Rejecting a last minute plea for a reprieve, a Maricopa County Superior Court judge ordered state officials to immediately start coughing up more than $300 million for public schools.
Judge Katherine Cooper said it is abundantly clear that voters ordered state aid to schools to be adjusted annually for inflation. She said the evidence also shows lawmakers ignored that mandate for several years.
Attorneys for the state argued there still is an open legal question of whether schools should now get the $1.3 billion they should have received in the past but did not, and Cooper has scheduled a hearing for October to hear arguments.
But the judge said there is absolutely no reason to delay the immediate adjustment of the inflation formula to what it should have been had the 2000 voter-approved law been followed.
Cooper's ruling, made public today, is not expected to be the last word. State officials are expected to appeal.
But attorney Donald Peters, who represents the school districts that successfully sued, said the money should start flowing — and now — to ensure that the money is available to help students.
Rep. John Kavanagh, R-Fountain Hills, who chairs the House Appropriations Committee, acknowledged the state does have the estimated $317 million needed right now. There is about $455 million in the state's “rainy day fund.”
Kavanagh said, though, the state was looking to use those dollars to help prevent a deficit for the following fiscal year. He said if those funds are gone and the state needs another $320 million for inflation adjustments above what lawmakers had anticipated, that results in an $800 million deficit.
There also is the question of how quickly all that can happen, with students going back to school this month.
“Our view is they ought to do it now,” said Peters.
Kavanagh, however, said it might have to wait until the regular legislative session convenes in January, providing the extra dollars for the full school year at that point. Anyway, he said, that additional time might give appellate courts a chance to rule on a likely appeal of Cooper's order.
The 2000 ballot measure boosted the state's 5-percent sales tax by six-tenths of a cent through June 30, 2021. It also requires the Legislature to forever increase funding for schools by 2 percent or the change in the gross domestic price deflator, whichever is less.
But faced with a budget shortfall, lawmakers and the governor stopped providing the inflation funding beginning with the 2009-2010 school year. They only partially funded it for last school year before finally getting back on track for the coming school year — but at a lower point than it would have been had the law been followed all along.
School districts sued, and last year the Arizona Supreme Court ruled the state had violated the 2000 law.
That sent the case to Cooper who said the aid should be reset to where it would have been had the law been followed.
Cooper determined that had the adjustments been made, the base amount of state aid per student would be $233 more than lawmakers set aside, or $3,550 a year. That translates out to the extra $317 million.
Attorneys for the state responded by asking her to delay her order. They said the state should not have to find the cash now and then possibly have to make another budget adjustment if there also is to be a $1.3 billion reimbursement.
Cooper brushed those concerns aside, saying the preference of lawmakers for a delay does not override the rights of the schools to the money they are now owed.
A spokesman for Attorney General Tom Horne said he is reviewing Cooper's ruling before deciding what to do next. The governor's office had no comment.
Cooper's order still leaves the question of where to come up with the funds, if not for this year than those future years.
Peters said it matters not to the schools he represents where lawmakers find the cash.
“That's entirely a question for them,” he said. “They could raise taxes if they decided to do so.”
Kavanagh said that's likely a non-starter, saying he has not found a single gubernatorial candidate of either party who supports hiking taxes. There's also the constitutional problem that it takes a two-thirds vote of both the House and Senate for any such increase.
Peters said how they do it is not his concern — as long as they do it.
“They could get rid of some of the tax cuts that are now taking effect that have been enacted in recent years,” he said, calling them “a large reason why we're running into the financial difficulties we're running into.”
During a two-year period, Gov. Jan Brewer signed bills to cut taxes on capital gains, provide tax breaks for new investments and eventually slash the corporate income tax rate by 30 percent. The price tag of just those efforts, when fully implemented, has been estimated to exceed $630 million. But proponents of those moves have said it is necessary to make Arizona more competitive and attract new employers to the state.
Peters said there is another option: Cut spending elsewhere in the state's $9.2 billion spending plan. More than $3.6 billion of that already is earmarked for education, meaning the reductions would have to be found in the balance.