Despite court ruling, education advocates say Prop. 208 can have a ‘long life’

Backers of the Invest in Education Act say the voter-approved tax hike on the rich to increase teacher pay and boost school funding has a future, despite last week’s Arizona Supreme Court ruling that the spending plan is likely unconstitutional.

The Invest in Education Act, which won nearly 52% of the vote in November as Proposition 208, adds a 3.5% surcharge on all income greater than $250,000 for individuals or $500,000 for joint filers. 

The Arizona Supreme Court ruled that Prop. 208 can’t evade a constitutional limit on school spending, and said its proposed spending is likely unconstitutional as a result. But the court stopped short of blocking the measure from going into effect, and instead remanded the case to a trial court to gather evidence on whether the spending will exceed those restrictions.

Leaders of Stand for Children and Children’s Action Alliance, two organizations that are part of the coalition that worked to pass Prop. 208, said the Supreme Court was premature in determining — without evidence — that schools will be violating the state constitution if they receive and spend from funds collected through Prop. 208. 

“When you actually look at the history of the expenditure cap, the limits and how they work, and how the funding flows, there’s room to argue that Prop. 208 very much works within the cap constitutionally,” said Rebecca Gau, executive director of Stand for Children. 

One of the key determinations the Court made in its ruling is that the money Prop. 208 sends to schools cannot be considered a “grant.” The ballot measure declared the money would be delivered as grants, which are exempted from the constitutional expenditure limit that was created in 1980. The court ruled that the spending from Prop. 208 would have to fit within that limit, which was last increased in 1986.

Chuck Essigs, a school finance expert at the Arizona Association of School Business Officials, said it’s not guaranteed that school spending will exceed the constitutional threshold, even if Prop. 208 money is given to schools.

“It’s really hard to predict exactly what’s going to happen with the limit,” he said. “It’s kind of like, What’s the stock market going to be in two years, three years, four years, five years? It’s the same thing if you look at the history of the limit calculation. For most years over a long period of time, we were under the limit, and for a time during the Great Recession we were way under the limit.”

The limit is calculated annually based on the school population of the previous year and inflation. Schools have historically been funded below the limit. 

Even if the limit is exceeded, there are two mechanisms for schools to comply with the constitutional spending cap: The legislature can waive the expenditure limit by a supermajority vote or school districts can reduce their budgets proportional to the amount that is exceeded. 

Another major issue in the Supreme Court ruling is that it won’t “sever” or leave some parts of Prop. 208 law in place if the sections that delineate disbursement are unconstitutional. Rather, the court signaled it would strike down all of Prop. 208 because the money raised through the income tax increase will “remain perennially sequestered,” with no way to spend it.

David Lujan disagrees. He leads the Children’s Action Alliance, one of the groups that campaigned for Prop. 208 and is part of the Invest in Arizona coalition. 

“(The Supreme Court) decision contemplates that those dollars cannot be used. That is not the case — even if we were to exceed the expenditure, as the procedures are set forth in Arizona, school districts will be able to use all the Prop. 208 dollars,” he said. “It’s a decision for local school districts.”

Because school districts have the flexibility of which funds to draw from to build their budgets, there’s room for Prop. 208 funds to fall within the constitutional limit, Lujan said. 

“I’m much more hopeful about our opportunity to see Prop 208 continue and to have a long life ahead. It’s far from a done deal what will happen in the trial court,” he added. 

Lujan thinks despite the potential blow to the school funding proposal, Arizona voters won’t be deterred from using the citizen initiative process to bring in new laws the legislature won’t take up. 

The coalition that helped pass Prop. 208 is now gathering signatures to place on the ballot three referendums to stop a tax cut package the legislature passed this session to get around the new tax on the wealthy. 

“Voters are angry about the tax giveaways to the rich that we saw in this legislature,” Lujan said.

“They are angry the legislature tried to work around prop 208 this session, so despite all the obstacles that initiatives get put in their path that doesn’t deter the voters of Arizona from seeking change at the ballot box. I don’t think that’s going to change going forward.”

But Paul Bender, a constitutional lawyer and law professor at Arizona State University, said the Supreme Court ruling on Prop. 208 could result in a “serious roadblock” on the constitutional rights of people in Arizona.   

“The Supreme Court decision seems to me to be against the spirit of the Arizona Constitution, which is that the people are the legislature of Arizona,” he said. “They are the final, ultimate legislature, and they can do whatever they want unless the constitution prohibits it — and even then, they could change the constitution.”

The lawsuit against Prop. 208 was filed by Senate President Karen Fann and other lawmakers. Bender said when it comes to education funding, the majority of Arizona voters and the legislature seems to be “in a war, in a battle.”

“The legislature doesn’t want to spend this money, the people want to spend this money,” he said. “The way I read the Arizona Constitution, the people should win — that’s what the Arizona Constitution says. I think it’s unfortunate that the people are being frustrated by the legislature and the Supreme Court decision from being able to exercise the power that they clearly have under the constitution. 

“They several times have said they want to exercise the power to tax and spend more money on public education, and they should have a right to do that.”