SB1092 - 512R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-977, Arizona Revised Statutes, is amended to read:

START_STATUTE15-977. Classroom site fund; definitions

A. The classroom site fund is established consisting of monies transferred to the fund pursuant to section 37‑521, subsection B, and section 42‑5029, subsection E, paragraph 10 and sections 15‑991.01, 15‑992 and 15‑994. The department of education shall administer the fund. School districts and charter schools may not supplant existing school site funding with revenues from the fund. All monies distributed from the fund are intended for use at the school site. Except as provided in subsection O of this section, each school district or charter school shall allocate forty per cent of the monies for teacher compensation increases based on performance and employment related expenses, twenty per cent of the monies for teacher base salary increases and employment related expenses and forty per cent of the monies for maintenance and operation purposes as prescribed in subsection H of this section. Teacher compensation increases based on performance or teacher base salary increases distributed pursuant to this subsection shall supplement, and not supplant, teacher compensation monies from any other sources. The school district or charter school shall notify each school principal of the amount available to the school by April 15 of each year. The district or charter school shall request from the school's principal each school's priority for the allocation of the funds available to the school for each program listed under subsection H of this section. The amount budgeted by the school district or charter school pursuant to this section shall not be included in the allowable budget balance carryforward calculated pursuant to section 15‑943.01.

B. A school district governing board must adopt a performance based compensation system at a public hearing to allocate funding from the classroom site fund pursuant to subsection A of this section. Beginning in school year 2014‑2015, individual teacher performance as measured by the teacher's performance classification pursuant to section 15‑203, subsection A, paragraph 38 shall be a component of the school district's portion of the forty per cent allocation for teacher compensation based on performance and employment related expenses.

C. A school district governing board shall vote on a performance based compensation system that includes the following elements:

1. School district performance and school performance.

2. Individual teacher performance as measured by the teacher's performance classification pursuant to section 15‑203, subsection A, paragraph 38. Beginning in school year 2014‑2015, the individual teacher performance component shall account for thirty-three per cent of the forty per cent allocation for teacher compensation based on performance and employment related expenses.

3. Measures of academic progress toward the academic standards adopted by the state board of education.

4. Other measures of academic progress.

5. Dropout or graduation rates.

6. Attendance rates.

7. Ratings of school quality by parents.

8. Ratings of school quality by students.

9. The input of teachers and administrators.

10. Approval of the performance based compensation system based on an affirmative vote of at least seventy per cent of the teachers eligible to participate in the performance based compensation system.

11. An appeals process for teachers who have been denied performance based compensation.

12. Regular evaluation for effectiveness, which shall comply by fiscal year 2014‑2015 with section 15‑203, subsection A, paragraph 38.

D. A performance based compensation system shall include teacher professional development programs that are aligned with the elements of the performance based compensation system.

E. A school district governing board may modify the elements contained in subsection C of this section and consider additional elements when adopting a performance based compensation system. A school district governing board shall adopt any modifications or additional elements and specify the criteria used at a public hearing.

F. Until December 31, 2009, each school district shall develop an assessment plan for its performance based compensation system and submit the plan to the department of education by December 31 of each year. A copy of the performance based compensation system and assessment plan adopted by the school district governing board shall be included in the report submitted to the department of education.

G. Monies in the fund are continuously appropriated, are exempt from the provisions of section 35‑190 relating to lapsing of appropriations and, except as provided in subsection O of this section, shall be distributed as follows:

1. By March 30 of each year, the staff of the joint legislative budget committee shall determine a per pupil amount from the fund for the budget year using the estimated statewide weighted count for the current year pursuant to section 15‑943, paragraph 2, subdivision (a) and based on estimated available resources in the classroom site fund for the budget year adjusted for any prior year carryforward or shortfall.

