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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
AMENDED
TPT; use tax; education
Purpose
Establishes new revenue distributions for education and the Classroom Site Fund (CSF). Conditions the enactment of this legislation on the outcome of the vote of the people of S.C.R. 1002 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 instead appropriated to the CSF (A.R.S. § 42-5029.02).
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 2020 Estimated CSF Revenues
|
Proposition 301 Sales Tax |
$483,903,100 |
|
Endowment Earnings |
$103,550,100 |
|
Prior Year Carryforward |
$40,163,100 |
|
Total Estimated Revenues |
$627,616,300 |
S.B. 1059 repeals the 0.6 percent TPT and use tax authorized by Laws 2018, Chapter 74, which is contingent upon voter approval of S.C.R. 1002 to levy a 1 percent TPT and use tax beginning July 1, 2021.
The Joint Legislative Budget Committee (JLBC) fiscal note indicates that there will be a shift in costs of $7,000,000 in FY 2022 to the state General Fund (GF) if no other funding source is identified for accountability costs. The state GF impact of repealing the income tax credit may be $0 or a cost of $25,000,000 in FY 2022, depending on interpretations of the relevant statutes (JLBC fiscal note).
Provisions
Distributions
1. Stipulates all monies collected by the 0.6 percent TPT and use tax, or by the 1 percent TPT and use tax proposed by the constitutional amendment, are distributed each fiscal year as follows:
a) $86,280,500 paid monthly to the Arizona Department Education (ADE) to fund basic state aid for additional school days;
b) $7,800,000 paid monthly to ADE to be used for school safety;
c) 82 percent of the amount remaining after the distributions to basic state aid and school safety paid monthly to the CSF;
d) 13.75 percent of the amount remaining after the distributions to basic state aid and school safety paid monthly as follows:
i. $86,469,200 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; and
e) 4.25 percent of the amount remaining after the distributions to basic state aid and school safety paid monthly as follows:
i. $1,500,000 to the trade and workforce development account at each community college district for trade and 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. the remaining monies are distributed to each community college district, provisional community college district and a qualifying Indian tribe with a community college on its own Indian reservation, based on the full-time equivalent student enrollment (FTSE) percentage of the total statewide FTSE in the preceding fiscal year.
2. Deems 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 school district, charter school, community college or university funding sources.
3. 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 specific distribution.
Classroom Site Fund
4. 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) 40 percent for maintenance and operation purposes; and
c) 20 percent for teacher base salary increases and employment-related expenses.
5. Removes requirements that CSF monies be spent for maintenance and operation purposes including assessment intervention programs and teacher liability insurance premiums.
6. Allows CSF monies to be spent for:
a) teacher compensation, including a base pay and performance pay component, 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;
i) school improvement; and
j) transportation.
Trade and Workforce Development Accounts (Trade and Workforce Accounts)
7. Restructures existing revenue distributions for trade and workforce development for a qualified community college district, provisional community college district or a qualifying Indian tribe with a community college on its own Indian reservation, based on the full-time equivalent student enrollment percentage of the statewide FTSE in the preceding fiscal year.
8. Renames a community college district's workforce development account as a trade and workforce development account.
Miscellaneous
9. Establishes, for taxable years beginning January 1, 2021, and ending before January 1, 2042, a credit for mitigating the additional rate increment to the state TPT and use tax rate for education.
10. Conditions the statutory repeal of the 0.6 percent TPT and use tax, and amended revenue distributions for education, on July 1, 2021, on the passage of S.C.R. 1002 at the next general election.
11. Conditions the enactment of revenue distributions for primary, secondary and higher education on July 1, 2021, if the Arizona Constitution is not amended by S.C.R. 1002 at the next general election.
12. Repeals A.R.S. § 42-5029.02 relating to the distribution of revenues collected for education.
13. Makes technical and conforming changes.
14. Becomes effective on July 1, 2021, subject to the provisions of the conditional enactment.
Amendments Adopted by the Education Committee
1. Specifies CSF monies can be spent for teacher compensation base pay and a performance pay component.
2. Adds that CSF monies can be spent for school improvement purposes, rather than accountability purposes.
3. Modifies revenue distributions, including designating $86,280,500 for additional school days and $7,800,000 for school safety programs.
4. Makes technical and conforming changes.
Amendments Adopted by Committee of the Whole
1. Reinserts the credit for the increased TPT and use tax rate for education.
2. Makes technical and conforming changes.
Senate Action
ED 1/28/20 DPA 5-3-1
APPROP 2/6/20 W/D
Prepared by Senate Research
February 25, 2020
JO/gs