The Arizona Legislature has approved a nearly $13 billion state budget that included a massive tax cut, but mostly rejected the pleas of education advocates to boost funds for public schools.
The income tax cut could result in a $350,000 windfall for the state’s richest residents, but also gutted a voter approved proposition that would have produced an estimated $1 billion annually for K-12 schools.
All of the District 4 representatives — Rep. Brenda Barton (R-Payson), Rep. Walt Blackman (R-Show Low) and Sen. Wendy Rogers (R-Flagstaff) supported the nearly $1 billion income tax cut. The measure passed on a straight party line vote, but it would take a two-thirds vote for lawmakers to increase the income tax rate in the future.
The tax cut effectively nullified Proposition 208, which would have imposed a 3.5% income tax surcharge on taxpayers making more than $250,000, or $500,000 for a couple — leaving the state with a top rate near 8%.
The new rate structure will have a top rate of 3.5% for high income earners, with a portion going into the general fund instead of education. Most other taxpayers will pay 2.5% up to an income of $27,272 and 2.98% above that. The 3.5% rate will kick in at an income of about $250,000. Most taxpayers will see a small reduction in their taxes, but high income taxpayers could save $350,000.
Meanwhile, lawmakers just barely rejected a massive expansion of private school vouchers, which shunt taxpayer money to private schools. Voters had previously rejected a similar expansion by a two-to-one margin.
Currently, some 10,000 students get vouchers averaging $11,000 to attend private school or offer home schooling, at a cost to taxpayers of more than $100 million annually. The bill would have expanded eligibility to an estimated 720,000 students. The program was intended to give parents an alternative to leaving their kids in failing schools, but most of the money has gone to parents in high-wealth districts with nearby private schools. Parents in rural districts generally have few private schools to choose from. The program has also been plagued by allegations of misspending and investigations showing some parents have accumulated $100,000 or more in their accounts.
The bill initially died in the House, but then passed the Senate as an add-on to the final budget bill. In the House, the bill returned as a rider in the budget education bill, then became a separate bill at the last minute. Three moderate Republicans balked and it died on a 28-28 vote in the House. The House and Senate versions must now be reconciled.
The representatives for Rim Country supported the expansion of vouchers to any student whose family qualifies for free and reduced school lunches and the children of veterans. Advocates for the Empowerment Scholarship Accounts argue the program saves money, since the vouchers actually pay a little less to parents than the state pays to the public district schools. District school officials say that argument neglects the fixed costs districts still face as enrollment declines.
On the whole, education advocates failed to convince lawmakers to take advantage of a surplus of more than $2 billion to make up lost ground for public education, with the latest studies showing per-student spending among the lowest in the nation. Arizona teachers have among the nation’s lowest salaries and largest class sizes.
Arizona spends about $8,000 per student for K-12 education, about 50% below the national average, which makes the state 49th out of 50 states. Education spending in Arizona amounts to 2.53% of in-state taxpayer income, compared to 3.6% in Texas, 3.2% in California, 3.7% in New Mexico, 4.8% in Massachusetts and 5.6% in Alaska, according to U.S. Census Bureau figures.
Arizona ranked as one of the least educated states in a recent ranking on the Wallet Hub website — ranking 36th out of 50. The rating considered things like high school graduation rates, college attendance rates and the percentage of the workforce with advanced degrees. It also measured the quality of the education system, which included things like test scores. Arizona ranked 33rd in “educational attainment” and 38th in “educational quality.”
The state received billions in federal grants this year to cope with the pandemic, but sales tax and income tax revenue proved much more resilient than originally predicted.
The state actually cut education funding by nearly $400 million this year due to a public school enrollment drop of some 50,000 students during the pandemic. Many parents shifted their children to private schools or home schooling.
The governor’s budget for the upcoming fiscal year restored some of that lost funding, mostly to support additional, temporary programs to help students make up for the learning losses caused by the shift in and out of distance learning.
The budget also pushed school choice programs, with a $500,000 marketing campaign to encourage students to explore public charter schools, private schools, online programs and other “choice” options. The budget also includes grants to help cover the transportation costs of parents who opt not to send their children to public schools.
Expect More Arizona, an education advocacy group, said the adopted budget stinted on most of the programs pushed by supporters of public education. Some of the programs include:
• $7 million for third grade literacy, funded with federal grants.
• $5 million for vocational classes for high school freshmen, out of the $10 million needed.
• $14 million for rural community colleges, out of the $21 million requested.
• $7.5 million for university promise scholarships, out of the $50 million requested.
• $1.3 million to cover the cost of fees for Advanced Placement classes through which high school students can earn college credits.
• Elimination of $7.5 million requested for preschool development grants.
• Some $30 million to pay down $930 million owed to K-12 education as a result of the rollover of funding from one fiscal year to the next the Legislature used to help balance the state budget during the recession.
• $7.5 million for community colleges for back-to-work scholarships.
• $50 million for special education.
• $1 million for gifted education.
• $68 million in ongoing funds and $33 million in one-time funds for universities, which remains short of the $165 million requested as part of the New Economy Initiative.