2. The allocation to each charter school and school district for a fiscal year shall equal the per pupil amount established in paragraph 1 of this subsection for the fiscal year multiplied by the weighted student count for the school district or charter school for the fiscal year pursuant to section 15‑943, paragraph 2, subdivision (a). For the purposes of this paragraph, the weighted student count for a school district that serves as the district of attendance for nonresident pupils shall be increased to include nonresident pupils who attend school in the school district.

H. Except as provided in subsection O of this section, monies distributed from the classroom site fund shall be spent for the following maintenance and operation purposes:

1. Class size reduction.

2. Teacher compensation increases.

3. AIMS intervention programs.

4. Teacher development.

5. Dropout prevention programs.

6. Teacher liability insurance premiums.

I. The district governing board or charter school shall allocate the classroom site fund monies to include, wherever possible, the priorities identified by the principals of the schools while assuring that the funds maximize classroom opportunities and conform to the authorized expenditures identified in subsection A of this section.

J. School districts and charter schools that receive monies from the classroom site fund shall submit a report by November 15 of each year to the superintendent of public instruction that provides an accounting of the expenditures of monies distributed from the fund during the previous fiscal year and a summary of the results of district and school programs funded with monies distributed from the fund. The department of education in conjunction with the auditor general shall prescribe the format of the report under this subsection.

K. School districts and charter schools that receive monies from the classroom site fund shall receive these monies monthly in an amount not to exceed one‑twelfth of the monies estimated pursuant to subsection G of this section, except that if there are insufficient monies in the fund that month to make payments, the distribution for that month shall be prorated for each school district or charter school. The department of education may make an additional payment in the current month for any prior month or months in which school districts or charter schools received a prorated payment if there are sufficient monies in the fund that month for the additional payments. The state is not required to make payments to a school district or charter school classroom site fund if the state classroom site fund revenue collections are insufficient to meet the estimated allocations to school districts and charter schools pursuant to subsection G of this section.

L. The state education system for committed youth shall receive monies from the classroom site fund in the same manner as school districts and charter schools. The Arizona state schools for the deaf and the blind shall receive monies from the classroom site fund in an amount that corresponds to the weighted student count for the current year pursuant to section 15‑943, paragraph 2, subdivision (b) for each pupil enrolled in the Arizona state schools for the deaf and the blind. Except as otherwise provided in this subsection, the Arizona state schools for the deaf and the blind and the state education system for committed youth are subject to this section in the same manner as school districts and charter schools.

M. Each school district and charter school, including school districts that unify pursuant to section 15‑448 or consolidate pursuant to section 15‑459, shall establish a local level classroom site fund to receive allocations from the state level classroom site fund. The local level classroom site fund shall be a budgetary controlled account. Interest charges for any registered warrants for the local level classroom site fund shall be a charge against the local level classroom site fund. Interest earned on monies in the local level classroom site fund shall be added to the local level classroom site fund as provided in section 15‑978. This state shall not be required to make payments to a school district or charter school local level classroom site fund that are in addition to monies transferred to the state level classroom site fund pursuant to section 37‑521, subsection B and section 42‑5029, subsection E, paragraph 10.

N. Monies distributed from the classroom site fund for class size reduction, AIMS intervention and dropout prevention programs shall only be used for instructional purposes in the instruction function as defined in the uniform system of financial records, except that monies shall not be used for school sponsored athletics.

O. Monies in the classroom site fund that are transferred to the fund pursuant to sections 15‑991.01 and 15‑992 must be distributed to school districts on a per pupil basis and used for educational enhancements. These monies must be held in a separate trust fund account designated as the classroom site fund trust fund account, and the superintendent of public instruction shall administer these monies as trustee. The state treasurer shall accept, separately account for and hold in trust any monies deposited in the state treasury, which are considered to be trust monies as defined in section 35-310 and may not be commingled with any other monies in the state treasury except for investment purposes. On notice from the superintendent of public instruction, the state treasurer shall invest and divest any trust fund account monies deposited in the state treasury as provided by sections 35-313 and 35-314.03, and monies earned from investment must be credited to the trust fund account. Surplus monies, including any unexpended and unencumbered balance at the end of the fiscal year, do not revert to the state general fund. The school districts in this state are the beneficiary of the trust. All monies in the classroom site fund trust fund account must be spent as the superintendent of public instruction directs to carry out this subsection.

