Arizona trial over state school facilities funding begins

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A 2017 constitutional challenge to Arizona’s system for funding public school facilities that spotlights districts’ unequal access to local property taxes and bond issuance finally went to trial last week. 

The case, filed in Maricopa County Superior Court by school districts and others against state School Facilities Board officials, contends the funding system violates the Arizona Constitution, which requires the state to establish and maintain a general and uniform public school system.  

“In effect, the state has transferred its constitutional obligation to fund public schools to local taxpayers,” the lawsuit states.

Arizona Gov. Katie Hobbs, a Democrat, has taken steps to address school facility problems by issuing executive orders mandating building inspections and creating a committee to update minimum standards for facilities.

Bloomberg News

The system also runs afoul of a 1994 Arizona Supreme Court ruling that ordered the state to create minimum adequate facility standards, provide funding to ensure that no district falls below them, and to put a funding mechanism in place that would not result in substantial disparities among districts, according to the complaint. 

While the state took action to comply with the ruling by enacting Students FIRST — a school capital finance system — in 1998 and establishing minimum building standards in 1999,  insufficient funding made school systems dependent “largely if not exclusively upon the property wealth in the district and the willingness of that district’s voters to pass bonds and (property tax revenue limit) overrides,” the plaintiffs’ opening statement filing said.

That led to a disparity among districts, according to Chuck Essigs, governmental relations director at the Arizona Association of School Business Officials, which had been a plaintiff in the lawsuit but withdrew in 2018.

“There were districts that could pass bonds,” he said. “Some districts have such low property wealth, the tax rate would be five, six, 10 times what it is in other districts. We have districts that have the tax base, but their citizens won’t approve the bonds.”

The plaintiffs’ statement contended “districts without these local resources are left with shabby schools, crumbling infrastructure, an inability to replace their bus fleets as needed, and inadequate resources to keep their technology and curriculum materials reasonably current.” 

With the election of a Democratic governor and attorney general in 2022, the defense in the case was turned over to Arizona’s Republican House speaker and Senate president, who are listed as intervenors in the lawsuit. The defense contends the state has provided substantial funding to schools through per-pupil funding and grants, according to a May 22 special intervenors’ trial memorandum. 

“The Arizona Constitution does not require that the legislature ensure every public school district possesses identical schools, have identical amounts of money for capital needs, or that the State of Arizona fund district schools according to the most popular new trends in school design or technology,” it said. “Rather, the Arizona Supreme Court has held that material differences will inevitably exist among the facilities at different Arizona public school districts.”

Instead of ensuring compliance with minimum facility standards, districts chose to spend discretionary state funding on other priorities, failed to timely seek building renewal grants, or faced problems due to the lack of preventative maintenance, the memorandum added. 

Plaintiffs argue that minimal capital funding from the state forced school systems to either allow their buildings to deteriorate, thereby harming the learning environment, or take money away from classrooms by tapping state maintenance and operations funds. 

“Arizona already has one of the lowest per-pupil spending rates, the lowest teacher salaries, and some of the largest class sizes in the country,” the complaint stated. “Every dollar taken from M&O funds exacerbates these problems.”

Lupita Hightower, superintendent of the Tolleson Elementary School District, where a cafeteria roof installed in 2016 collapsed last year, testified at the trial last week that 87% of state maintenance and operations funding is used to pay for salaries and benefits in her district.

“So we would not be able to implement even the minimum (standards) and of course we do want the maximum for the kids,” she said. 

In its fiscal 2023 annual report, the Arizona Department of Administration’s School Facilities Division said it awarded $151 million for new construction, $33.7 million for land acquisition and site conditions, $289 million in building renewal grants, and $148,303 for two emergency deficiencies correction projects.

The trial was delayed for years as plaintiffs sought settlements under former Republican Gov. Doug Ducey followed by Democratic Gov. Katie Hobbs, who took office in January 2023, according to Essigs. In the meantime, there has been some movement to begin addressing key parts of the complaint like outdated minimum standards.

“The minimum standards are way below where they need to be on technology and they really don’t exist for the type of school safety the schools should have today,” Essigs said.

Last year, Hobbs issued executive orders mandating the state’s school facilities division undertake inspections of all public school buildings at least once every five years. She also established a Minimum Adequacy Guideline Modernization Committee to recommend updated guidelines that include safety and security measures by July 1. 

The trial, which is scheduled to last until June 24, comes as costs escalate for a universal school voucher program Arizona launched in September 2022, raising concerns about harm to public school funding. 

Students at a high school in Tucson, Arizona. Capital funding

Bloomberg News

Initial estimates released in June 2022 by the state’s Joint Legislative Budget Committee cited what it called a “highly speculative” projection universal expansion would cost $33.4 million in fiscal 2023, rising to $125.4 million in fiscal 2025. The program’s actual price tag was $474 million in fiscal 2023, which ended June 30. 

While the state appropriated $624 million for 68,380 students in fiscal 2024, 71,520 students were being funded through Empowerment Scholarship Accounts at an annual cost of nearly $700 million as of Dec. 31 with the majority of the payments in the $7,000 to $8,000 per pupil range, according to the Arizona Department of Education’s latest quarterly report. Only 47% of K-12 students attended a public school immediately prior to obtaining an ESA.

Earlier this year, Hobbs unveiled a plan to increase the program’s accountability and transparency, including a requirement for prior attendance in a public school for ESA recipients.

Voucher programs face pushback in other states. The Utah Education Association filed a constitutional challenge in state court last week against the Utah Fits All Scholarship Program.

“It violates Utah’s constitution, which clearly states that education should be free and open to all, and specifically delegates general control and supervision by the Utah State Board of Education, which protects the use of public funds for public education,” state teachers’ union President Renee Pinkney said in a statement. “Instead, the voucher program diverts $82.5 million of taxpayer money to private schools, which are not free, not open to all, and not overseen by the Utah State Board of Education.”

After the Texas House blocked vouchers last year, Republican Gov. Greg Abbott campaigned for candidates who would support the effort when lawmakers return to session in January. In the wake of results from run-off primary elections last week, he declared there would be enough votes in the legislature to pass “school choice.” 

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