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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
education funding; TPT; use tax
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 a resolution 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 $64.1 million 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. 1345 repeals the 0.6 percent TPT and use tax authorized by Laws 2018, Chapter 74. It is contingent upon voter approval of a resolution 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 approximately $7,000,000 in FY 2022 to the state General Fund from expenses currently covered by Proposition 301.
Provisions
Distribution of Revenues
1. Outlines the annual distribution formula for all monies collected from the TPT and use tax, as outlined in the constitutional amendment.
2. Directs 70 percent of the amount generated to be paid in monthly installments to the CSF.
3. Directs 20 percent of the amount generated to be paid in monthly installments as follows:
a) 34 percent to the Technology and Research Initiative Fund; and
b) 66 percent to the Arizona Board of Regents for proportionate distribution to each university based on the number students receiving in-state tuition at that university to subsidize resident student tuition costs.
4. Directs 5 percent of the amount generated to be paid in monthly installments as follows:
a) $48 million to be distributed as follows:
i. $1 million to each community college district’s workforce development account for workforce development programs;
ii. $300 thousand to each provisional community college district for trade and workforce development programs, excluding a community college tuition financing district; and
iii. the remaining monies distributed proportionally, based on the full-time equivalent student count, to each community college district and provisional community college district;
b) $2 million to be distributed as follows:
i. $500 thousand to the treasurer or other designated depository of each qualifying Indian tribe for trade and workforce development programs at each community college on an Indian reservation that is owned, operated or chartered by a qualifying Indian tribe; and
ii. the remaining monies distributed proportionally based on full-time equivalent student count to each qualifying Indian tribe for each community college on an Indian reservation that is owned, operated or chartered by a qualifying Indian tribe.
5. Directs 5 percent of the amount generated to be paid in monthly installments as follows:
a) $25 million to the state General Fund for the cost of the income tax credit;
b) $15 million to the Arizona Department of Education (ADE) for school safety;
c) $7 million to ADE for continued maintenance, operation and evaluation of the Education Learning and Accountability System;
d) $3 million to the Auditor General to report on the use of the appropriated monies by Arizona school districts, charter schools, community college districts and universities; and
e) any remaining monies to the CSF.
6. Specifies the monies distributed are 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 funding sources for a school district, charter school, university or community college.
7. Stipulates if the monies collected are insufficient to maintain outlined amounts, each dollar amount will be reduced proportionally for the following:
a) trade and workforce development programs at community colleges, provisional community college districts and qualifying community colleges on an Indian reservation;
b) costs of the income tax credit;
c) ADE appropriations for school safety and the Education Learning and Accountability System; and
d) reports from the Office of the Auditor General on the use of the appropriated monies
Classroom Site Fund
8. Removes specified distributions from the CSF requiring each school district or charter school to allocate:
a) 40 percent for teacher compensation increases;
b) 20 percent for teacher base salary increases and employment related expenses; and
c) 40 percent for maintenance and operation purposes.
9. Removes the requirement that CSF monies be spent for maintenance and operation purposes including:
a) assessment intervention programs; and
b) teacher liability insurance premiums.
10. Adds requirements that CSF monies be spent for the following purposes:
a) teacher compensation, rather than teacher compensation increases;
b) educational interventions;
c) voluntary full-day kindergarten;
d) the increased cost of additional school days enacted in 2000;
e) student support services;
f) tutoring;
g) character education;
h) school resource officers; and
i) career and technical education.
11. 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.
12. Requires ADE to annually use $86,280 from the CSF to fund basic state aid for schools.
Miscellaneous
13. Conditions the enactment of this legislation on the passage of the constitutional amendment at the next general election contained in S.C.R. _____.
14. Requires Legislative Council staff to prepare proposed legislation conforming statute to the provisions of this act for consideration in the 54th Legislature, First Regular Session.
15. Repeals statute relating to the additional 0.6 percent TPT and use tax beginning in 2021.
16. Repeals statute relating to the distribution of revenues collected for education.
17. Repeals statute relating to a refundable tax credit.
18. Defines terms.
19. Makes technical and conforming changes.
20. Becomes effective on July 1, 2021, subject to the provisions of the conditional enactment.
Prepared by Senate Research
February 15, 2019
JO/gs