Transcription

• Speaker #0

  Welcome to Beyond the Ballot AZ. I'm your host, Tom Collins, Executive Director of the Arizona Citizens Clean Elections Commission.

• Speaker #1

  And I'm Gina Roberts, Voter Education Director for Clean Elections.

• Speaker #0

  Today, we're talking about how money and schools and buildings converge.

• Speaker #1

  You know, we're just coming off of a November 4th election. About 10 out of our 15 counties had elections. And so voters saw a lot, especially here in Maricopa County. of items related to schools, to public schools. We saw everything from looking at maintenance and override elections to districts seeking bond approvals to districts seeking authority to sell or lease property. And so voters had to make some important decisions here. And what's interesting is when you look at the results, which are available, and you can go to our website for those, you know not every district voted the same way. So we actually did have some districts where their voters rejected those bond measures. And now those districts are going to have to figure out what to do with those potential shortfalls that they have in that funding that the bond approval would have provided. And then we have several districts where voters said, yes, let's go ahead and do it. So it's really interesting to see how voters across the county, across the state, made their voice heard on education.

• Speaker #0

  We're here with Glenn Farley. He's the Director of Policy and Research at the Common Sense Institute. He spent eight years with Governor Ducey's administration as Chief Economist and Policy Advisor, and recently he's led research on school capital financing at CSI. Glenn, thanks for joining the show. Thanks for having me, Tom. Pleasure to be here.

• Speaker #1

  So, Glenn, I read your report that was published on the Common Sense Institute's website. I believe it was in August. A lot of great information in there. You know, it took me a bit to read it, but I thought it was very interesting. And I learned a lot. And it seemed like the main takeaway here was that your research found that school capital finance standards are outdated. So can you walk our listeners through that? And really, what does that mean? Why are they outdated? And what do we need to do about it?

• Speaker #2

  Recall, if you will, what kind of the state of Arizona looked like in the late 1990s, and particularly in the early 2000s before the Great Recession. This was a period of rapid growth and our school districts were growing extremely rapidly at the time as well. And the sort of foundational assumptions that policymakers made at the time is this growth would continue more or less in perpetuity. So the systems were designed in that environment with that assumption. Given perpetual rapid growth, how do we fund that growth quickly, efficiently and in perpetuity? What they never really contemplated was the possibility that... student enrollment growth or state growth generally would plateau or even decline. What happened in 2008 with the Great Recession and every year since is exactly that. District enrollment in Arizona peaked in 2008. It's declined every year since. During and after the pandemic, that decline really accelerated. Enrollment more or less fell off a cliff in the 2020 to 2021 period, recovered somewhat before resuming decline. Despite those long-term declines, though, the school system has continued growing. Total funding has continued growing, and the number of capital assets, buildings, square footage have continued growing. And the report you talk about flags that gulf, that today we've got roughly twice as much space and assets in the district school system in Arizona than are needed given current enrollment levels. We think... The cause of that gap is exactly those formulas that were designed 25 years ago.

• Speaker #1

  I know since COVID, personally as a parent, my perspective on education has changed. But are we seeing those low enrollment rates come from just families doing what's best for them in terms of school choice? Is this private schools, charter schools? With those enrollment rates you just mentioned, do those include charter school figures?

• Speaker #2

  You're sort of getting to the crux of the issue, which is... what happened back in 2008, A, and then what really happened, if you will, after the pandemic. So the long-term trend 2008 on is slow demographic change. First declining birth rates, and now, as of 2022, declining school-age populations. So school-age population in Arizona, the growth rate peaked prior to the Great Recession. Total population of 5 to 17 year olds peaked in 2022, and we've lost five to 17 year olds. ever since. So that simply means there are fewer children total than we anticipated back in the 2000s. But there's a second part of that, which you also allude to. Demographic change alone can't explain the scale of the enrollment gap. It's much larger than the either slowdown or subsequent decline in the number of kids. That is something we call sort of the preference shift. And for sure, many folks picked up on this preference shift during and after the pandemic. But I think there's some evidence that it's been sort of occurring slowly, steadily over time. You asked, were those enrollment figures specific to the districts or they include charters. When Arizona talks about total public K-12 enrollment, we're talking the sum of district and charters combined. They're both in there, which is why I think the district phenomenon specifically has been sort of hiding in plain sight since 2008. Total public K-12 enrollment in Arizona has grown every year since 2008. That didn't start shrinking until 2021. All the growth, though, between 2008 and 2021 was on the charter side. District enrollment peaked way back in 2008. That... is a consequence of the preference shift.

• Speaker #0

  You know, several weeks before the election, we had another inflection point, which was the state judge found that the state side of this formula was not being kept up to the state constitutional standard for a general and uniform school system. How do you see that case fitting into this as a policy matter? Is this an opportunity? Is this a threat? Is this, you know? I mean, the judge obviously is bound by the existing case law.

