Arizona school funding must cover inflation, ruled Court of Appeals

PHOENIX - Even in tough budget years, the Arizona Legislature must give schools an annual boost in funding to cover inflation under a proposition approved by voters in 2000, the state Court of Appeals ruled Tuesday.

The decision means schools, which say they have lost about $250 million in inflation adjustments in the past three budget years, should begin seeing yearly increases again, according to lawyers for school districts and associations that filed suit.

Gov. Jan Brewer's office, however, put the total at $188 million.

The appeals court said it was not ordering the Legislature to pay schools the money they would have received. But the ruling said any future appropriations should include the inflation adjustment or run afoul of the state constitution's Voter Protection Act, which requires the Legislature to obey voter mandates. The ruling overturned a trial court decision dismissing the lawsuit.

A spokeswoman for the Arizona attorney general's office said an appeal to the state Supreme Court is planned.

If the appeal is unsuccessful, it could throw a monkey wrench into Brewer's plans to boost school funding to pay for education priorities she laid out in her State of the State address Monday.

The 2000 ballot measure known as Proposition 301 raised the state sales tax by 0.6 percent and required the Legislature to adjust school funding by about 2 percent per year to allow for inflation. The law said it would apply to base funding, transportation costs and other special funds.

The Legislature went along until the budget crunch of 2010, when it funded only an increase in transportation and not basic school funding, a one-year cut of $61 million. Lawmakers pointed to the use of the word "or" in the law to show they could decide against funding every part of the education budget. Materials given to voters and the legislative history of the law shows it really means "and," the court ruled.

"I can't believe that in a court of law `or' means `and,"' said Rep. John Kavanagh, who heads the House appropriations committee. "And it's just going to mean less money for others areas of government, because we have a limited amount of additional funding that we can do."

The appeals court ruling sympathized with lawmakers but said they were required to follow the law.

"Without question, the Legislature faces substantial challenges in preparing the state's budget, particularly during difficult economic circumstances," the ruling said. "But our Constitution does not permit the Legislature to change the meaning of voter-approved statutes by shifting funds to other purposes to meet other budgeting priorities."

Sen. Rich Crandall, a former education committee chairman, acknowledged that voters meant the inflation adjustment to go to all school funding.

"I think it was always the intent, and the expectations of voters, that that's what it meant," Crandall said. "We, in desperate times, took some desperate measures and said, `Hey, we think it could mean this instead.' And one court said we were right."