1. Budget and Legislative Update
Dr. Chuck Essigs
Arizona Association of School Business Officials

2. The Arizona Economy
February marked the 7th consecutive month of year-to-year growth in base General Fund Revenues
Sales, Individual Income, and Corporate Income tax collections are all above the forecast
Other Indicators:
Unemployment Rate is unchanged at 9.6%
The Arizona Department of Commerce did its annual revision of employment data – the result is that “the state suffered considerably higher job losses in 2010 than previous estimates had indicated.”
In 2010, Arizona had an average of 27,100 FEWER jobs PER MONTH than previously reported.
January 2011’s net job gain of 700 positions marked the end of 35 consecutive months of year-over-year job losses -- “Contrary to what was previously reported, revised unemployment estimates now indicate that the state has just barely started to reverse an unprecedented 3-year streak of job losses”
1.34 million persons AHCCCS (Arizona’s Medicaid system)
1.1 million persons receiving food stamps
937,114 students in Districts + 120,962 in Charters = Total: 1,058,078 (Est. for FY2011)

3. Projected Budget Shortfall
FY $550 million
FY $1.0 billion
FY $600 million
FY $1.1 billion

4. Long Range Forecast Estimated revenue in FY2014 of $8.46 billion
Vs. actual revenue in:
FY2005 of $7.72 billion
FY2006 of $9.26 billion
FY2007 of $9.62 billion
9 years before revenues will be back above the FY2005 level

5. Source of State Dollars – Fiscal Year 2011
Sales Tax $4.3 billion 52%
Individual
Income Tax $2.5 billion 31%
Corporate Tax $0.6 billion 7%
Other $0.86 billion 10%
Total $8.2 billion

6. Budget/Future Considerations
One cent sales tax ends in FY $1 billion
K-12 rollover - $1 billion (estimate)
Suspended funding formulas - $1 billion
Increased cost to State from AV decline

7. Other Issues Full-day K $218 million No inflation increase
for Base Formula over $50 million
Classroom Site Fund over $200 million

8. Suspended K-12 Funding Formula Items*
Capital Outlay (CORL)** $
Soft Capital $188,120,700
New Utilities (Repealed) $100,000,000
Charter School
Add’l Assistance $ 17,656,000
Building Renewal $241,593,600
$646,235,100
*No estimate for New School Construction
** Included both $63,864,800 and $35,000,000 Edu. Jobs Related Cut.

9. “Jobs” Bill and TABOR “Jobs” Bill – K-12 Specific Items TABOR
Reduces the Class 1 (business) assessment ratio from 20% to 18%, in ½ percentage point increments per year, beginning in Fiscal Year 2014 (FY14) and ending in Fiscal Year 2017 (FY17)
Reduces Class 2 (agricultural and vacant land) from 16% to 15% beginning in Fiscal Year 2017
Increases the homeowner’s rebate for FY14 through FY17 by the amount needed to offset the assessment ratio change effects
TABOR
Various bills and referenda
Would limit general fund revenues to the previous year’s budget plus population growth and inflation

10. FY2012 State Budget and Budget Related Legislation

11. State Budget for FY2011
State Funding Reduced by estimated $101.2 Million
Districts and Charters Budget Capacity Reduced by estimated Million
Districts Could Use Edu. Jobs Funds to Cover Reduction (1/2 of Total Edu. Jobs Funding Available)
Budget Revision Not Required

12. State Budget FY2012 Base Level stays at $3,267.72/ No Increases
Inflation Increase of 0.9%
Transportation $0.02 Mile Increase
Addition Assistance for Charters
K-8 Increase of $14.47 to $1,621.97
9-12 Increase of $16.86 to $1,890.38

13. Reductions to Soft Capital and CORL
Soft Capital Cut by $188.1 Million – Most Likely a Greater than 90% Reduction
CORL Cut #1 by $63.9 Million
CORL #2 Cut by an Additional $35 Million – Edu. Jobs Issue

14. Reduction to Additional Assistance for Charters
Additional Assistance Cut by $17.7 Million (Average $135 per student)

15. Small District Adjustment
For districts with fewer than 1100 students, Soft Capital and CORL cuts cannot total more than $5 million statewide

16. Phase Out of Career Ladder and OPIP
Base Level Adjustment
4% FY2012
3% FY2013
2% FY2014
1% FY2015
Qualifying Tax Rate
$0.10 K-8 and 9-12 districts
$0.20 K-12 Districts

17. Facilities Funding New School Formula – Suspended
Building Renewal Formula - Suspended

18. Joint Tech Districts
Prohibits JTED’s from Receiving State Funding for 9th Grade Students

19. Other Items Actual Utility Funding Formula Eliminated
Teacher Performance Pay Program (ARS15-977) Eliminated

20. ASRS Contributions
Changes Current 50/50 Split to Employee Pays 53% and Employer Pays 47%
Estimated Rate Beginning July 1, 2011
Employee would be 10.75%, now will be at 11.40%
Employer would be 10.75%, now will be at 10.10%

21. Increase for Both From FY2011 to FY2012
Employee goes from 9.85% to 11.40%
Employer goes from 9.85% to 10.10%
Employee up 1.55%
Employer up 0.25%

22. Estimated Impact of ASRS on FY2012 Contributions
Salary
Employee
Employer
$20,000
$130 increase
$130 decrease
$40,000
$260 increase
$260 decrease
$80,000
$520 increase
$520 decrease
Amount district saves will result in reduced state aid and budget capacity. Charters are also impacted.