• Speaker #2

  I'd say clearly, depending on your perspective, it's a threat in the certainly fiscal sense of the word in that the historic response to this, whether it was the litigation back in the 90s or the litigation following the Great Recession and the legislature's decision to suspend certain formula elements, the historical solution to these problems, yes, has been new formulas, but also new funding, right? And new funding comes with new costs at a time when the legislature is already grappling with record high funding and a slowdown in revenue growth, right? So it's a risk from that perspective. And I want to just disclaim at the beginning that I'm certainly not an attorney, and this is just sort of my lay opinion given the data. But what's unequivocally true is the system that was designed in the 90s in response in part to litigation at that time was intended to address in part equity issues. the balance the legislature struck, and this was really a political balance driven by, in many cases, the asks, wants, and desires of the school districts themselves, was to maintain the option for what we're calling the bonds and overrides for sort of local control over their school district funding while still establishing almost a floor, a basic bare minimum that the state would guarantee regardless of whether your voters would want to approve um, um, Approve additional funding, if that makes sense. That was the balance that the legislature tried to strike. It's arguable, and I think the argument is ongoing, whether the legislature succeeded or not. What is inarguably true is the amount of money that's been invested system-wide over the last two decades is far in excess of what enrollment growth alone should have demanded. And the result should be that we have a lot of excess facilities and a lot of facilities We should see it showing up on the quality side. And this is where I think there's a massive data gap that's fueling litigation and public angst and things like that. We don't really have a good sense of the quality of the school facilities in Arizona. We have anecdotal sense. And this is when districts, particular districts with particular issues, call attention to their particular issues, but on sort of a system-wide basis. There's very little sense, in my opinion, of the quality of the facilities. But just looking at the gaps between the enrollment numbers and the funding numbers, to me, as an outsider looking in, that money had to go somewhere. My suspicion is that money has gone to renovating and improving the facilities, not just building more empty buildings. So I think the facilities are probably a lot nicer than we think. What I would like to see is some sort of an inventory, some sort of an objective look at what exactly we have. And what is its quality on an objective and sort of holistic basis? But I think that's missing at the moment.

• Speaker #1

  And what about Prop 123? Does that play a role here? We know voters approved that in, I believe it's 2016. We didn't see it on the ballot this year in 2025. Not sure if or when it's going to come to voters again to consider. But what sort of impact does Prop 123 have here?

• Speaker #2

  Yeah, so for a little bit of background for your listeners, Proposition 123 was itself a solution to another round of litigation. This time, it was litigation related to decisions the legislature made during the Great Recession. There was a funding crisis, a revenue crisis in Arizona during the Great Recession, so there wasn't enough money to meet the state's expenditures. The legislature suspended some elements of the K-12 formula to balance the books. The litigation was over the legality of those suspensions. It was ultimately settled. with the school districts. The settlement required the state to put in a bunch of new and one-time, a combination of new ongoing and one-time monies to sort of compensate them for those recessionary cuts. One of the tools that the state used to pay for that settlement was Proposition 123, which temporarily for 10 years increased distributions from the land trust. As you alluded to, Gina, that had a 10-year sunset date. It is now sunsetting. If the legislature does nothing, which as of now they've done nothing, because the formulas, this is exactly what gave rise to the Great Recession litigation, the formulas are what we call voter protected. It means that the state is sort of constitutionally required to fund these formulas. The expiration of Prop 123 doesn't result in any cuts to the K-12 system. The state must continue to pay the same amount. It'll just shift it from the state's land trust to the state general fund. So the consequence of doing nothing, Gina, is the funding stays exactly the same, but how we pay for it shifts from the land trust to the general fund. The good news is the general fund is much larger today than it was in 2016 when we were settling this lawsuit. So it's much more able to absorb that cost than it was a decade ago. And so I think that status quo is affordable and sustainable. But again, if that's the right call policy-wise is a different question.

• Speaker #1

  We're talking a lot about, you know, the policy, the funding, right? We're talking about the money. But then, to me, what's missing is, well, who's making the decision on where those monies are going to? And how do I have a say in that as a parent, you know, as a resident? And so to me, this is where I think, you know, it's important to get involved with your local governing board. And, you know, as we go through and we see future elections and paying attention to those elections, you can vote on them, but also School's in session right now. Your governing board is probably meeting once a month. Look up those public notices and agendas. Go attend those public meetings. Look at what's on the agenda and have a say in what your local leaders are deciding on how to spend those monies.

• Speaker #0

  The other thing that I would add about what we're trying to do is to put voters in a position where when they go to a school district meeting, they can listen to the content we have and read the materials on our website. And understand some of the bureaucratic shorthand that a school board or a legislator might speak in that doesn't necessarily naturally translate to how regular people talk or think about things, right? So when somebody says a bond, they're probably talking about a building. When somebody says M&O, they're probably talking about something related to personnel or programs. You know, when somebody talks about a state formula, you know, they're talking about, you know, money that's coming. from state taxpayers when somebody talks about, you know, the federal government, you know, where's that money? And because if you're trying to understand why your legislator votes a certain way or what the issues that your school district is wrangling with, it's helpful to at least, if you're going to follow that discussion, have some understanding of the terminology they're using and what that means practically. And we hope that through our website, this podcast, our newsletter You know, all those products are designed to, you know, build up to our role in educating folks about our statewide candidates and election in 2026, where we know that whether it's a candidate election, whether there is something on the ballot or not, you know, voters are going to be thinking about how does this affect my student and how does this affect my school and how does this affect my bottom line. Thanks for listening to Beyond the Bell at AZ. I'm Tom Collins.

• Speaker #1

  And I'm Gina Roberts.