Building Costs

Second Thoughts on Students First.

Arizona lawmakers spent years developing Students First, the state program that has doled out more than $2 billion to build and repair schools since 1998.

Now Superintendent of Public Instruction Tom Horne, a Republican who took office last month, wants to dump the system altogether.

Under his proposal, dubbed Arizona Saves, the state would return the responsibility for building and repairing schools to local school districts, which would raise money through property taxes. Horne estimates that would free up one-third of a billion dollars in the state budget to fund education, universities, healthcare and other programs.

Best of all, says Horne, it's basically free. Homeowners won't see an increase in their property taxes because school districts can wait until they retire old bonds before they'll have to ask voters to approve new ones.

Does saving a $333 million a year with no additional local taxes sound too good to be true?

Tim Hogan, the attorney who successfully sued to force reform of school construction financing, says that's the problem with the plan's projection: "It's just plain not true."

Hogan notes that state officials now estimate that Students First will cost an average of $350 million a year for the foreseeable future under the current funding formula, so unless districts are prepared to bond for that much money immediately, they can't continue to build schools that meet the current state standards.

"You can't wait to build new schools," Hogan says. "You either need to build a new school or you don't. There are formulas for determining when you're entitled to a new school under Students First. It's not a matter of discretion or judgment."

Hogan knows a thing or two about the subject. The executive director for the Arizona Center for Law in the Public Interest, he represented a coalition of low-wealth school districts that first took the state to court over school construction funds, which were then raised through voter-approved bonds that were repaid by property taxes. Under that system, wealthy districts could build lavish facilities, while poor districts struggled to carve out playgrounds between the trailers.

The Arizona Supreme Court ruled that the system created unconstitutional disparities between school districts and ordered the Legislature to come up with a new program. After years of debate and proposed fixes that were rejected by the courts, Students First finally met with approval in 1998.

Students First set up a state School Facilities Board, which is supposed to get a check from the state's general fund based on a strict funding formula. In the 2001 budget, for example, the state paid $200 million to build new schools and another $123 million to repair facilities, according to the Joint Legislative Budget Committee staff. (A third fund, to bring dilapidated schools up to minimum standards, has cost the state roughly a billion dollars, but those funds have mostly come from the .6-cent education sales tax approved by voters in 2000. A final $280 million to finish those repairs is still outstanding.)

Back in the good old days of the roaring '90s, when everyone could believe that Yahoo! really was worth a couple billion bucks, the general fund was flush. But to cover recent budget shortfalls, the state has raided the Students First program by more than a hundred million dollars. Last year, the state spent only $38 million on building maintenance costs, even though the School Facilities Board requested $128 million. Lawmakers also opened up a $400 million line of credit for new school construction rather than pay $310 million up front.

Hogan has already won court fights over the funding cuts. In a decision that's now under appeal, a Maricopa County Superior Court judge has ruled the state owes the schools at least $152 million.

Despite complaints about cuts in funding, Hogan says Students First is working well. "The schools districts I represent are pleased with Students First and think it has done a reasonably good job," he says. "We have always thought the standards were too minimum, but our problems were so severe that it really didn't matter at that point."

The Horne plan, Hogan complains, "would re-create the kind of disparities that got us into this problem in the first place." He's sure the Arizona Supreme Court would reject it.

Horne is just as confident that his plan would pass constitutional muster because it contains a program allowing low-wealth districts to get a subsidy from the state to help repay bonds.

Under the Horne plan, voters would have two chances to approve bonds. If they reject both proposals, the state would step in to build the schools--but it would also withhold the homeowner rebate the state now credits on property taxes. Since businesses don't get the rebate, homeowners would bear the entire cost of school construction.

"Since it's residents who have the votes rather than businesses, I would predict that you wouldn't see bonds going down twice in a row," says Horne, who concedes that his plan doesn't give voters much of a choice. "Nobody likes that, but that's what the Supreme Court has put on us. The Supreme Court has said one of the elements is that you can't permit a district to not furnish schools for its students. It's a state responsibility."

Horne says it's vital for the state to return that responsibility to individual school districts because as long as construction costs eat up $350 million a year from the general fund, lawmakers will believe they're adequately funding education. Until that attitude changes, "we'll have drastic cuts in spending on what counts in education, which is in the classroom," Horne says.

Horne adds that he wouldn't be opposed to a statewide property tax to fund school construction, but that kind of plan would never pass a conservative Legislature that refuses to raise taxes.

Gov. Janet Napolitano opposes Horne's proposal in its current form, according to Paul Koehler, the administration's education policy advisor.

Napolitano is open to new ideas about financing school construction, but wants to learn more from educators, business leaders and others about how the program is working before making any decisions, says Koehler.

"She doesn't want to put the state in a situation where we're heading back to court," Koehler says.

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