PHOENIX — Proposition 123 put billions into Arizona public schools over a decade, but deep divisions between Gov. Katie Hobbs and Republican lawmakers mean a renewal is up in the air.
Hobbs walked away from budget negotiations with Republican leaders last month, saying the lawmakers refused to discuss a Prop. 123 proposal.
“We have a once-in-a-decade opportunity to increase funding for our public schools, and last week, Republicans told us they're walking away from that, and I don't know how we balance our budget without that,” Hobbs told reporters March 27.
But state Sen. J.D. Mesnard told ABC15 on Thursday that a Prop. 123 deal is not off the table, saying the governor is trying to shift blame onto Republicans.
“All we can say is, No. 1, we are still here, willing to negotiate,” he said. “She is the one that pulled the plug. We did not.”
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Prop. 123 temporarily increased the amount of money that flows into K-12 schools from the State Land Trust. The measure, which voters passed in 2016, expired last year, and lawmakers plugged the hole with money from the state's General Fund.
“We are facing challenging revenue conditions and an extension of Prop. 123 is more and more necessary to make sure that we are investing in our public schools and making sure we're providing our students the opportunity they deserve,” Hobbs said.
But Mesnard said that even if the Legislature sent a new Prop. 123 to voters in November, it wouldn’t free up any money in the state budget.
“Any strategy that looks at Prop. 123 and the state land trust fund as a piggy bank to solve budgetary challenges we may be facing now is putting a lot on the voters,” Mesnard said.
If the state spends the $300 million on other budget items and then voters reject it, he said, “then we're in a world of hurt.”
“And we're halfway through the fiscal year by that point, so it's extremely irresponsible to use it in that way,” he said.
What is Prop. 123?
Prop. 123 sent billions to K-12 schools over a 10-year period that ended last year.
Arizona’s Constitution mandates a 2.5% distribution from the State Land Trust Permanent Fund to schools every year.
A decade ago, Arizona voters approved a constitutional amendment that raised the percentage to 6.9% for 10 years. The state had lost a lawsuit over school funding, and the additional money was used to pay for the required increase in school funding.
Prop. 123 expired last year, and the governor and state lawmakers failed to reach a deal for a new ballot measure.
Because the state is legally obligated to send the roughly $300 million to schools each year, lawmakers backfilled the dollars from the State General Fund when Prop. 123 expired on June 30, 2025.
Deep divides on Prop. 123
Hobbs and Republican leaders have been at odds over how to renew Prop. 123 for years.
Mesnard, a Republican who represents Legislative District 13, said Hobbs’ proposal this year for a 10.9% distribution is just too high. Using the State Land Trust to backfill the $300 million currently paid by the General Fund, take out additional money to service debt and allocate more money to schools is not sustainable, he said.
“What we essentially would be doing is robbing future generations to pay for the here and now, and the fund was never meant for that purpose,” he said.
Hobbs said 10.9% was one of a list of options.
“That ... absolutely was not a red line, and it was not the only option that we put on the table,” she said.
Mesnard said a Prop. 123 deal could still be worked out. But it wouldn’t include a distribution that isn’t sustainable, he said.
“In addition, we really do want to look at this as an opportunity for new money, not just backfilling the General Fund,” he said, adding that a Prop. 123 renewal is an opportunity to prioritize teachers and classroom spending.
Hobbs released her budget proposal in January and has called on Republican lawmakers to publicly release their plan.
“When Republicans can show us that they're serious about putting forward a budget that meets the needs of Arizonans, that provides more funding for our public schools, and addresses all of these other challenges we're facing, and covers the price tag for the tax giveaways they want to give to corporations and billionaires, then we can come back to the table,” she said March 27.
Republicans say the numbers in Hobbs’ proposal don’t add up, saying it counts on funding that's not guaranteed — such as a federal reimbursement for border spending and a Prop. 123 renewal — and proposes several tax and fee increases.
In the meantime, Republican leaders are moving ahead with their own budget plan.
"What I can tell you is that we are still hard at work, notwithstanding the governor having walked away, and we're going to continue to press forward until we have a budget,” Mesnard said.
