State, local school districts face financial disaster

But it’s not just Payson.

Pine-Strawberry would lose close to $500,000 and Tonto Basin nearly $300,000.

That could mean layoffs, canceling school, shutting down school sites – who knows?

It all depends on whether the legislature acts in time to lift a 40-year-old limit on school spending.

School advocates are calling for a special session before the term of the current legislature expires in January – but so far Gov. Doug Ducey has remained non-committal. His office issued a statement saying only “We’d consider it if the votes are there.”

The issue could become even more difficult if lawmakers don’t act before the new legislature takes over in January. Lifting the Aggregate Expenditure Limit will require a two-thirds vote. The voters elected a number of new lawmakers who have been much more critical of public school spending than outgoing moderate Republican incumbents. The state will have a new Democratic governor – Katie Hobbs – but also a new Republican Superintendent of Education – Tom Horne.

The new lineup makes it harder to predict whether the new legislature could assemble a two-thirds vote to lift the spending cap.

State lawmakers lifted the expenditure cap for the 2021-22 school year last June, with 48 votes in the House and 21 in the Senate. All the Democrats supported lifting the cap, but nine Senate Republicans and 12 House Republicans voted against the measure. It’s unclear whether that number would grow in the next legislative term.

Most of the superintendents in the state – including Payson Superintendent Linda Gibson – have urged lawmakers to call a special session.

“We would face a cut of more than $3 million,” said Gibson. The cut would hit in April, with just three months left in the school year.

Voters improved the school spending cap back in 1980. The cap left enough cushion to have faded as an issue for decades. However, the spending limit began to bind as voters and lawmakers added various pots of money to school budgets. Arizona remains about 40% below the national average when it comes to per-student spending – but nonetheless total spending has begun to bump up against the limit.

Lawmakers raised the cap in 2002, 2008 and earlier this year. Lawmakers also increased school spending by $1 billion in the current year budget, the first bipartisan budget in years. About $600 million was added to the base funding, with the rest for one-time programs and projects. The state’s budget included a multi-billion-dollar surplus, buoyed by federal pandemic grants and an economy that performed much better than expected during the pandemic and the rapid recovery from the shutdowns intended to slow the spread of COVID.

If lawmakers don’t act, schools will have to cut $1.3 billion statewide – which works out to about 17% of the total budget for most school districts.

Such a large cut would have a huge impact if imposed at the beginning of the year — but would prove catastrophic if it all came at the end of the school year.

The impact could prove especially severe in smaller, rural school districts, which rely more heavily on state funding rather than local property taxes.