Arizona schools, state make final pleas on funding

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By Jennifer Thomas By Jennifer Thomas

PHOENIX (AP) -- Arizona schools seeking back payments of about $1 billion the Legislature didn't provide for mandatory inflation boosts are asking a judge to reject the state's arguments that it can't afford to pay.

Lawyers for school districts wrote in a filing this week that the Legislature has several options, including putting off planned tax cuts, an income tax surcharge or a sales tax boost to pay the money. Attorney Donald Peters also noted that if Maricopa County Superior Court Judge Katherine Cooper accepts the state's argument, the Legislature could get away with underfunding anything just by claiming poverty.

"As long as (the Legislature) keeps revenues below projected expenditures, it can claim that it is "impossible" for the state to comply with any judgment that requires a significant expenditure of funds," Peters wrote. "That is not the law and should not be the law."

But the Legislature's attorney, Bill Richards, countered in an 88-page final case overview and proposed order that there just isn't any money available, and that Cooper doesn't have the authority to order the Legislature to supply the funding anyway. He also wrote that many of the students who were harmed when the inflation increases weren't provided from 2009-2013 are gone and that the tax revenue collected in those years also is gone.

And, Richards said, schools may have lost out on funding but they continued serving those students.

"The only evidence received by the court indicates that all of the testifying districts are currently able to provide their students an opportunity to learn what is required under Arizona minimum standards and that they are in fact teaching their students skills required under those standards," Richards wrote.

Schools countered that they can surely use the money, since they put off capital expenditures and teacher raises because they were shortchanged.

Schools won a state Supreme Court ruling last year that the Legislature broke the law when it failed to provide the inflation adjustments during the recession. Cooper then ordered Arizona to increase school funding in the current budget year by about $336 million and continue those boosts in future years, an expected increase of $1.6 billion through 2019.

Cooper is now considering their request for back payments estimated at $1 billion, and heard a week of testimony in October over whether she could order the back payments, whether the schools need them and whether the state can afford to pay.

The Legislature is already appealing Cooper's July order, and any decision she reaches on back payments is virtually assured to be appealed as well.

The decision on back payments, expected by the end of the year, could make the state's current budget woes much more difficult. The state is facing a budget shortfall of $520 million in the fiscal year ending June 30 and a $1 billion shortfall in the next budget year, including the school funding boosts already ordered by Cooper.

The state's budget this year is $9.3 billion.

Incoming Gov. Doug Ducey will be tasked with filling those budget gaps and trying to fund any new order Cooper issues. He's said that he will look at overall school funding formulas if the state ultimately is ordered to pay back payments under Cooper's orders, but is also open to a settlement.

The case centers around the requirements of Proposition 301, which voters approved in 2000. The law raised the state sales tax by 0.6 percent and required annual inflation adjustments for schools. Lawmakers stopped providing the annual boosts in 2009, when state revenues were decimated by the Great Recession. Schools sued, and the state Supreme Court ruled last year that inflation adjustments were required.

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