Arizona Court Says Annual Inflationary Increase for Schools Are Not Optional

Last Updated: April 11, 2013

This article appeared in the April 2013 Rural Policy Matters.

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The Grand Canyon State education budget will increase by around $80 million beginning next year as a result of an order saying the Legislature must make full annual increases for inflation. The Arizona State Court of Appeals has overturned a lower court’s ruling in Cave Creek School District v. Ducey and State of Arizona. The earlier ruling had agreed with the state that lawmakers could choose to apply the inflationary increase only to some elements of education funding each year.

In 2000, voters approved Proposition 301, which requires the state to adjust funding for public schools upward each year by either two percent or the rate of inflation, whichever is lower. The statutory language requires Arizona lawmakers to "increase the base level or other components of the revenue control limit.” Proposition 301 also raised the state sales tax by 0.6 percent.

In 2010, the Legislature only applied the increase to transportation funding, not the base student cost. The Arizona Education Association and a number of school districts challenged that action in court. The case was filed in early 2011. (Editor’s note: See previous RSFN coverage here.)

A lower court had agreed with lawmakers and said that the word “or” in the law allowed them to decide which parts of the education budget to increase each year. But the Court of Appeals found that materials given to voters about the proposition and legislative history shows the intent of the law was to apply an annual inflationary increase to base funding, transportation costs, and other special funds for schools.

The state argued that the Proposition could not control legislators’ future actions or budget priorities. But in Cave Creek, the court cited the state’s Voter Protection Act, passed in 1998, which prohibits legislators from repealing or altering any measure approved by voters. “Taking such actions would directly contravene what the voters intended,” according to the court’s order.

The court acknowledged that the recession made the budgetary process difficult, but did not excuse noncompliance with the law: “Without question, the legislature faces substantial challenges in preparing the state’s budget, particularly during difficult economic circumstances. But our constitution does not permit the legislature to change the meaning of voter-approved statutes by shifting funds to meet other budgeting priorities.”

Tim Hogan, a long-time student and school advocate in Arizona, represented the plaintiff coalition in the case. On the ruling, he said, “It requires the Legislature to honor the vote of Arizonans when they approved this.”

The legislature also chose not to adjust the base level for the 2011–12 or 2012–13 fiscal years. The court did not order repayment of the underfunding from the previous three school years. But some lawmakers have said that the ruling means they will not be able to fund other education priorities this year, including support for implementing Common Core standards and incentive payments for schools with high test scores.

Arizona, like many states, is expecting a budget surplus this year. Estimates of the surplus put that amount around $700 million.

The Arizona attorney general's office said an appeal to the state Supreme Court is planned.

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