Maricopa County Superior Court Judge Katherine Cooper ruled on Friday, that the state must pay $317 million in inflation funding that should have been allocated to schools in the 2013-2014 school year. Cooper found that the voters’ approval of Prop 301 in the year 2000 required lawmakers to increase state aid to public schools each year to compensate them for inflation.
The Judge found:
The argument is that the Legislature is only required to increase the base level by two percent. If they do that, they have complied with §15-901.01. Funding in excess of two percent over the prior year is “supplemental.” Per the State, supplemental funding is never adjusted for inflation. In fact, it should serve as a credit against future inflation adjustments. In short, the Legislature complies with §15-901.01 as long as the base averages two percent increases each year. Any funding over that is not adjusted for inflation.
For example, n FY 2005-06, the Legislature increased the base level by 3.2%. It appropriated these additional funds to cover the cost of a longer school year (i.e., more days of education), including teacher salary increases. In 2006-07, 2007-08, etc., they continued to set the base level to cover these additional costs.
Once again, the language and intent of §15-901.01 fail to support the State’s argument. Nothing in the statute suggests that, if the Legislature increases the base level by more than two percent, it can skip the inflation adjustment for that year. The statute does not say that, if there is an increase exceeding two percent, the inflation adjustment applies only to part of that appropriation. Finally, the statute does not provide for a credit to offset the inflation adjustment in a subsequent year.
Past funding levels do not change the operation of the inflation formula. The base level is the base level as set in §901(B)(2). The inflation formula is stated separately in §15-901.01. Whatever the base level is, the same formula applies. Neither §15-901(B)(2) nor §901.01 creates any exception to this calculation. Each year, the required adjustment applies to the dollar amount set by the Legislature for that year.
Again, legislative history demonstrates that the Legislature knew that so-called “supplemental” funding would be added to the base level and, as a result, adjusted annually for inflation. As part of Prop 301, in addition to inflation adjustments, voters approved a longer school year along with a tax increase to pay for it. (Arnold Declaration, para. 23-26.) The increase was to cover “the increased cost of basic state aid under section 15-971 due to added school days and associated teacher salary increases…” 2000 Ariz. Sess. Laws, ch. 1 at §38 (5th Spec. Sess.). Starting with FY 2005-06, the funds were to be transferred to the Department of Education. Instead, the Legislature placed these funds into the base level and has continued to do so since then.
Two points. First, the tax dollars placed in the base level were not added to adjust for inflation. Voters approved this money be raised and spent to provide more days of education for students. Id. It is disingenuous for the State to argue that, in correcting the current base level, money for additional fixed expenses should not be adjusted and/or should count toward the State’s required inflation adjustment.
Second, more school days means increased recurring costs for school districts. These are the kind of costs that the base level is intended to address. When the Legislature chose to disburse additional funding via the base level, they presumably knew that §15-901.01 would require annual inflation adjustments to the total base level. The court must “presume that the legislature, when it passes a statute, knows the existing laws.” Daou v. Harris, 139 Ariz. 353, 357, 678 P.2d 934, 938 (1984). They made this decision starting with FY 2005-06. They had been making the required adjustments since FY 2001-02. The court must conclude that the Legislature intended to protect this additional funding against inflation by adding it to the base level. Otherwise, school districts would have been burdened with cost of a longer school year with no mechanism to offset the effect of inflation.
Judge Cooper noted that the “Amended Complaint does not state a claim for monetary relief for FY 2009-10. It is not clear to the court why given Cave Creek’s position on remand that there was no adjustment made for 2009-10. While the Supreme Court’s decision is retroactive, the Court did not address Cave Creek’s specific claims for relief. Those claims are before the trial court. Given Arizona’s notice pleading requirements, the court must conclude that a claim for relief for FY 2009-10 is not pled. Nothing in this decision, however, bars Cave Creek from moving to amend its Amended Complaint.”
Arizona’s Superintendent of Public Instruction John Huppenthal threw Arizona lawmakers under the bus while continuing his practice of ignoring the realities of Arizona’s more dysfunctional school districts in a statement released immediately after the ruling, “Today’s ruling in favor of restoring funding for Arizona schools honors what voters approved in 2000. Our public schools were hit especially hard by the recession and I look forward to working with the Governor and Legislature to implement this decision. When these funds become available, I strongly encourage school governing boards to take a thoughtful and deliberative look at how to best allocate the funding to ensure the investment made by Arizona tax payers directly impacts student academic success and provides more Arizona children a world-class education.”