Lawmakers tackle $9.8 billion budget filled with Ducey’s priorities

The fiscal year 2018 budget proposed a small boost in pay for Arizona teachers, allowed the state’s universities to take on more debt to construct new buildings, and instituted a performance-pay program for high-achieving schools.

And, despite a lengthy negotiating process, Gov. Doug Ducey is poised to get nearly everything he asked for in the budget he proposed months ago.

Lawmakers and Ducey had battled for months over how best to spend the less than $200 million available for new initiatives out of the state’s $9.8 billion budget.

The Legislature was still debating the proposed budget as of press time on
May 4.

The budget proposal introduced in the Legislature on May 2 included all of Ducey’s priorities, though several of his ideas were modified.

He touted his spending plan as an “education budget” throughout the session, saying the state needs to use its available revenues to boost schools throughout the state.

He told KTAR 92.3 FM on May 1 the spending plan would be a “home-run budget for K-12 education.”

But critics said the budget didn’t do enough to help struggling schools or stem the ongoing teacher shortage. Instead, they called the tiny teacher pay raise he proposed an insult.

Ducey proposed a 2 percent raise over 5 years, coming in at 0.4 percent annually. Teachers and school advocates condemned the miniscule raise, equating it to one Starbucks drink per paycheck. They, along with Democrats, pushed for a 4 percent raise.

Teachers would get slightly more in pay after lawmakers settled for a 1 percent increase in the first year, and another 1 percent the next year.

The budget specified that the money for teacher pay increases must be spent over and above any other boosts given through overrides, Proposition 123 or inflation raises.

Daniel Scarpinato, Ducey’s spokesman, said the governor is “very pleased” with where the teacher pay raise ended up in the budget.

“The governor wanted 2 percent, and the fact that we’re able to do that faster is great,” Scarpinato said.

The major sticking point impeding the passage of a budget is a borrowing plan for universities, which faced opposition from multiple factions of the Legislature for different reasons. Some said taking on more debt wasn’t conservative. Democrats said the plan, as originally crafted, would hurt cities, and opposed the idea in an attempt to leverage votes for their own priorities, like more teacher pay.

The Republican-led Legislature resisted the idea of letting universities bond for $1 billion to help with new construction and pay for deferred maintenance. But, as of press time, lawmakers appeared poised to approve a modified bonding plan.

As originally proposed, the bonding plan would have allowed universities to keep the sales tax they ordinarily would pay to the state, a total of $37 million next year, as an ongoing stream of funding to borrow against. While the bonding idea was touted as a 30-year plan, the mechanism of keeping sales taxes didn’t have an expiration date.

Lawmakers took issue with the idea, saying the amount could grow far beyond $1 billion and would negatively impact the state’s general fund and local governments’ share of revenues.

The newfangled university bonding plan set the amount at $27 million the first year, increased for inflation, for 25 years. Also, it would no longer sweep local governments’ share of revenues or recapture sales taxes.

It also included some reporting requirements, including universities having to provide information on their expenses for upcoming years to the Legislature and the governor. It also required approval by the Legislature’s Joint Committee on Capital Review for any new buildings to be constructed by the universities. If money is used for maintenance, renewal or other needs aside from new construction, there is no review required.

Another Ducey initiative, pushed by the Arizona Chamber of Commerce and Industry, would reward high-performing schools by giving them more money. The budget stipulated that the majority of the additional dollars must go to teachers, and the rest of the funds should go toward expanding student access to the high-achieving schools.

The results-based funding plan, totaling $38 million, would provide schools that score in the top 10 percent on the state’s standardized test additional money per student.

Low-income schools, defined as those with 60 percent or more students qualifying for the federal free or reduced lunch program, would get $400 per student if they score in the top 10 percent of all low-income schools. High-income schools – meaning those with less than 60 percent of students on free or reduced lunch plans – would get $225 per pupil if they score in the top 10 percent of all schools.

Opponents of the plan, and even those who would receive funding from it, said the money would be better used to increase teacher pay, instead of targeting schools that are already doing well.

Under the deal, lawmakers got one big concession from the governor: highway funding. Ducey had zeroed out highway funds that were included in last year’s budget, instead focusing almost entirely on funding education in this year’s spending plan.

Lawmakers insisted on ongoing money for the Highway User Revenue Fund, which comes from gas taxes, to help fix Arizona roads. Over the years, HURF monies have repeatedly been swept to finance state operations.

The final budget plan included $30 million for HURF, which will come from a fund housed at the Arizona Department of Transportation. That fund hasn’t been used.

Even minor Ducey requests made it into the final budget. His State of the State address laid out more than a dozen steps to improve education, and the majority of those ideas appeared in the budget.

Aspiring teachers who attend Arizona universities could get free tuition if they work in Arizona public schools. Teachers in underserved fields could get student loan reimbursement. Rural schools could get broadband Internet access.

The only Ducey item missing from the budget deal is a $1,000 bonus for teachers who work in low-income schools, which would have cost $6.4 million.

A plan touted as full-day kindergarten for low-income schools was re-labeled “early literacy” in budget documents, which showed $8 million for it next year instead of the $10 million Ducey wanted.

“We’re very pleased,” Scarpinato said. “We think this is a good budget, it’s an education budget, and we’re looking forward to getting it passed.”

One idea that didn’t make it into the final budget: a restoration of two-year eligibility for cash assistance for needy families.

Ducey signed a budget two years ago that dropped Temporary Assistance for Needy Families, or cash assistance, to one year, the lowest in the nation. The drop in benefits left thousands of poor Arizonans without cash for basic needs, and it cost the state money in other areas.

Scarpinato said TANF is still a standalone bill that could move outside the budget with “real potential for bipartisan support.” The bill to restore the benefits ran into opposition from Democrats, who said it had too many strings attached.

“We would still like to see it get up here. We think it’s got important reforms, and it makes sense to extend these benefits,” Scarpinato said.