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Budget and Legislative Update

Janice Palmer and Dr. Chuck Essigs. Budget and Legislative Update. The Arizona Economy. February marked the 7 th consecutive month of year-to-year growth in base General Fund Revenues Sales, Individual Income, and Corporate Income tax collections are all above the forecast Other Indicators:

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Budget and Legislative Update

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  1. Janice Palmer and Dr. Chuck Essigs Budget and Legislative Update

  2. The Arizona Economy • February marked the 7th consecutive month of year-to-year growth in base General Fund Revenues • Sales, Individual Income, and Corporate Income tax collections are all above the forecast • Other Indicators: • Unemployment Rate is unchanged at 9.6% • The Arizona Department of Commerce did its annual revision of employment data – the result is that “the state suffered considerably higher job losses in 2010 than previous estimates had indicated.” • In 2010, Arizona had an average of 27,100 FEWER jobs PER MONTH than previously reported. • January 2011’s net job gain of 700 positions marked the end of 35 consecutive months of year-over-year job losses -- “Contrary to what was previously reported, revised unemployment estimates now indicate that the state has just barely started to reverse an unprecedented 3-year streak of job losses” • 1.34 million persons AHCCCS (Arizona’s Medicaid system) • 1.1 million persons receiving food stamps

  3. Projected Budget Shortfall • FY 2011 $550 million • FY 2012 $1.0 billion • FY 2013 $600 million • FY 2014 $1.1 billion

  4. Long Range Forecast • Estimated revenue in FY2014 of $8.46 billion • Vs. actual revenue in: FY2005 of $7.72 billion FY2006 of $9.26 billion FY2007 of $9.62 billion

  5. Source of State Dollars – Fiscal Year 2011 Sales Tax $4.3 billion 52% Individual Income Tax $2.5 billion 31% Corporate Tax $0.6 billion 7% Other $0.86 billion 10% Total $8.2 billion

  6. Budget/Future Considerations • One cent sales tax ends in FY2014 - $1 billion • K-12 rollover - $1 billion (estimate) • Suspended funding formulas - $1 billion • Increased cost to State from AV decline

  7. Other Issues • Full-day K $218 million • No inflation increase for Base Formula over $50 million • Classroom Site Fund over $200 million

  8. Suspended K-12Funding Formula Items* • Capital Outlay (CORL)** $ 98.864.800 • Soft Capital $188,120,700 • New Utilities (Repealed) $100,000,000 • Charter School Add’l Assistance $ 17,656,000 • Building Renewal $241,593,600 $646,235,100 *No estimate for New School Construction ** Included both $63,864,800 and $35,000,000 Edu. Jobs Related Cut.

  9. “Jobs” Bill and TABOR • “Jobs” Bill – K-12 Specific Items • Reduces the Class 1 (business) assessment ratio from 20% to 18%, in ½ percentage point increments per year, beginning in Fiscal Year 2014 (FY14) and ending in Fiscal Year 2017 (FY17) • Reduces Class 2 (agricultural and vacant land) from 16% to 15% beginning in Fiscal Year 2017 • Increases the homeowner’s rebate for FY14 through FY17 by the amount needed to offset the assessment ratio change effects • TABOR • Various bills and referenda • Would limit general fund revenues to the previous year’s budget plus population growth and inflation

  10. FY2012 State Budget

  11. State Budget for FY2011 • State Funding Reduced by $101.2 Million • Districts and Charters Budget Capacity Reduced by 101.2 Million • Districts Could Use Edu. Jobs Funds to Cover Reduction (1/2 of Total Available)

  12. State Budget FY2012 • Base Level stays at $3,267.72/ No Increases • Inflation Increase of 0.9% • Transportation $0.02 Mile Increase • Addition Assistance for Charters • K-8 Increase of $14.47 to $1,621.97 • 9-12 Increase of $16.86 to $1,890.38

  13. Reductions to Soft Capital and CORL • Soft Capital Cut by $188.1 Million – Most Likely a Greater than 90% Reduction • CORL Cut by $63.9 Million • CORL Cut by an Additional $35 Million – Edu. Jobs Issue

  14. Reduction to Additional Assistance for Charters • Additional Assistance Cut by $17.7 Million

  15. Small District Adjustment • For districts with fewer than 1100 students, Soft Capital and CORL cuts cannot total more than $5 million statewide