23. Classroom Site Fund Started In FY2002
Highest year FY2008 $397 per weighted student
District had been allowed to spend to estimate
For FY2010 cumulative shortfall of $195
Starting in FY2011 state had to adjust for shortfall

24. FY2012 Number Estimated amount $219
Adjusted for shortfall $219-$ = $94
Legislature may set amount at $120 (SB1263)

25. TNT Tax Rates / QTR and State Equalization
Current QTR $ Unified / $ Elementary and High School
Proposed (FY2012) $ Unified / $1.782 Elementary and High School
State Equalization Rate Current is $ proposed (FY2012) is $0.4259

26. School Districts and Associations
HB 2002 (school district monies; associations; elections)
As amended, this bill would prohibit school districts from paying for membership in an association that attempts to influence an election.

27. SB1263 Schools, Administrative Reduction
Reduces time frame for closing schools
Classroom Site Fund - $120 and supplanting for FY2012
Override calculation relief continues for FY2012 – Base level and Full Day K
Changes performance pay for Superintendents – Excludes benefits and sets amount up to 20%
Flexibility on disposal of equipment, furnishings and supplies

28. SB1263 Schools, Administrative Reduction Continued
For FY2012 and 2013 allows unrestricted capital to be used for any capital or operational expense (excludes SFB and override funds)
For FY2012 and 2013 permits carryover in excess of 4%

29. HB2301 Soft Capital and Extracurricular Tax Credit
Maybe Soft Capital could be used for operational expenses
Unspent contributions for a program that has been discontinued or has not been used for 2 consecutive fiscal years may be used for any extracurricular purpose
Unencumbered monies
50% may be used for short-term items such as technology, textbooks, library resources, instructional aids, pupil transportation vehicles and furniture and equipment in Fy2012 and FY2012 (Does not apply to funds received after FY2010)

30. How Does Arizona School Spending Compare With the Nation?

31. AZ

32. Arizona vs. U.S. Average 1969-70 to 2006-07
Year AZ
U.S. Average
AZ Percent of U.S. Average
$674
$751
89.7%
$1865
$2088
87.3%
$3717
$4643
80.1%
$4476
$5689
78.7%
$5030
$6412
72.8%
$7610
$10041
75.7%
$7608
$10259
74.2%
Source: National Center for Education Statistics (NCES)

33. Change in Ranking 1969-70 AZ ranked 29th above 21 other states
To move back to 89.7% of U.S. Average
Increase expenditures to $9202 ( )
Increase of $1594 per pupil

34. In 1969-70 AZ Above These States
Arkansas Georgia Idaho* Indiana Kentucky Louisiana Maine Mississippi Missouri New Hampshire New Mexico
North Carolina
North Dakota
Oklahoma
South Carolina
South Dakota
Tennessee
Utah*
Virginia
West Virginia
* States AZ was above in

35. Arizona vs. National Average FY2008 Per Pupil Spending by Function
Area
National AZ
Difference
AZ % of National
Total
$10,297
$7,814
<$2,483>
75.9%
Classroom
$6,262
$4,481
<$1,781>
71.6%
Student Support
$556
$577
$21
103.8%
Food Service
$390
$373
<$17>
95.6%
Plant Operations
$1,003
$881
<$122>
87.8%
Instructional Support
$539
$436
<$103>
81.4%
Transportation
$438
$346
<$92>
79%
Administration
$1,109
$720
<$389>
64.9%
Source: Arizona School District Spending (Classroom Dollars) Fiscal Year 2010, Office of the Arizona Auditor General

36. Arizona vs. National Average FY2008 Per Pupil Spending by Function
Area
National AZ
Total
$10,297
$7,814
Classroom
$6,262
$4,481
Student Support
$556
$577
Instructional Support
$539
$436
Plant Operations
$1,003
$881
Subtotal
$8,360
$6,375
% of Total
81.2%
81.6%
Source: Arizona School District Spending (Classroom Dollars) Fiscal Year 2010, Office of the Arizona Auditor General

37. Key Policy Issues

38. School Labeling SB 1286 (2010, 2nd Regular Session)
Labeling changed from word labels to letter grades
Adds the labeling of school districts in the aggregate
New formula:
50% of the school and district profile must be based on academic performance measures
½ = all students academic gain
½ = lowest quartile academic gain

39. Teacher and Principal Evaluations
SB 1040 (2010, 2nd Regular Session)
Requires the State Board of Education, on or before December 15, 2011, to adopt and maintain a model framework for a teacher and principal evaluation instrument
Must include quantitative data on student academic progress that accounts for 33% and not more than 50%
Must include best practices for professional development and evaluator training
Requires school districts and charter schools to annually evaluate individual teachers and principals beginning in school year
Teacher and Principal Evaluation Task Force
Expedited process
Will provide a framework to districts
March State Board of Education Study Session and scheduled for Final Adoption in April
Various organizations will be charged with implementation assistance

40. Move On When Reading and Move on When Ready
HB 2731 (2010, 2nd Regular Session)
Creates the Grand Canyon Diploma to enable high school students to choose different educational pathways.
HB 2732 (2010, 2nd Regular Session)
Establishes the Task Force on Reading Assessment to report by January 15th, 2011
Requires that a student not be promoted from the 3rd grade if the student obtains a score on the reading portion of the AIMS test, or a successor test, that demonstrates that the student is reading far below the 3rd grade level
Requires the State Board of Education (SBE) to develop intervention and remedial strategies
Requires school districts to offer at least one of the intervention and remedial strategies developed by the SBE