Gov. Doug Ducey appears to have solved one of the hairiest problems in Arizona politics: How to give more money to teachers—without raising taxes—and settle a long-standing billion-dollar lawsuit filed against the Grand Canyon state by its own school districts. Mr. Ducey, a former CEO of Cold Stone Creamery, apparently knows how to wheel and deal.
Arizona ranks near the bottom of states by total per-pupil funding for K-12 education. Voters tried to fix the problem in 2000 in the usual way: by throwing money at it. They approved a referendum to raise the state sales tax to 5.6% from 5%, with all of this new revenue to be reserved for education. The measure was designed to ensure that school funding kept pace with inflation. The language required the legislature to annually raise the base-level school funding or increase other educated-related expenditures.
When the Great Recession hit, however, lawmakers put inflation adjustments on hold, reasoning that growth in school spending had outpaced inflation in previous years. The legislature did increase funding for school transportation, and it argued that this “education-related expenditure” was enough to satisfy the letter of the law.
The schools disagreed, so in 2010 they sued the state. Last year courts sided with the schools and demanded that the legislature immediately dedicate an additional $336 million to K-12 education. Judges began contemplating back payments of $1.3 billion—nearly 15% of the state’s annual budget.
Reviewing several poor options, the governor’s office noticed something curious about the results of the 2000 tax increase. Education spending had gone up 41%, but the share of funds eaten by non-classroom expenses, such as plant operations and student support services, had grown every year for the past nine. The state auditor’s office calculated that in 2013 Arizona spent only 54% of school funds in the classroom, compared with 61% nationwide. Several academic studies have shown a direct correlation between that figure and student achievement, so it’s no surprise that Arizona ranks near the bottom in educational success, too.
Providing more resources to teachers and students is popular with many voters; paying higher taxes to hire district paper-shufflers is not. So Gov. Ducey came up with a clever plan to draw $2 billion over a decade from the state trust lands—a constitutional set-aside, established at statehood to promote public education, that currently holds about 9 million acres and more than $5 billion. The governor wanted to put that additional money directly into the classroom, rather than funnel it through layers of bureaucrats. Even with this outflow, the governor’s estimates showed, the trust would continue to grow in the long term, and its value would be higher in five years than today.
More money for schools with no new taxes: What’s not to like? A lot, apparently. Mr. Ducey’s plan disrupted the usual coalition of teachers unions and public school districts, leading some in the K-12 establishment—those administrators and union officials who have a way of soaking up dollars while doing little for students—to take the unfamiliar position of objecting to new education funding.
The superintendent of Mesa Public Schools, Arizona’s largest district, launched an email and robocall campaign to turn parents against the proposal. He insisted he was fighting for “the children,” but he was less upfront about disclosing that his lobbying effort was funded with school-district money that could have been put into the classroom instead.
On the other side of the aisle, several of Gov. Ducey’s fellow Republicans preferred to keep the state lands in reserve as a safety net for the future. The green-eyeshade crowd was suspicious of any new spending, even without added taxes. State Treasurer Jeff DeWit, the most prominent official to criticize the plan, lobbied GOP legislators against his own governor. A political newcomer, Mr. DeWit worried that the plan would shortchange the state land trust by several billion dollars—40 years from now. The trust is one of the few fiefdoms that Mr. DeWit controls, and he wanted to keep that money in his back pocket, collecting interest. His re-election campaign three Novembers from now might be tougher if his balance sheet shows a short-term dip.
The disruptive nature of Gov. Ducey’s proposal was unmistakable. With the legislature weighing whether to place his plan on the next ballot, the two sides in the lawsuit were forced to the mediation table after judges’ pleas for the parties to settle had failed. After tense meetings at the governor’s office between legislative and education leaders, a deal was struck that would give schools $3.5 billion over 10 years—$2 billion from the land trust and $625 million reallocated from the state’s general fund. The legislature quickly passed the bargain, and Gov. Ducey signed it on Oct. 30.
Voters still must sign off in a May 17 referendum, but the prospects seem good. Assuming it passes, Mr. Ducey might want to consider a career in hostage negotiation.