  16. Phase Out of Career Ladder and OPIP • Base Level Adjustment • 4% FY2012 • 3% FY2013 • 2% FY2014 • 1% FY2015 • Qualifying Tax Rate • $0.10 K-8 and 9-12 districts • $0.20 K-12 Districts

  17. Facilities Funding • New School Formula – Suspended • Building Renewal Formula - Suspended

  18. Joint Tech Districts • Prohibits JTED’s from Receiving State Funding for 9th Grade Students

  19. Other Items • Actual Utility Funding Formula Eliminated • Teacher Performance Pay Program (ARS15-977) Eliminated

  20. ASRS Contributions • Changes Current 50/50 Split to Employee Pay 53% and Employer Pays 47% • Estimated Rate Beginning July 1, 2011 • Employee would be 10.75%, now will be at 11.40% • Employer would be 10.75%, now will be at 10.10%

  21. Increase for Both From FY2011 to FY2012 • Employee goes from 9.85% to 11.40% • Employer goes from 9.85% to 10.10% • Employee up 1.55% • Employer up 0.25%

  22. Estimated Impact of ASRS on FY2012 Contributions Amount district saves will result in reduced state aid and budget capacity. Charters are also impacted.

  23. Classroom Site Fund • Started In FY2002 • Highest year FY2008 $397 per weighted student • District had been allowed to spend to estimate • For FY2010 cumulative shortfall of $195 • Starting in FY2011 state had to adjust for shortfall

  24. FY2011 Number • Estimated amount $220 • Adjusted for shortfall $220-$195 = $25 • Legislature set amount at $120

  25. FY2012 Number • Estimated amount $219 • Adjusted for shortfall $219-$124.99 = $94 • Legislature may set amount at $120 (SB1263)

  26. How Does Arizona School Spending Compare With the Nation?

  27. AZ

  28. Arizona vs. U.S. Average 1969-70 to 2006-07 Source: National Center for Education Statistics (NCES)

  29. Change in Ranking • 1969-70 AZ ranked 29th above 21 other states • 2007-08 AZ ranked 48th above 2 other states • To move back to 89.7% of U.S. Average • Increase expenditures to $9202 (2007-08) • Increase of $1594 per pupil

  30. In 1969-70 AZ Above These States Arkansas Georgia Idaho* Indiana Kentucky Louisiana Maine Mississippi Missouri New Hampshire New Mexico North Carolina North Dakota Oklahoma South Carolina South Dakota Tennessee Utah* Virginia West Virginia * States AZ was above in 2007-08

  31. Arizona vs. National Average FY2008 Per Pupil Spending by Function Source: Arizona School District Spending (Classroom Dollars) Fiscal Year 2010, Office of the Arizona Auditor General

  32. Arizona vs. National Average FY2008 Per Pupil Spending by Function Source: Arizona School District Spending (Classroom Dollars) Fiscal Year 2010, Office of the Arizona Auditor General

  33. Key Policy Issues

  34. School Labeling • SB 1286 (2010, 2nd Regular Session) • Labeling changed from word labels to letter grades • Adds the labeling of school districts in the aggregate • New formula: • 50% of the school and district profile must be based on academic performance measures • ½ = all students academic gain • ½ = lowest quartile academic gain

  35. Teacher and Principal Evaluations • SB 1040 (2010, 2nd Regular Session) • Requires the State Board of Education, on or before December 15, 2011, to adopt and maintain a model framework for a teacher and principal evaluation instrument • Must include quantitative data on student academic progress that accounts for 33% and not more than 50% • Must include best practices for professional development and evaluator training • Requires school districts and charter schools to annually evaluate individual teachers and principals beginning in school year 2012-2013 • Teacher and Principal Evaluation Task Force • Expedited process • Will provide a framework to districts • March State Board of Education Study Session and scheduled for Final Adoption in April • Various organizations will be charged with implementation assistance

  36. Move On When Reading and Move on When Ready • HB 2731 (2010, 2nd Regular Session) • Creates the Grand Canyon Diploma to enable high school students to choose different educational pathways. • HB 2732 (2010, 2nd Regular Session) • Establishes the Task Force on Reading Assessment to report by January 15th, 2011 • Requires that a student not be promoted from the 3rd grade if the student obtains a score on the reading portion of the AIMS test, or a successor test, that demonstrates that the student is reading far below the 3rd grade level • Requires the State Board of Education (SBE) to develop intervention and remedial strategies • Requires school districts to offer at least one of the intervention and remedial strategies developed by the SBE

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