disagree approach.

Yes, Prop. 123 was a settlement, she said, but “I think there’s a dispute on if they were owed that amount of money because there was an ‘or’ instead of an ‘and’ in the language,” she added.

The Supreme Court made a decision, Lesko later said, but she still doesn’t agree with it.

Ever Enough?

Repeatedly invoking the “and or” question and essentially denying the accuracy of the Supreme Court’s ruling is a dangerous line of thinking, according to some education officials. Chuck Essigs, a lobbyist for the Arizona Association of School Business Officials, is flabbergasted by the ongoing debates over Prop. 123 happening at the Capitol.

“We had no idea that once the settlement was put in place and approved that we’d still have to fight the Legislature on whether we were owed the money or not,” Essigs said.  “We never in our wildest dreams… thought we’d continue to have to fight that we won.”

When Essigs and others go to the Capitol asking about steps four, five and six – put simply, to ask for more money – they are constantly challenged by lawmakers in control of the state’s purse strings, who argue that Prop. 123 is already providing plenty for schools.

Sen. Sylvia Allen summarized the logic of some Arizona Republicans in a letter to The Arizona Republic earlier this month, pointing to Prop. 123 as a means to quench the thirst of those advocating for the state to spend more on K-12.

“When is it ever enough?” Allen wrote.

“It wasn’t a benevolent act on their part,” Essigs said. But some lawmakers genuinely believe that, with the approval of Prop. 123, “we’re giving the money out of the goodness of our heart, not out of the legal argument that we lost.”

That belief undercuts the true impetus for Prop. 123, and reveals the Legislature’s disdain for some rulings by the judicial branch.

The crux of Cave Creek v. Ducey was settled when the Supreme Court upheld an appellate court ruling in favor of the schools, which concluded that Proposition 301 required lawmakers to fully fund annual inflationary adjustments for all components of school dollars.

Though an initial trial court ruling sided with the lawmakers and their argument for a plain reading of the law – “and means and, and or means or,” as Ducey said – the Legislature lost on appeal, as the Court of Appeals looked beyond the law’s plain text. The Court of Appeals found that a plain reading of the law “would contradict the intent of the Legislature that drafted the provision and the voters who approved.”

The Supreme Court held that the lawmakers had violated the Voter Protection Act by adopting budgets that contradicted the people’s will in Prop. 301. They left untouched the appellate court’s ruling on the “and or” language, however, since the state never appealed it to the high court.

Essentially, the voters intended for Prop. 301 to require annual, fully-funded inflation adjustments for schools.

With that crucial argument settled, all that was left was to decide how much schools were owed as victors. Had that portion of the lawsuit raged on, the Legislature could have been left with a one-time bill as high as $2 billion – a figure that accounts for a resetting of the baseline K-12 funding formula, but also back payments for the years in which legally-required inflation funding wasn’t provided.

Lesko said that Prop. 123 did help the Legislature get out of a losing battle in court. They could have allowed the legal system to take its course, but she acknowledged that given the history of the case – repeated losses by lawmakers – it was best to move on out of court.

But she vehemently defended the actions of legislators like herself, who during the Great Recession didn’t provide all the legally-required inflation funding. Lesko has pushed a bill, SB1178, to audit Prop. 123 dollars. Though the funds come with no strings attached for how to spend them, Ducey and lawmakers such as Lesko have pointed to the settlement when questioned why more funding isn’t available for teacher pay raises.

When Bolding pushed back on March 21, arguing that it was disingenuous to now ask for an accounting of dollars that schools are legally able to spend freely per the settlement, Lesko said she wouldn’t allow herself to be backed into a corner and acknowledge that schools were owed the money.

“I don’t agree with that because I believe that ‘or’ means ‘or.’ ‘Or’ doesn’t mean ‘and,’” Lesko said. “The Supreme Court may have disagreed with me, but I disagree with their ruling on it.”

Danger of Prop. 123

Those who negotiated the settlement on behalf of schools took some heat because the amount paled in comparison to what possibly could have been won in court.

Perhaps if supporters of the settlement had known it would come to this, maybe they would’ve looked at the deal differently, Essigs said.

He made a comparison of Lesko’s rationale.

