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Arizona’s education funding: questions and answers

Daily updates come out of the state Capitol about how lawmakers plan to cut K-12 education funding for next year, with cuts ranging from $300 million to $900 million. Lost in the shuffle is the discussion about how Arizonans fund education.

Critics point out that the state is last nationally in per pupil expenditures, while legislators point out that education spending has skyrocketed in the past 15 years. School district governing board members decry the state’s property tax code, while lawmakers lobby for a business tax cut. Parents and teachers question how the state could consider cutting more from schools, while legislators point out that K-12 education funding is more than 40 percent of the general fund.

What do we spend?

Separate studies from the National Education Association, the American Legislative Exchange Council, Education Week’s Quality Counts, the U.S. Census Bureau and the National Center for Education Statistics all put Arizona near the bottom in per pupil expenditures. The state never ranks higher than 48th, in studies that include the District of Columbia.

Arizona’s general fund was more than $9.7 billion in 2007-2008, with about $4 billion – or 41 percent – going to the Arizona Department of Education, according to state Superintendent Tom Horne’s annual report. The Joint Legislative Budget Committee put the figure at $4.2 billion.

Neither number adds in money from Proposition 301, used to increase teacher salaries, or from county and local taxes, increasing the number to about $6.5 billion, according to the budget committee.

Using a student count of 1,044,785, the average spent per pupil is $6,227, with the number decreasing after being adjusted for inflation. The national average in most studies is about $9,000.

The libertarian-leaning Goldwater Institute includes capital expenses such as the cost of building new schools. With that approach, Arizona spends $8,528 per student. Calculating expenditures should include all sources of revenue, said Matthew Ladner, the institute’s vice president of research.

Horne disagreed, saying that per pupil expenditures should calculate only money spent teachers and programs in the classroom.

“Construction cost is a result of the fact that we’re a growing state,” Horne said. “And that’s a product of growth. It’s not an effort that we’re making in education.”

How do we pay for it?

Arizona’s education funding, unlike most of the country, depends less on property taxes than other revenue sources. The state restructured its education funding formula in 1980 to lower property taxes to undercut an attempt to add California’s Proposition 13 to the state Constitution, said Chuck Essigs, director of government relations for the Arizona Association of School Business Officials.

The state has a constitutional 1 percent cap on residential property taxes.

The new funding formula made Arizona education more equitable, but tied funding to other revenue sources. Counties assess property taxes, but the state pays 38 percent through the homeowners rebate, costing the state about $400 million annually.

Education also loses money with the suspension of the county equalization tax in 2006. If assessed this year, the property tax would cost 39 cents per $100 of assessed value, or about $95 for a $200,000 home. The tax would create $250 million in public-education revenue, Essigs said.

The state relies heavily on sales tax, corporate income taxes and personal income taxes to fund education, a system many believe is flawed. Those taxes are volatile during a recession.

Proposition 301 revenue, used for Arizona teacher salaries and performance pay, is funded by sales tax. In 2007-2008, revenue totaled about $500 million. Next year, that revenue is projected to be at $323 million, Essigs said.

Property taxes have a disadvantage in equity. Some districts are more willing to tax themselves, passing bonds and overrides, while others are left underfunded.

“You don’t want to have variations based on the neighborhood the kid lives in,” Horne said.

What do we get?

Arizona students lag when it comes to achievement. The state ranks in the bottom 12 states in performance on 2007′s National Assessment of Educational Progress.

But spending more money to improve education might not be the solution, Horne said.

That’s why his focus is on accountability and assessment, he said.

“It’s my job as the state superintendent to see to it that we hold everybody accountable, schools, teachers, and students,” Horne said. “(Then) I can show the Legislature that if we put money into education we will show academic results.”

More money, Ladner said, is not the answer.

“If we don’t want to shortchange kids, we need to squeeze every single ounce of effect out of every single penny we put into the system,” Ladner said.

That means erasing a teacher tenure system that takes into account the interests of adults, not students, he said.

Spending can increase student achievement if money is spent on good teachers and improving education strategies, said Lawrence Picus of the University of Southern California’s Rossier School of Education.

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