O. P. For the purposes of this section:

1. "AIMS intervention" means summer programs, after school programs, before school programs or tutoring programs that are specifically designed to ensure that pupils meet the Arizona academic standards as measured by the Arizona instrument to measure standards test prescribed by section 15‑741.

2. "Class size reduction" means any maintenance and operations expenditure that is designed to reduce the ratio of pupils to classroom teachers, including the use of persons who serve as aides to classroom teachers. END_STATUTE

Sec. 2. Title 15, chapter 9, article 5, Arizona Revised Statutes, is amended by adding section 15-977.01, to read:

START_STATUTE15-977.01. Arizona K-12 education fund

The Arizona K-12 education fund is established consisting of monies generated by the qualifying tax rate determined pursuant to section 41-1276, subsection B, except for one hundred fifty million dollars of the monies generated by sections 15‑991.01 and 15‑992, the state equalization assistance property tax rate prescribed in section 15‑994 and monies appropriated from the state general fund for basic state aid and additional state aid for schools. The department of education shall administer the fund. Monies in the fund are continuously appropriated, are exempt from the provisions of section 35-190 relating to lapsing of appropriations and are annually distributed to school districts in the form of basic state aid and additional state aid. END_STATUTE

Sec. 3. Section 15-991.01, Arizona Revised Statutes, is amended to read:

START_STATUTE15-991.01. Tax levy for property not located in a school district

A. The board of supervisors of each county, at the time of levying other taxes, shall annually levy a tax on property that is not located in a school district. The tax levy shall be at a rate equal to one‑half the qualifying tax rate prescribed in section 15‑971, subsection B, paragraph 2, per one hundred dollars of assessed valuation used for primary property taxes. The tax shall be levied and collected in the same manner as general county taxes on the property. The tax levy provided for in this section is not subject to title 42, chapter 17, articles 2 and 3. The monies received pursuant to this section shall be transmitted by the county treasurer to the state treasurer to be deposited in the state general fund to aid in school financial assistance Arizona K‑12 education fund established by section 15‑977.01, except that the state treasurer shall annually deposit a total sum of one hundred fifty million dollars levied pursuant to this section and section 15‑992 in the classroom site fund established by section 15‑977.

B. The reduction in taxes prescribed in section 15‑972 applies to taxes levied pursuant to this section on residential property, except that the state shall not make the payments prescribed in section 15‑972, subsection H for this reduction in taxes.

C. This section does not apply to territory that was previously unorganized but that is currently part of a school district that is joined pursuant to section 15‑445. END_STATUTE

Sec. 4. Section 15-992, Arizona Revised Statutes, is amended to read:

START_STATUTE15-992. School district tax levy; additional tax in districts ineligible for equalization assistance; definition

A. The board of supervisors of each county shall annually levy, at the time of levying other taxes, levy school district taxes on the property in any school district in which additional amounts are required, which shall be at rates sufficient to provide the additional amounts. No delinquency factor for estimated uncollected taxes may be included in the computation of the primary tax rate for school district taxes. No local property taxes may be levied for any deficit in the classroom site fund. The taxes shall be added to and collected in the same manner as other county taxes on the property within the school district. The amount of the school district taxes levied upon on the property in a particular school district shall be paid into the school fund of such the school district, and the county treasurer shall transmit the monies that are generated by the qualifying tax rate determined pursuant to section 41‑1276 and the state equalization assistance property tax levy pursuant to section 15‑994 to the state treasurer for deposit in the Arizona K‑12 education fund established by section 15‑977.01.

B. At the same time of levying taxes as provided in subsection A of this section, the county board of supervisors shall annually levy an additional tax in each school district that is not eligible for equalization assistance as provided in section 15‑971 in an amount determined as follows:

1. Determine the levy that would be produced by fifty per cent of the applicable qualifying tax rate, prescribed in section 15‑971, subsection B, per one hundred dollars assessed valuation.