“It’s kind of like if we were in a car accident, and you were at fault. We went to court and we got a judgement, but we ended up settling because I wanted the money. And the next year down the road, you said, ‘It really wasn’t my fault anyway,’” Essigs said.

Chris Kotterman, a lobbyist for the Arizona School Boards Association, said he anticipated the settlement would inherently make life difficult at the Capitol. Faced with limited money to spend to support new needs across the state, lawmakers traditionally take a “dollars and cents” approach to funding, he said.

“We knew this going in, that this is the danger of Prop. 123,” Kotterman said. “Having just got a substantial sum of money makes it a lot harder to make the case that you need more money.”

And he understands the frustration of lawmakers who despised the requirements of Prop. 301 from the beginning. Many felt handcuffed by the requirement to adjust K-12 dollars for inflation since the voters demanded it in 2000.

The recession provided an opportunity to challenge the law, and the result was the court confirmed it, Kotterman said.

As for new legislators who weren’t around for the legal battle, they don’t necessarily have the context to understand why Prop. 123 was needed, he said.

That’s how Kotterman and others find themselves fighting laws that seek to audit Prop. 123 dollars, though Kotterman said it’s hard to know for sure how many lawmakers feel as Lesko does.

Moot Point

Kotterman and other school advocates have argued in committee hearings that such an audit is likely impossible. Prop. 123 dollars are infused into the baseline funding formula for schools. There’s no earmark to determine now how much comes from Prop. 123 and how much would have otherwise been appropriated.

But the underlying rationale surrounding the audit is what truly concerns lobbyists like Jay Kaprosy, who represents the Arizona Charter School Association.

While opposing an amendment to add audit language to HB2297 in the Senate Appropriations Committee on March 28, Kaprosy said schools aren’t opposed to transparency – Lesko’s second attempt to audit school spending on teacher salaries – they’re just averse to the assumption the audit makes, which is that if schools don’t give teachers raises, they’re going against the will of the public.

Still, Senate President Steve Yarbrough said schools should be happy to comply.

“I would submit that if I were a school official, business official or otherwise, I would be enthusiastic in saying, ‘Well of course, we should account for the people’s money… Regardless of why we got it, the fact is it’s still the people’s money, and we should be more than willing to go the extra mile to account for what we’re doing with that money to the very best we can,’” Yarbrough said.

Yarbrough insisted that the audit is not an attempt to pressure schools, or attach de facto strings to Prop. 123 dollars. But he also sidestepped questions about the nature of Prop. 123, and whether the Legislature did anything wrong when withholding funds.

It’s moot now that the settlement is in effect, Yarbrough said.

“I will fall back to my perspective that is, at this moment, it just doesn’t really matter,” he said.

Don Peters, the now-retired attorney who successfully argued the school’s case before the Supreme Court, also said the decision is somewhat moot with Prop. 123 passing. The high court’s holdings were essentially superseded by the settlement, he said.

“Not that the whole decision doesn’t matter anymore – it may matter in future disputes about initiatives and referenda. But the holdings were superseded by the settlement, the specific holdings of what were required under Prop. 301. That was part of what the settlement was meant to do,” Peters said. “Now their obligation is to obey Prop. 123.”

The compromise made him well aware that many lawmakers don’t agree with the Supreme Court – even some of those negotiating the settlement felt that way.

“I went through the settlement discussions that the governor hosted, and believe me, I heard the legislative attitude that they didn’t do anything wrong,” Peters said.

He urged those now debating the next steps of education funding to stop fighting over the past, but also said those lawmakers who want to say Prop. 123 is reason enough to not seek bold new funding for education are mistaken.

“We were aware that was a possible risk. I could cite Gov. Doug Ducey by saying this is a first step. This was nothing but a first step. It solved one problem. We still have very poorly funded schools,” Peters said. “If anybody thinks (Prop. 123) solved all the problems, they weren’t listening to the governor, among other things, who was very well aware that it didn’t.”

Clarification: This story has been updated to reflect that the Supreme Court never considered the “and or” question in it’s opinion in Cave Creek v. Ducey, as the state never included that question in it’s appeal of the appellate court’s ruling.