What's the story behind the 2009 Budget Fix?

Late last night, January 28, 2009, the Arizona House and Senate worked out their differences to address the $1.6 billion deficit for the current year. Some interesting things took place in those last few hours that affected K-12 Education.

Within the Arizona Constitution, there is a formula that determines how much schools can spend each year. It is called the Constitutional Aggregate Expenditure Limit (CEL). This has been in place for years. When the legislature began funding All-Day Kindergarten a few years back, the formula was never adjusted to count kindergartners as full time students, only half day (there are many reasons political and ideological for why this is so but that is a discussion for another day). Because of this, schools have found themselves with more funding than they are allowed to spend. It takes a two thirds vote (40 in the House, 20 in the Senate) to allow schools to exceed this constitutional limit.

For the past four years, the legislature has voted to allow schools to exceed this limit. The vote has always been close; but, it has always passed. Last Thursday, the bill to allow this to happen passed the Arizona House Education Committee 10-0. Schools are expected to exceed the CEL by approximately $98 million this year. If the bill does not pass by March 1st, schools are required to adjust their budgets downward by the end of March. For example, within the Mesa School District, this amounts to approximately $7 million.

Senate President Bob Burns has a good understanding of where each of his members stands on the CEL. He knew he didn't have the votes to get it passed this year given the sorry state of our finances. So, as part of the final negotiations, President Burns asked that the CEL not be sent to the Senate because he knew it wouldn't pass. Because it reduces budgets by $98 million, it contributes to a solution for the huge deficit, but it is a cut to K-12. The Senate and House Appropriation Chairs had originally proposed a $103 million cut to K-12 primarily from soft capital (money used for textbooks, furniture, computers, etc.). It would be a double hit to not pass the CEL and to take $103 million, so something had to be proposed.

So here is where the final numbers ended up...
1) No passage of the CEL this year (reduces budgets by approximately 1.7% for school districts)
2) Hold harmless provision for the small districts in Arizona (under 600 students) on the CEL.
3) $4 million reduction to charter schools since they are not subject to the CEL
4) Reduction in soft capital of $21 million (we pushed for zero but given that the CEL is comprised of local and state money and the cash is actually saved in 2010 - a little complicated - we didn't win). This also has a hold harmless for small districts.
5) Reduction of $8 million at the ADE and an additional savings of $2 million by eliminating a recently introduced math and science initiative.
6) One of the policy changes we wanted for the next five months was to remove the strings from "soft capital" funding to provide ultimate flexibility to districts. Any soft capital remaining can be used wherever it is needed.