Alia Beard Rau and Mary Jo Pitzl

The Republic | azcentral.com

Arizona's next governor and state Legislature may have a financial mess on their hands when they take office in January because those before them didn't adequately fund public education.

Maricopa County Superior Court Judge Katherine Cooper has issued a judgment in the long-standing lawsuit challenging school funding, requiring the state to boost funding to public and charter K-12 schools by $317 million this fiscal year.

The courts had already determined that Arizona shorted the public-school system during the Great Recession by not fully covering inflation costs required under the voter-approved Proposition 301. Cooper ruled in July that the state would have to pay $1.6 billion over five years to catch schools up to where they should be under the formula. And on Wednesday, she ruled that the first payment is due now.

The state unsuccessfully sought to delay the judgment until Cooper had time to also resolve the fight over whether the state owes an additional $1.3 billion for retroactive inflation costs. Oral arguments will be held on that issue in late October.

"They need to start giving the schools the money now," said Don Peters, the attorney who represents a coalition of school districts and education-advocacy groups. "There is now a court order in effect that requires the state to comply."

The state will appeal and will likely seek a stay asking the court to halt the required payments until the appeal is resolved.

But even if a stay isn't granted, the governor and Legislature are likely to push the issue off until January, when the new governor is sworn in and the legislative session begins.

A political fight over money would not be popular with officials in the midst of election season.

"We should go back and deal with this, and we should set the framework for the next Legislature and the next governor," said House Minority Leader Chad Campbell, D-Phoenix, who is not seeking re-election. "But I don't have any belief the governor will call a special session on this issue."

Brewer spokesman Andrew Wilder did not return calls seeking comment.

Peter Gentala, attorney for the House, would not discuss legal strategy beyond confirming it will appeal.

The position of Republican legislative leadership is that the court opinion restricts the Legislature from ever being able to decrease the growth rate, even if it boosted it by more than was required in previous years.

"It becomes a one-way ratchet," Gentala said. "Neither the legislative drafters nor the voters who approved it foresaw it as a compound-interest provision."

Based on continued sluggish growth, the Joint Legislative Budget Committee is projecting a $49million shortfall by the end of the current fiscal year.

Adding the $317 million required educational payment pushes that to a $366million shortfall.

And that doesn't include the possibility of the additional $1.3 billion in back payments. The plaintiffs are asking for an additional $250million a year over five years for that.

To avert such a shortfall, state revenue would have to grow by 9.4 percent, according to the JLBC. Growth has been at 2 percent.

No lawmaker — Republican or Democrat — has made any public move to prepare for the looming bill. But Senate President Andy Biggs has said leadership has been having conversations.

His efforts to pull back on spending during this year's budget debate and even during the special session on child welfare were outvoted.

The most painless short-term option would be to dip into the state's "rainy-day fund," which contains about $455 million. But that would solve the problem only for a year.

Campbell said the new governor and Legislature are going to have to work together to find the money, and he said it will likely require boosting revenue.

"Governor Brewer and this Legislature have handed out tax break after tax break to these special-interest groups, and they are gutting our revenue stream," he said. "Governor Brewer is leaving office, and we are in no better shape than when she took office. She tried to plug the holes with these temporary fixes, and now, the dam's about to break."

The boost in funding still won't catch per-student money up to that in many other states.

Without the additional funding, the state has allocated $3,373 in Arizona funding per student. Cooper's judgment would boost it 5 percent, to $3,560.

In fiscal 2014, the state allocated $3,327 per student.

According to the Center on Budget and Policy Priorities, a national policy organization, Arizona spending ranks in the bottom 10 nationally. Illinois was last, with $2,136 per student. Minnesota was at the top, with $9,905 per student.

Chris Thomas, general counsel for the Arizona School Boards Association, said that this week's court ruling is a victory but that there is still a ways to go.

"The light at the end of the tunnel just got a little bit closer," he said.

Schools won't boost funding in anticipation of reimbursement by the Legislature, Thomas said.

"We have to have appropriated money sitting there," Thomas said. "That appropriation has not been made, so we're telling our districts there's still a lot more to come with this in terms of resolution."

He said the school districts are willing to discuss a settlement compromise on the lingering $1.3 billion question.

Gentala declined to comment on the status of any such talks.

ON THE BEAT

Alia Beard Rau covers the Arizona Legislature, the budget and state government, with an emphasis on government accountability and public money.

How to reach her

alia.rau@arizonarepublic.com

Phone: 602-444-4947

Twitter: @aliarau

Funding

How the ruling will affect school funding

Arizona public schools will get an extra $317 million this fiscal year as the state is forced to comply with a 2000 ballot initiative requiring it to fund inflation costs annually. Over five years, that will cost the state $1.6 billion. Because the Legislature chose not to cover those costs during the recession, the state may owe the K-12 system an added $1.3 billion, depending on how the court rules.