With a quickie special session coming to a close, the education-funding package that settles a major education-funding lawsuit is passing out of the Senate today, giving Gov. Doug Ducey a big victory in delivering $3.5 billion in additional dollars to schools over the next decade.
The deal—which will have to be approved by voters next May—is fairly complex, but the most troubling element is how much of the state land trust dollars will be diverted to ongoing education expenses.
That element had both legislative Democrats and Republican such as state Treasurer Jeff DeWit and former state treasurer Dean Martin complaining that the plan busts the state trust in a significant manner. And they’re right: Never before have state leaders moved to get such short-term gain over long-term growth with the state land trust dollars.
The state land trust now basically pays out the interest that is earned from the trust, which grows as state land is sold or leased and the proceeds are deposited in the trust. (It’s more complicated than that, but that’s the gist.) The idea, which dates back to statehood, is that the land trust would grow in perpetuity while providing annual payouts for the schools.
Right now, the trust pays out a steady 2.5 percent of its value to the schools every year. The plan increases that to 6.9 percent annually for the next decade.
Today, the trust is worth about $6 billion. In 10 years, if you leave the current rules in place, it’ll be worth about $9 billion and will generate about $180 million a year for schools. If you go forward with Ducey’s plan, in 10 years the trust will be worth a little more than it’s worth today—and will only generate $100 million a year for schools. (All of those numbers are estimates that depend on how much land is sold over the next decade, what happens with the stock market, etc.)
This is the big downside of this deal: If Ducey and the Republicans could have just decreased the percentage from the trust to 4 or 5 percent, you’d make less of a long-term dent—and you’d likely turn some critics into supporters.
The education lobby that is supporting this—School Boards Association, the Children’s Action Alliance and others—all say that this is the only way to get funding to schools now, which is probably a safe bet. Even if they win the lawsuit at the Arizona Supreme Court, lawmakers could just ignore the order to provide more funding or drag it for years. So they’re taking the deal now and arguing that the state will still need more for education in the future—an argument that’s not likely to persuade legislative Republicans, who are going to say they’re done their part for schools.
Democrats are arguing that there are plenty of dollars available to the state right now to fund the schools. That’s sort of true—although there aren’t nearly enough dollars to fund everything the state should be doing, from taking care of highways to helping single moms afford daycare so they can keep their jobs to ensuring the state investigates cases of child neglect to lifting the one-year lifetime limit for families that are down on their luck to get a little bit of cash assistance to supporting the universities to making needed repairs at state parks to…well, the list goes on.
Ducey gets to brag that his deal settles the education-funding lawsuit without raising taxes—and a resistance to raising any taxes under any circumstances remains at the top of Ducey’s agenda. And what using the trust dollars really does is open the door for Ducey to argue once again that the state can afford more tax cuts that will, if past experience is any indication, primarily go to Arizona’s wealthiest residents. Watch and see.