School Finance in Arizona Chuck Essigs AASBO

Funding of Schools  Very little state assistance  Very little state control  Ability to fund educational programs based upon wealth of community 1950 – Today  Gradual increase in state assistance  Gradual increase in state control  Higher level of equity between school districts

How is the Budget Limit Established? Revenue Control Limit (RCL) 1.Regular ADM of the District a. Preschool Handicapped b. K-8 Students c Students 2.Special Program Add-ons a. Certain Handicapped Students b. Limited English Learners (ELL) c. K-3 Students d. All K students 3.Teacher Experience Index 4.Pupil Transportation Program

Group A Concept Elementary and High School Basic Wt. Group A Wt. Total* Basic Wt. Group A Wt. Total* Elem $3,332 $526 $3,858 $3,332 $526 $3, H.S. $3,875 $350 $4,225 Regular education - special services: Specific learning disability Emotional disability Mild mental retardation Remedial education Speech/language impairment Homebound Other health impairment Bilingual Preschool/speech lang. delay Gifted Preschool/moderate delay Career Exploration *Includes 1.25% for “Teacher Compensation”

Small School District Funding Weights School Year Elementary High School Elementary High School District Small Small Size Isolated Small Isolated Small Over 600 $3,858 $3,858 $4,225 $4, increases up to $5,194 $4,560 $5,560 $5,194 * Isolated = no schools within 30 miles of another district or if road conditions and terrain make the driving slow or hazardous; 15 miles

Group B Add-On Category Weight Amount Category Weight Amount K $4,505* K $200 English Learners $383 Disabled StudentsRange from $10,502 to $25,711 Hearing Impaired, Multiple Disabilities, Physically Impaired, Moderate Mental Retardation, Severely Emotionally Disabled and Visual Impairment * at 0.50 = $2,252

Group A Concept Extra funding forExpenditures for every student =special needs students  No financial incentive to put student in  No financial incentive not to end services  Assumes fairly equal distribution of students

Group B Concept Extra funding forExpenditures for specific students =specific students  Identification criteria clear  Parents follow programs

Capital Outlay Revenue Limit (CORL) Note: 64% transferred to M&O Unweighted Student Count times Support Level times CORL growth factor plus High School Texts

Soft Capital Unweighted Student Count times Support Level

CORL and Soft Capital Amounts*  CORL K-8 = $  CORL 9-12 = $  CORL textbooks 9-12 = $69.88  Soft Capital = $ * Same amount since for all areas

Additional Assistance Charter Schools  Charter Schools / CORL, Soft Capital, Pupil Transportation, School Facilities Board (SFB)  Additional Assistance K – 8$1, – 12$1,718.10

District Base Level Add-ons Teacher compensation Teacher compensation –Increase Base Level by 1.25% in SBE approves “performance evaluation system” i.e. certification Teacher experience index Teacher experience index –2.25% increase to BSL for each year of experience above average Career ladder Career ladder –28 districts get additional 5.5% increase to Base Level

Equalization Concept School District Spending Limit (Equalization Base) minus Local Contribution (QTR)equals State Aid (Equalization Assistance)

Two Hypothetical Unified Districts “Property Rich” $3, x 1,000 (weighted ADM) $3,226,880 guaranteed Local property taxes $50,000,000/$100 (district’s taxable value) x $ QTR equals $1,462,200 (45% of guaranteed amount) State (& county) $3,226,880 minus $1,462,200 equals $1,764,680 (55% of guaranteed amount) “Property Poor” $3, x 1,000 (weighted ADM) $3,226,880 guaranteed Local property taxes $25,000,000/$100 (district’s taxable value) x $ QTR equals $731,000 (23% of guaranteed amount) State (& county) $ 3,226,880 minus $731,100 equals $2,496,780 (77% of guaranteed amount)

Some District Budget Categories... are paid from local property taxes... are paid from local property taxes causing issues with per-pupil spending and taxation... causing issues with per-pupil spending and taxation

M&O Overrides M&O Overrides M&O Overrides –10% of RCL K-3 Overrides K-3 Overrides –5% of K-8 RCL

Other Items Outside Equalization Base, FY 2008  Desegregation  Adjacent Ways  Excess Utilities  Transportation RCL  Small School Dist.  Dropout Prevention  Registered Warrants

Inflation Funding through Increases to Base Level Increases to Base Level Increase less than inflation for 9 or 10 years Increase less than inflation for 9 or 10 years Inflation funding covered one-third of actual inflation Inflation funding covered one-third of actual inflation

Prop. 301 / Implemented in School year   For first 5 years – 2%  For FY and each year thereafter, the Legislature is required to increase the Base Level or other RCL components by the lesser of 2% or the price deflator.

Inflation Impact – Post Prop. 301 (continued) Year Actual Rate * Funding Inc.** Variation *** **** ***** * Percentage growth in the GNP price deflator ** Percentage increase in the base level funding factor as provided in A.R.S ***Includes an additional 1.2% for retirement/health insurance ****Includes an additional 2.4% for retirement/health insurance and increase salary for non-administrative personnel *****Includes 0.98% for increased salary for non-admin. personnel

Education Week Rankings Adequacy of Funding  Rank 49th out of 50  Arizona $7,112 vs. national average of $9.963

Education Week Rankings Education Spending Per Pupil FY2006 (Operational) Rank State Amount 1Vermont$15,139 2Wyoming$14,128 3New Jersey$13,238 Avg.U. S. $9,963 48Nevada$7,213 49Arizona$7,112 50Utah$5,964

American Legislative Exchange Council (ALEC) Arizona ( ) (Operations)  Expenditure Per Pupil rank next to last  Pupil/Teacher Ratio = 21.3 vs. national average of 15.2  Pupil/Teacher Ratio rank next to highest (only Utah at 22.1 puts more kids in each class)

Move to National Average  Using ALEC data, Arizona is $2,956 below national average  46% increase to move to average  Estimated cost is $3 billion  2% inflation - $100 million  30 years of extra 2% needed

Also Part of the Spending Per Pupil Discussion / Capital Spending Arizona ranks near the top for:  student growth  capital expenditures per pupil  student/teacher ratio

Other Major Revenue Sources  Classroom Site Fund – Prop. 301 ($470 per student / $390 per weighted count)  Instructional Improvement Fund – Indian Gaming ($40 per student)

Budget Limit School District Governing Board Allocates Funds to Regular, Special and Pupil Transportation Program from Budget Limit Pupil Transportation Special Ed. includes: A. Programs for the handicapped B. Gifted education C. Programs for LEP students D. Remedial education E. Vocational and technical education F. Career education Special Education Regular Education

Budget Limit Increase No Growth Growth Decline New students 2% 0 Plus inc. amt./stu. + 2% + 2% + 2% 4% 2% Hire new Salary Cuts staff + Increase salary increase

Salary and Benefits 85 – 90% of operating budget

Governing Board Employees More Services More Services Taxes High Quality Higher Salaries Parents and Community Taxpayer Budget

Not enough dollars to meet demands Not enough dollars to meet demands Formula / Legislature Dollars not being spent effectively Dollars not being spent effectively Budget Allocation / School District