Arizona Republic: Proposition 123 Ruling Is An Inaccurate, Misleading Take On Arizona School Funding
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Robert Robb
Arizona Republic
October 7, 2019
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Opinion: Judge Neil Wake's ruling about Prop. 123 revived false claims made by opponents. And the judge added some of his own.
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Hard to believe that we are relitigating Proposition 123.
That’s the ballot measure voters approved in 2016 to increase distributions from the state land trust to the schools. Voter approval also effectuated the settlement of a lawsuit over skipped inflation funding payments to the schools.
Prop. 123 is back as a discussion item because a ruling by federal district court judge Neil Wake gave those who lost the vote an opportunity to vent once more.
And have they.
In reality, the ruling is no big deal. The increased distributions voters approved will continue for as long as voters approved them. The question Wake purported to decide was whether, if voters change the distribution formula in the future, that has to be approved by Congress before going into effect.
The real plaintiff here was Judge Wake
The state land trust was established by Congress when Arizona was admitted to the union. It is established in both the federal Enabling Act and the Arizona Constitution. Changes, such as in the distribution formula, have to be made in both places.
Back in 1999, Congress made such an approval through referencing the section in the Arizona Constitution containing the distribution formula. The legal question is whether Congress intended to get out of the need to approve changes in the distribution formula by agreeing in advance to whatever alterations Arizona makes? Or was it just approving the specific change before it at the time?
That’s a fair question, although not one fairly before Wake. All the true beneficiaries to the trust, including representatives of the schools, supported Prop. 123 and opposed the litigation. Wake gave standing to some random dude who wanted to contest it and then rustled up a lawyer to represent the dude.
The real plaintiff in this case was Wake.
Wake’s opinion is that Congress hasn’t granted advanced approval to trust distribution changes. That’s not an unreasonable reading of the law.
What he got wrong about school finance
Regretfully, however, Wake’s most recent decision isn’t a dispassionate ruling on the law by a judge. It’s a political screed about education funding in Arizona. And a screed that contains factual inaccuracies, misleading statements and judicial irrelevancies.
Congress subsequently, and retroactively, approved the distribution changes contained in Prop. 123. So, the state moved to have this case dismissed as moot.
To avoid doing that, Wake concocted a claim that the state, and particularly Gov. Doug Ducey, was a constant threat to raid the state trust fund because of a policy of otherwise starving the schools.
Wake described the tax cuts since the 1990s as “endemic,” which is the language of an advocate, not a judge.
The judge asserts that the state skipped inflation funding for “a dozen years.” Actually, it was just three.
According to Wake, a 2000 ballot proposition required that education funding be increased annually by a minimum of “the greater of 2% or the rate of inflation.” Actually, it was whichever is lesser.
Wake also took a slap at charter schools
Wake took a slap at charter schools, although the relevance is tough to discern. In a clearly disapproving tone, he wrote: “School choice is promoted by charter schools, which receive state funding at a per pupil rate higher than public school students receive.”
Now, this is a bit of public finance legerdemain. Charter schools do receive more in per-pupil funding directly from the state than district schools. But they receive less when all sources of revenue are considered, particularly local property taxes which charters can’t levy.
More fundamentally, charter schools are public schools. Charter students are public school students. Funding for them is funding for public education.
Wake asserts that the inflation funding lawsuit was settled “entirely with School Land Trust Fund monies.” That also is inaccurate.
There were commitments to increased general fund appropriations as well. And since the settlement, per-pupil appropriations from the general fund have been increased well beyond what was required by the settlement.
The biggest misrepresentation of all
So, why this misadventure in Arizona education finance history? It’s irrelevant to the legal question supposedly before Wake: Whether Congress continues to have to approve every change in the distribution formula Arizona makes, or whether it washed its hands of that obligation with the 1999 amendment?
While the education finance screed was irrelevant to that question, it was Wake’s way of dodging the motion to dismiss due to mootness, while decrying Ducey’s supposed iniquity one more time.
The largest, and most regrettable, misrepresentation is a claim made more directly in a previous ruling by Wake and repeated by those cheering his last stand against Prop. 123: That the higher distribution contained in the measure is depleting the state land trust’s principal.
A 2012 change, which Wake contends was also implemented illegally, set the distribution at 2.5% a year. Prop. 123 increased that to 6.9%.
The state treasurer’s office reports that the average annual rate of return on the state land trust has been 9.2% over the last decade.
Far from being depleted, the state land trust’s principal is still being fattened by retained earnings that should be being distributed to current schools.
Wake is right that there is likely to be a continuation of a higher distribution after Prop. 123 expires in 2025. But not strictly because of parsimony in funding from other sources.
It will be primarily because the Prop. 123 distribution more closely approximates what schools should have been receiving all along.
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