Updated February 22, 2019 by Expect More Arizona
A handful of bills were introduced this session to replace and expand Proposition 301, which generates funding for K-12 and postsecondary education. The bills various sponsors, Rep. Michelle Udall, Sen. Sylvia Allen and Sen. Kate Brophy McGee have since come to an agreement on a single proposal. This blog has been updated to outline what the current proposal entails.
Expect More Arizona is currently Neutral on these bills. Any referendum going to voters should significantly impact consensus priorities in the Roadmap for P-20 Education Funding, and the proposal as it currently is drafted does not yet meet that bar. We will update you if the bill advances or our position changes. We look forward to ongoing conversations about these bills.
What’s the backstory?
Proposition 301 was passed by voters in November 2000. Among other things, Prop 301 increased the state sales tax from 5.0 percent to 5.6 percent, dedicating the increased revenues to public education. To support low-income families for whom the additional sales tax would be an added burden, Prop 301 also included a tax credit. The extra 0.6 percent sales tax and the associated tax credit for low-income households was set to expire at the end of 2021.
Last year, the Legislature passed a bill that extends the education sales tax rate another 20 years, from 2021 through 2041.
Here’s a breakdown of where the money went in 2017-18 (source: Arizona Treasury Office):
- Classroom Site Fund (see description below): $420M
- Five (5) additional school days each school year: $86.3M
- School Facilities Board (school buildings): $64.1M
- Other programs managed by the Arizona Department of Education (school safety, accountability, failing schools): $16.5M
- State Universities (technology & research) $77.4M
- Community Colleges $19.3M
- Tribal Colleges $773K
- Tax credit for low-income households $25M
The Classroom Site Fund is distributed to school districts and charter schools on a per-pupil basis. The funds are used for teacher performance pay (40 percent), teacher base pay (20 percent), and general maintenance and operations (40 percent). Class size reduction, dropout prevention, teacher professional development, interventions for struggling students, and tutoring are just some of the ways this funding benefits students.
At the start of the legislative session, Senator Sylvia Allen (R – Snowflake; Senate Education Committee Chair) introduced two bills to take the place of Proposition 301.
Senate Concurrent Resolution 1001 (SCR 1001) proposed eliminating the existing six-tenths of one percent (0.6 percent) sales tax and replacing it with a one percent (1.0 percent) sales tax. If passed by the Legislature, Arizona voters will make the final decision at the ballot box in November 2020. If passed by the voters, the new sales tax rate would take effect July 1, 2021.
Senate Bill 1080 (SB 1080) was introduced by Senator Allen alongside SCR 1001 to change the distribution of the funding that would be collected as a result of the one percent sales tax.
Representative Michelle Udall (R – Mesa; House Education Committee Chair) and Senator Kate Brophy McGee (R – Phoenix) introduced similar, but not identical bills (HCR 2024, SCR 1011, SB 1345 and HB 2563). During a recent Senate Education Committee meeting, it was discussed that Senator Allen, Senator Brophy McGee and Representative Udall have come to agreement on a single proposal. SCR 1001 and SB 1080 will be the bills able to move forward to match the House proposal. Therefore, HCR 2024, HB 2563, SCR 1001 and SB 1080 all await the Rules Committee in their respective Chambers.
Proposed changes to fund distribution
If the bills to change how Prop 301 funds are distributed pass through the Legislature and are signed by the Governor, they do NOT have to go to the voters for approval. However, the distribution changes ONLY take effect if voters pass the change to the sales tax rate.
- SB 1080 and HB 2563 would reduce the buckets the funds go to down to just three. Of the total revenue generated by a one percent sales tax:
- 75 percent would go to K-12, with a small portion of this going to the Department of Education to provide accountability and transparency as to how the money is invested.
- 20 percent would go to the state’s three public universities to subsidize student in-state tuition costs and the Technology and Research Initiative Fund (TRIF). TRIF provides seed money for student research grants.
- Five (5) percent would go to Arizona’s community colleges, provisional community colleges and tribal colleges for the expansion of trade and workforce development programs.
- All revenue for K-12 schools would be distributed through the Classroom Site Fund, which means local district governing boards will determine how to allocated the money based on each individual school’s needs. However, the bill makes changes and additions to what the Fund can be used for:
- Before funds are placed in the Classroom Site Fund, $86.3 million would be allocated to fund the basic state aid formula (the same amount of Prop 301’s original support of 5 extra school days), and $1.5 million would be allocated to the Auditor General for support of their functions related to reporting on educational institutions’ uses of the funds
- Assessment intervention programs and teacher liability insurance premiums would no longer be permissible uses for the funds
- Education interventions, voluntary full-day kindergarten, student support services, tutoring, character education, school safety, career and technical education, and local school/district accountability would be added to the list of approved uses for the funds
- Teacher pay, teacher professional development, class size reduction, and dropout prevention remain approved uses for the funds, but the specific allocation percentages defined earlier in this post go away
- The funding for community colleges would be distributed so that each community college district and qualifying tribal college will receive $1.5 million, and each provisional community college will receive funding between $0.1 million and $1.5 million based on their enrollments, then all remaining funds are distributed proportionally – based on enrollments – to all community colleges, qualifying tribal colleges, and provisional community colleges.
What’s the funding impact?
While some have called this bill a new penny for education it is important to remember that only 40 percent of the sales tax collected will be new revenue. It will NOT increase education funding by more than a billion dollars, as has been suggested.
Remember that the total amount of revenue generated in any given year is determined by how much you and I spend. In a strong economy, when spending is up, tax revenues are strong. A recession could bring a slowdown in spending, thereby decreasing the amount collected.
That said, using the 2017-18 revenue figures as reference, the state would have generated an additional $473 million if the tax rate had been one percent instead of 0.6 percent, or $1.18 billion total.
If the proposed distribution changes were in effect, the funds would have been distributed as follows:
- K-12 – $861 million (approx. $274 million more)
- Universities – $260 million (approx. $182.6 million more)
- Community Colleges – $59 million (approx. $40 million more)
Other things to consider
- Putting all of the K-12 revenue generated into the Classroom Site Fund gives individual school districts and charter schools more control over how the dollars are spent, but it removes direct funding of specific grant programs, which has the potential to create inequities and perpetuate achievement gaps.
- While roughly $470 million more funding education is nice, it is far from what is needed to support the success of all students and meet the state’s long-term education goals. Check out the Roadmap for P-20 Education Funding to learn more about what’s needed.
- The Department of Education currently receives Prop 301 distributions to cover the cost of the statewide assessment and support failing schools (approx. $8.5 million). That funding would go away if these bills pass, but costs to the state would remain.
No protection for low-income families
- SB 1080 and HB 2563 remove the allocation of $25 million for a tax credit for low-income families. Because sales tax impacts everyone, the tax credit had been included to offset the impact to vulnerable populations. With no dedicated revenue stream to support this tax credit, the state general fund could support this tax credit, but this legislation is silent on this.