2. Subtract the amount determined in section 15‑971, subsection A from the levy determined in paragraph 1 of this subsection. This difference is the additional amount levied or collected as voluntary contributions pursuant to title 48, chapter 1, article 8, except that if the difference is zero or is a negative number, there shall be no levy.

C. Monies collected pursuant to subsection B of this section shall be transmitted to the state treasurer for deposit in the state general fund to aid in school financial assistance Arizona K‑12 education fund established by section 15‑977.01, except that the state treasurer shall annually deposit a total of one hundred fifty million dollars levied pursuant to this section and section 15‑991.01 in the classroom site fund established by section 15‑977.

D. The additional tax prescribed in subsection B of this section is considered to be primary property tax for purposes of section 15‑972, subsection B, except that this state is not required to make the payments prescribed in section 15‑972, subsection H for these reductions in taxes.

E. For the purposes of this section, "assessed valuation" includes the values used to determine voluntary contributions collected pursuant to title 9, chapter 4, article 3 and title 48, chapter 1, article 8. END_STATUTE

Sec. 5. Qualifying tax rate changes; phase in

Notwithstanding sections 15‑991.01 and 15‑992, Arizona Revised Statutes, as amended by this act, the qualifying tax rates on property that is not located in a school district and on property in a school district that is not eligible for equalization assistance are the following amounts in the following fiscal years:

1. In fiscal year 2013‑2014, fifty per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

2. In fiscal year 2014‑2015, sixty per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

3. In fiscal year 2015‑2016, seventy per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

4. In fiscal year 2016‑2017, eighty per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

5. In fiscal year 2017‑2018, ninety per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

6. In fiscal year 2018‑2019 and continuing each fiscal year thereafter, one hundred per cent of the applicable qualifying tax rate prescribed by section 15‑971, subsection B, Arizona Revised Statutes.

Sec. 6. Qualifying tax rate monies transmitted to the classroom site fund; phase in

Notwithstanding sections 15‑991.01 and 15‑992, Arizona Revised Statutes, as amended by this act, the county treasurers in this state shall transmit a portion of the monies received from levying the qualifying tax rate on property to the state treasurer for deposit in the classroom site fund established by section 15‑977, Arizona Revised Statutes, that total the following amounts in the following fiscal years:

1. In fiscal year 2013‑2014, zero dollars.

2. In fiscal year 2014‑2015, thirty million dollars.

3. In fiscal year 2015‑2016, sixty million dollars.

4. In fiscal year 2016‑2017, ninety million dollars.

5. In fiscal year 2017‑2018, one hundred twenty million dollars.

6. In fiscal year 2018‑2019 and continuing each fiscal year thereafter, one hundred fifty million dollars.

Sec. 7. Intent

It is the intent of the legislature to:

1. Simplify and improve the current system for funding elementary and secondary education in this state.

2. Reduce restrictions on the use of monies by school districts.

3. Eliminate disparities in per pupil funding.

4. Increase total funding for pupils who enroll in school districts in this state.

5. Establish a new K-12 education fund for the purpose of providing transparency in education funding.

6. Generate a new qualifying tax rate to eliminate disparities in per pupil funding between school districts that have adopted budget overrides and school districts that have not adopted budget overrides.

Sec. 8. Requirements for enactment; two-thirds vote

Pursuant to article IX, section 22, Constitution of Arizona, this act is effective only on the affirmative vote of at least two-thirds of the members of each house of the legislature and is effective immediately on the signature of the governor or, if the governor vetoes this act, on the subsequent affirmative vote of at least three-fourths of the members of each house of the legislature.

Sec. 9. Conforming legislation

The legislative council staff shall prepare proposed legislation conforming the Arizona Revised Statutes to the provisions of this act for consideration in the fifty‑second legislature, first regular session.