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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
AMENDED
TPT; use tax; education
Purpose
Establishes new revenue distributions for education and the Classroom Site Fund (CSF) subject to an amendment to the Arizona Constitution. Conditions the enactment of this legislation on the affirmative vote of the people of S.C.R. 1001 at the next general election.
Background
Proposition 301 was approved by voters in November 2000 and established a 0.6 percent transaction privilege tax (TPT) and use tax that was set to expire in mid-2021. Laws 2018, Chapter 74 extended this 0.6 percent TPT and use tax beginning July 1, 2021, and ending June 30, 2041, with the same distribution of revenues as Proposition 301, except the $64,100,000 distributed for school facilities bond debt was appropriated to the CSF (A.R.S. § 42-5029).
The CSF provides additional funding to public schools from Proposition
301 and K-12 endowment earnings. Each school district or charter school
distributes the CSF as follows: 1) 40 percent for teacher compensation
increases based upon performance and employment-related expenses; 2) 20 percent
for teacher base salary increases and employment related expenses; and
3) 40 percent for maintenance and operation purposes (A.R.S.
§ 15-977).
Currently, CSF monies must be spent for maintenance and operation purposes as follows: 1) class size reduction; 2) teacher compensation increases; 3) assessment intervention programs; 4) teacher development; 5) dropout prevention programs; and 6) teacher liability insurance premiums (A.R.S. § 15-977).
FY 2019 Estimated Classroom Site Fund Revenues
|
Proposition 301 Sales Tax |
$435,277,400 |
|
Endowment Earnings |
$103,425,500 |
|
Prior Year Carryforward |
$60,250,200 |
|
Total Estimated Revenues |
$598,953,100 |
S.B. 1080 repeals the 0.6 percent TPT and use tax authorized by Laws 2018, Chapter 74. It is contingent upon voter approval of S.C.R. 1001 which amends the Arizona Constitution to levy a 1 percent TPT and use tax beginning July 1, 2021.
According to the Joint Legislative Budget Committee, due to the restructuring of the CSF, there will be a shift in costs of $7,000,000 in FY 2022 to the state General Fund from expenses currently covered by Proposition 301.
Provisions
Distribution of Revenues
1. Stipulates all monies collected, as outlined in the constitutional amendment, are distributed each fiscal year as follows:
a) 75 percent paid monthly to the CSF with;
i. $86,280,500 paid to ADE to fund basic state aid; and
ii. $1,500,000 to the Auditor General (OAG) to report on the use of appropriated monies by school districts, charter schools, community college districts and universities;
b) 20 percent paid monthly as follows:
i. $78,000,000 to the Technology and Research Initiative Fund with a two percent annual increase starting in FY 2023;
ii. the remaining monies distributed to the Arizona Board of Regents (ABOR) to be distributed proportionally to each university based on the number of students receiving in-state tuition to subsidize resident student tuition costs;
c) 5 percent paid monthly as follows:
i. $1,500,000 to the workforce development account in each community college district for workforce development programs;
ii. the following outlined amounts to each provisional community college district and a qualifying Indian tribe with a community college on its own Indian reservation, except for community college tuition financing districts, based on full-time equivalent student count:
|
Full-time equivalent student count |
Distributed amount |
|
Between 101 and 249 |
$100,000 |
|
Between 250 and 499 |
$250,000 |
|
Between 500 and 749 |
$500,000 |
|
Between 750 and 899 |
$1,000,000 |
|
At least 900 |
$1,500,000 |
iii. and the remaining monies are distributed proportionally to each community college district, provisional community college district and qualifying Indian tribe based on the full‑time equivalent student enrollment (FTSE) percentage of the total statewide FTSE in the preceding fiscal year.
2. Requires school districts, charter schools, community college districts and universities to cooperate and provide all necessary information and data to the OAG.
3. Requires the monies collected to be distributed in addition to any other appropriation, transfer or allocation of public or private monies from any other source and prohibits the monies from supplanting, replacing or causing a reduction in other school district, charter school university or community college funding sources.
4. Specifies if the monies collected are insufficient to appropriate the outlined dollar amounts, each dollar amount will be reduced proportionally based on the collected monies for that area.
5. Conditions the enactment of this legislation on the passage of the constitutional amendment at the next general election contained in S.C.R. 1001.
Classroom Site Fund
6. Removes requirements for school districts and charters to allocate the following amounts from the CSF:
a) 40 percent for teacher compensation increases, based on performance and employment‑related expenses;
b) 20 percent for teacher base salary increases and employment-related expenses; and
c) 40 percent for maintenance and operation purposes.
7. Removes requirements that CSF monies be spent for maintenance and operation purposes including:
a) assessment intervention programs; and
b) teacher liability insurance premiums.
8. Adds requirements that CSF monies be spent for the following purposes:
a) teacher compensation instead of teacher compensation increases;
b) educational interventions;
c) voluntary full-day kindergarten;
d) student support services;
e) tutoring;
f) character education;
g) school safety;
h) career and technical education; and
i) accountability purposes.
9. Removes the transfer of funds to the CSF, from the 0.6 percent TPT and use tax, set to begin on July 1, 2021, that was authorized by Laws 2018, Chapter 74.
Miscellaneous
10. Repeals A.R.S. § 42-5010.01 relating to the additional 0.6 percent TPT and use tax beginning in 2021.
11. Repeals A.R.S. § 42-5029.02 relating to the distribution of revenues collected for education.
12. Repeals A.R.S. § 43-1072.02 relating to a refundable tax credit.
13. Makes technical and conforming changes.
14. Defines terms.
15. Becomes effective on July 1, 2021, subject to the provisions of the conditional enactment.
Amendments Adopted by Committee
1. Requires ADE to annually use CSF monies for basic aid for schools.
2. Makes a technical change.
Amendments Adopted by Committee of the Whole
1. Modifies CSF distributions by:
a) reinserting the distribution for class size reduction;
b) eliminating the distributions for the increased cost of additional school days and school resource officers; and
c) adding distributions for school safety, career and technical education and accountability purposes.
2. Modifies revenue distributions from the 1 percent TPT and use tax as follows:
a) increases, from 73 percent to 75 percent, monthly distributions to the CSF, and distributes the monies as follows:
i. $86,280,500 annually, paid in monthly installments, to ADE to fund basic state aid for the additional school days; and
ii. $1,500,000 annually, paid in monthly installments, to the OAG for reports on the use of the appropriated monies;
b) changes, from 22 percent to 20 percent, the monthly distribution to ABOR by designating:
i. $78,000,000 to the Technology and Research Initiative Fund and, beginning in FY 2023, increased by 2 percent each year; and
ii. the remaining monies distributed to ABOR to be distributed proportionally to each university to subsidize resident student tuition costs;
c) changes the 5 percent monthly distributions as follows:
i. $1,500,000 to the workforce development account for workforce development programs at each community college district;
ii. establishes outlined amounts to each provisional community college district and each qualifying Indian tribe with a community college on its reservation based on full-time equivalent student count; and
iii. directs the remaining monies to community college distributions as outlined.
3. Specifies if the collected monies are insufficient for the outlined amounts, there will be a proportional reduction based on the collected amounts for each designated area.
4. Makes technical and conforming changes.
Senate Action
ED 1/22/19 DPA 5-3-0
Prepared by Senate Research
March 4, 2019
JO/gs