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Busting the Trust

Lawmakers pass school-funding deal that provides more dollars now but fewer in the future.

With a quickie special session last week, state lawmakers approved an education-funding package that settles a major education-funding and gave Gov. Doug Ducey a big political victory in delivering $3.5 billion in additional dollars to schools over the next decade—provided that voter approve the deal in a special election next May.

Ducey called the passage of the package "a great day for Arizona kids, families and teachers. We all know there is plenty of gridlock and partisanship in politics, but through this effort, we have proven that if we work together, in a spirit of good faith, we can improve the lives of Arizonans."

Senate President Andy Biggs said the legislation was "a sign of effective leadership in our state. The governor, Republican legislative leadership and the education community worked together to find the best funding package for our children. Now, voters will have the opportunity to decide if they agree. Today is a day to celebrate passage of this bipartisan agreement."

But Democrats, most of whom only voted for portions of the package reluctantly, were not celebrating the deal.

"Legislative leaders are parading the settlement as a great thing for Arizona," said Senate Democratic Leader Katie Hobbs. "Yet these are the exact same people who willingly cut school funding by billions of dollars over the last eight years, the same people who illegally ignored the will of Arizona voters by refusing to fund inflationary increases and the same people who are only here today because a lawsuit from our schools forced them."

"Our children deserve better than shell games, but they also deserve to learn in schools that aren't suffering from neglect," Hobbs added. "While we would have preferred our schools be made whole, as the court ordered, we recognize the fact that this settlement was sadly the best this Legislature is willing to do right now. But right now, something is better than nothing for our children."

 The education lobby that is supporting this deal—the Arizona Association of School Board Officials, the Children's Action Alliance and others—had similar misgivings, but said that the agreement is the only way to get funding to schools now, which is probably a safe bet. They had won a lawsuit that determined that lawmakers had failed to properly provide inflation funding for the schools, but even if they had continued to win through the appeals process, GOP lawmakers could have just ignored the order to provide more funding or drag it out for years.

The Arizona Association of School Board Officials released a statement that made a point of saying that they considered the deal just the first step toward improving school funding and noted that they were settling for far less than they were owed in back payments.

"The fact remains that, even after settlement of this issue, Arizona will still rank near the bottom relative to what other states invest in their education system on a per-student basis, and we do not even move up one ranking with these additional funds," the statement read, "This should also not be viewed as solving Arizona's long-term or short-term funding needs, or as a replacement for local funding mechanisms such as bonds or overrides, but it is an acknowledgement of the fact that our public schools cannot wait."

The deal is fairly complex, but the part that gave considerable heartburn to both legislative Democrats and Republicans such as state Treasurer Jeff DeWit and former state treasurer Dean Martin is the amount of money that's being drawn from the Permanent Land Endowment Trust Fund. They have a legitimate complaint: Never before have state leaders moved to get such short-term gain over long-term growth with the state land trust dollars.

The land trust fund now basically pays out the interest that is earned from the trust, which grows as state land is sold or leased and the proceeds are deposited in the trust. (It's more complicated than that, but that's the gist.) The idea, which dates back to statehood, is that the land trust would grow in perpetuity while providing annual payouts for the schools.

Right now, the trust pays out a steady 2.5 percent of its value to the schools every year. The plan increases that to 6.9 percent annually for the next decade.

Today, the trust is worth about $6 billion. In 10 years, if you leave the current rules in place, it'll be worth about $9 billion and will generate about $180 million a year for schools. If you go forward with Ducey's plan, in 10 years the trust will be worth a little more than it's worth today—and will only generate $100 million a year for schools. (All of those numbers are estimates that depend on how much land is sold over the next decade, what happens with the stock market, etc.)

This is the big downside of this deal: If Ducey and the Republicans could have just decreased the percentage from the trust to 4 or 5 percent, there would have been less of a long-term dent—and they might have turned some critics into supporters.

Democrats argued that there are plenty of dollars available to the state right now to fund the schools. That's sort of true—although there aren't nearly enough dollars to fund everything the state should be doing, from taking care of highways to helping single moms afford daycare so they can keep their jobs to ensuring the state investigates cases of child neglect to lifting the one-year lifetime limit for families that are down on their luck to get Temporary Assistance for Needy Families to supporting the universities to making needed repairs at state parks to ... well, the list goes on.

Ducey gets to brag that his deal settles the education-funding lawsuit without raising taxes—and a resistance to raising any taxes under any circumstances remains at the top of Ducey's agenda. And what using the trust dollars really does is open the door for Ducey and Republican lawmakers to argue once again that the state can afford more tax cuts that will, if past experience is any indication, primarily go to Arizona's wealthiest residents.

State Rep. Andrea Dalessandro, a Southern Arizona Democrat, told the Weekly she was "fearful that it is a Trojan Horse that will, in the long term, make things worse."

Ducey, she said, has set the stage "for more ineffective corporate tax cuts, if I am reading my colleagues on the other side of the aisle correctly."

Zona Politics with Jim Nintzel airs at 8 a.m. Sunday mornings on the CW Tucson, Channel 8 on Cox and Comcast and Channel 58 on Dish, DirecTV and broadcast. You can hear the show on KXCI, 91.3 FM, at 5 p.m. Sundays. This week's guests are former state lawmaker Jonathan Paton and attorney Jeff Rogers.

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