August 24, 2021

The Latest on Prop 208

By: Erin Hart, Senior Vice President and Chief of Policy and Community Impact

Last week the Arizona Supreme Court issued a decision about Prop 208. So, what does this ruling mean for Prop 208 and for education funding in Arizona?

The short answer is the decision puts Prop 208 in jeopardy, which could take away a significant future source of funding for K-12 education. It is not a done deal yet – a lower court needs to make a final decision. So until then, Prop 208 stands.

Here’s What You Need to Know:

Prop 208 was passed by voters in 2020 and was projected to generate as much as $600M-$827M for K-12 education, specifically to support pay for teachers and school staff, among other uses (see below). A number of legal challenges were made against Prop 208 that went before the Arizona Supreme Court. 

There were two main issues left for the Court to decide upon. The first was whether voters had the ability to raise taxes on themselves. The court found that it is allowable for citizens to raise taxes via a simple majority, as was done with Prop 208.

The second issue was whether Prop 208 should be considered a “grant.” This is a bit technical, but matters because Arizona has a school spending limit that was passed by voters in 1980 called the Constitutional Expenditure Limit. It says that school districts can’t collectively spend more than the cap allows. If Prop 208’s funding is a grant, it would not be counted towards the limit, but if it is not a grant then it would count towards the limit.

The court found that Prop 208 is not considered a grant and asked a lower court to decide whether the funding should be counted towards the constitutional expenditure limit. This decision has not been made yet and will be taken up by a lower trial court.

What Does This Mean?

This means that Prop 208 is hanging on, but if it generates more money than the constitutional expenditure limit allows, it could be thrown out and declared unconstitutional. Again, this is up to a lower court to decide.

The other factor to consider is that the constitutional expenditure limit can be raised by the legislature and has been done in the past (read more on this below).

Next Steps

While we wait for the trial court to hear the case and make their decision, the point must be made again that we need a stable, long-term funding solution for P-20 education in Arizona. Education is the best investment our state can make in our future workforce and economy.

Additional Background Information:

What is the Constitutional Expenditure Limit?

Arizona has a self-imposed cap on education spending called the constitutional expenditure limit.

It was passed by Arizona voters in 1980 as an amendment to the constitution and sets a limit for total spending by all school districts (charter schools are not included). The expenditure limit can fluctuate depending on the number of students and inflation. Community colleges, cities, towns and districts also have expenditure limits.

The current expenditure limit is $6.31B. Last week, the Arizona Department of Education said that school expenses are $6.16B, which is $144M less than the current expenditure limit. On top of this, the limit is expected to decrease due to a decline in student enrollment in 2020-21 because of COVID.

Can the Limit be Raised or Eliminated?

Yes, the Arizona legislature has the ability with a two-thirds vote to exceed the expenditure limit, which has been done in the past. Eliminating the spending cap is possible, but would require voter approval since it is a constructional amendemet.

In the 2020 and 2021 legislative sessions, there were efforts to increase or eliminate the limit, but they did not advance.

Background on Prop 208:

Proposition 208 was passed by voters in November 2020. The measure would impose a tax surcharge on Arizonans making more than $250K (as individuals) or $500K (if filing jointly) to support education in Arizona. The funds are allocated for salaries for teacher and classroom support, teacher mentoring and retention, CTE programs, and the Arizona Teachers Academy. Prop 208 is projected to collect as much as $600M to $827M a year, which will likely be reduced should the tax cuts passed by the legislature and Governor go into effect at the end of September. There is a referenda process in place that is challenging these tax cuts. If enough valid voter signatures are collected, it would pause the implementation of the tax cut and send the decision of whether to keep them or not to the ballot in 2022. 

Background on Prop 301:

Proposition 301 was passed by voters in 2000. It increased the sales tax by six-tenths of a cent. Funding goes to support K-12, community colleges and universities. It generates more than $600M a year for education for things like teacher pay, school facilities, and added instructional time (it added five additional days to the school year).

Additional Resources:

Erin Hart is senior vice president and chief of policy and community impact at Education Forward Arizona. She leads Education Forward Arizona’s policy and convening efforts, working to bring communities together to advance agreed-upon policy goals. She brings two decades of experience in Arizona and national education policy, coalition building, strategic communications, strategy development and nonprofit leadership.