The case for Proposition 208, which would give Arizona one of the highest state income tax rates in the country, is partly based on an incorrect history of education funding in Arizona.
The pitch by proponents is that the Arizona Legislature routinely cuts K-12 funding so voters have to take it into their own hands, however flawed Proposition 208 might be. The historical record, fully considered, doesn’t bear that out.
The recession in the late 2000s, resulting from the busting of the residential real estate bubble, hit state revenues hard. They fell by about a third.
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Lawmakers tried to minimize school cuts
The reaction of the Legislature, however, wasn’t to seize the opportunity to slash K-12 funding, as the caricature has it. Instead, it did nearly $7 billion of other things to stave off the need to do that.
It borrowed more than $2 billion against state buildings. It moved nearly $2 billion from other accounts into the general fund, which supplies most of the state funding for schools. And it referred to the voters a temporary, three-year increase in the state sales tax of one percentage point, which voters approved.
That raised $2.7 billion.
With the depth and length of the recession, even all that proved insufficient. A case could be made, and I made it at the time, that the temporary sales tax should have been extended. Instead, spending cuts were enacted.
School funding constituted roughly 40% of the state’s general fund. In a deficit, cuts to it can’t be avoided. So, the Legislature skipped a few inflation adjustments to basic state aid and reduced some other revenue streams. This was extremely stressful for schools.
Most cuts have been restored
However, since the state’s economy has recovered, these cuts have been largely restored. Basic state aid has been increased vastly in excess of the skipped inflation payments. The other revenue streams have been largely replenished.
You will hear opponents proclaim that, despite all this, schools are still receiving $1 billion a year less in per-pupil funding, adjusted for inflation, than they were in 2008. This is an outdated calculation.
Based upon the current budget, the real deficit is $665 million. And even that is misleading.
In 2008, the state was building lots of new district schools. Since then, virtually all the enrollment growth has gone to charter schools.
The state doesn’t fund new charter schools. They have to fend for themselves. So, there’s a material flaw in using 2008 as a point of comparison.
Proponents use it because it was the high water mark for inflation-adjusted, per-pupil funding. That’s understandable, but an exclusive focus on 2008 is distorting. Current inflation-adjusted, per-pupil funding exceeds that of 2004,