Arizona School Officials Brace for Budget Cuts (AZ)
December 6, 2010
Arizona school officials are bracingfor more and deeper budget cuts as the state faces continued shortfalls.
A federal mandate that provided afloor under state spending for schools will expire in mid-2011 at a time whenstimulus funding is drying up, and Arizona officials are chaffing under aseparate federal requirement to not cut Medicaid enrollment.
"Anybody who is payingattention knows there’s going to be cuts," said Rep. Rich Crandall, theHouse Education Committee chairman. "It’s truly turning into a health carevs. education issue."
Arizona lost a third of its revenueduring the Great Recession, forc ing cutbacks across state services, andlegislators still must grapple with a midyear shortfall and a bigger deficit inthe next budget.
The current budget already includesmore than $700 million of school funding reductions, some new and some repeatedfrom past budgets.
The biggest were halvingkindergarten funding ($218.3 million), skipping school maintenance money($231.1 million), cutting money for purchasing computers and other equipment($165.1 million) and slashing the inflation adjustment for per-student basicstate aid ($61.4 million).
That’s in addition to delays ofschool aid payments into the following fiscal years fiscal year to kick the candown the road. Lawmakers have now resorted to so-called "rollovers"three times, adding up to $952.6 million in deferred funding. School districts are paid interest but can face cashcrunches because of the tardy payments.
Despite a continuing budget crisisthat has cut revenue by a third, reductions to K-12 funding have beenproportionately lighter than some other programs.
Federal stimulus money helpedpropped up funding for both education and health care, and the program’smaintenance of effort" requirement doesn’t let the state cut its schoolfunding below 2006 levels Arizona has already cut down to that level.
That has meant Arizona has largelycut around the edges in school funding, without reducing basic state aid paidon a per-student basis. And the state gave districts new flexibility onspending, allowing money to be shift to more critical needs.
So far, said House AppropriationsChairman John Kavanagh, R-Fountain Hills, "the impact on K-12 has beenminimal."
The MOE requirement likely willminimize any midyear school funding cuts to help close the projected $825million shortfall in the current $8.5 billion state budget.
But the stimulus money is drying upand the MOE requirement expires in July, when the state’s 2012 fiscal yearbegins, "and 2012 scares me to death," ; said Chuck Essigs, a schoolfinance expert with the Arizona Association of School Business Officials.
The projected shortfall for thatfiscal year is $1.4 billion. If that shortfall is spread proportionally amongall state programs, the cut for K-12 school funding would be $518 million.
Crandall and Kavanagh said theyexpect new school funding cuts to be less than that for several reasons.
Those include political support foreducation and a sense that lawmakers should try to follow voters’ desire toprotect school funding when the Proposition 100 sales tax increase was approvedin May for three years.
But the additional $1 billion ofannual sales tax revenue is already built into the deficit calculation.
"Thank God for Proposition100," Essigs said. "Prop 100 didn’t save schools from (all) cuts butcertainly the volume and extent of any cuts are going to be less because that’san extra $1 billion in th e general fund that wouldn’t be there."
K-12 funding represents more than athird of the general fund and the deficit "is going to make somereductions inevitable," Kavanagh said. "However, the general sense ofthe members and I suspect even the governor is that K-12 should not be cut thatdeeply owing to informal quid pro quos when they approved the sales taxincrease."
But lawmakers might includecontingency cuts in the next budget that would take effect if the state can’tget dispensation from the federal government to cut the state Medicaidprogram’s enrollment, Kavanagh said.
The federal health care overhaulprohibits the state from reducing Arizona Health Care Cost Containment System’senrollment, blocking a planned cut of eligibility of approximately 300,000people, or roughly a quarter of the Arizona enrollment.
The contingency cuts "would beeverywhere including education. That’s the doomsday scenario," he said.
School officials said options forcost-saving cuts including laying off staff, increasing class sizes, closingschools, shutting special programs and evaluating all the services theyprovide.
Essigs warned district officials tobegin planning for a 10 percent in state funding, and a Flagstaff UnifiedSchool District official said he’s taking it to heart.
"It looks really grimhere," said Ken Garland, the Flagstaff director’s finance director.
Garland said his district alreadyhasn’t provided pay raises for the past three years. Teacher layoffs likelywould be in the mix if state funding is cut, he said.
Essigs said one wild card is roughly$200 million in federal stimulus fundingthat school districts received this fall. That money could offset some statefunding cuts but it’s only a one-time cash infusion, he noted.
"Some are going to use it thisyear. Some are waiting to see what the Legislature does in January andFebruary," he said.