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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
REVISED
K-12; school funding; revisions
Purpose
Establishes a state student funding formula (SSF formula) which must be used to calculate charter school equalization assistance. Outlines procedures for an eligible school district to elect to use the SSF formula and prescribes the calculation of tax rates for a school district that uses the SSF formula.
Background
The school finance formula entitles school districts to funding in an amount known as the equalization base, which is equal to the sum of the base support level (BSL), transportation support level (TSL) and district additional assistance (DAA). The BSL is calculated by multiplying the statutory per-student base level amount by the district's weighted student count, multiplied by the teacher experience index (TEI). The TEI increases a school district's BSL by 2.25 percent for each year by which the district's average certified teacher experience exceeds the state average (A.R.S. §§ 15-941 and 15-943).
The equalization base for a school district is first funded by local property tax revenues collected from the qualifying tax rate (QTR) levy and then by the state General Fund (state GF). Basic State Aid (BSA) is the amount of state GF monies necessary for a school district to receive the full equalization base amount after accounting for the assumed QTR revenues (A.R.S. § 15-971).
A charter school's equalization base is equal to the sum of the BSL and charter additional assistance (CAA). The BSL calculation for charter schools excludes the TEI increase. Charter school formula costs are funded only by the state GF (A.R.S. § 15-185).
The Joint Legislative Budget Committee (JLBC) fiscal note estimates that, if all 25 currently eligible school districts that could financially benefit opt into the SSF formula for FY 2025, state GF costs would increase by $26.2 million. If the additional 24 school districts that could financially benefit from allowing overrides and bonds to expire and opting into the SSF formula do so, costs would increase to $118.5 million over time. However, JLBC states that the impact is highly uncertain because the election outcomes cannot be predicted in advance and the number of districts that would benefit may change over time (JLBC fiscal note).
Provisions
SSF Formula
1. Establishes the SSF formula to be calculated by adding the BSL, including the TEI, to the state additional assistance (SAA).
2. Sets the SAA per student count amounts at:
a) $2,025.29 for preschool programs for children with disabilities and kindergarten through grade 8; and
b) $2,360.44 for grades 9 through 12 for charter school and for school districts that elect to use the formula.
Charter Schools
3. Determines that charter school equalization assistance must be calculated according to the SSF formula, rather than by adding the BSL and CAA.
4. Removes the exclusion of TEI from charter school base support level calculations.
5. Removes the specified per-student charter additional assistance amounts of:
a) $1,985.58 for preschool programs for children with disabilities and kindergarten through grade 8; and
b) $2,314.16 for grades 9 through 12.
6. Removes the requirement that a charter school that was a district school in the prior year and has a sponsor that is not a school district must reduce the charter school's BSL by an amount equal to the BSL and CAA received in the current year for pupils who were enrolled in the traditional public school in the prior year.
School Districts
7. Determines equalization assistance for a school district that elects to use the SSF formula to include SAA, rather than DAA.
8. Authorizes a school district that provides instruction to students in any combination of kindergarten programs and grades 1 through 12 to use the SSF formula to determine the school district's district support level, if the school district does not have an override in place and either:
a) does not owe any debt service payments on any Class A or Class B Bond; or
b) has four or fewer remaining fiscal years in which it is scheduled to make payments on a Class A or B Bond.
9. Authorizes the governing board of an eligible school district for which the estimated total school district primary property tax rate will be less than or equal to the prior year rate, to:
a) vote at a governing board meeting to use the SSF formula; or
b) call an election to submit to the voters the question of whether the school district should use the SSF formula.
10. Authorizes the governing board of an eligible school district for which the estimated total school district primary property tax rate will be greater than the prior year rate, to call an election to submit to the voters the question of whether the school district should use the SSF formula.
11. Requires the question submitted to the voters to describe the tax rate associated with using the SSF formula and the estimated cost of that tax rate for the owner of a single-family home valued at $200,000.
12. Specifies that a school district authorized to use the SSF formula by a vote of the electors or the school district governing board (governing board) to use the SSF formula, and not the standard formula, beginning the next fiscal year following the authorization.
13. Precludes a school district using the SSF formula from:
a) receiving DAA;
b) applying for or receiving funding from the Division of School Facilities or School Facilities Oversight Board, except funding for new school facilities; or
c) using any other source of property tax-generated funding, including funding generated through bonds or overrides or for desegregation costs, the transportation revenue control limit, small school district budget adjustments, tuition loss or improving adjacent ways.
14. Directs a governing board that decides by a majority vote to revert to the standard formula to determine the question by calling an election.
15. Requires, for a governing board that calls an election on the question of whether to use the SSF formula or the question of whether to revert to the standard formula, that the question be submitted to a vote at an election that is held:
a) on the first Tuesday after the first Monday in November; and
b) in the same manner as other school district elections.
16. Authorizes a school district in which a majority of the qualified electors who vote on the question vote to no longer use the SSF formula to use all other available funding authorized by law in the fiscal year following the election.
17. Prohibits a school district from submitting a question for an override or class A or class B bond in the same election as a question to opt out of the SSF formula.
18. Redefines the district support level as the base support level, for a school district that elects to use the SSF formula.
19. Redefines revenue control limit as the base revenue control limit for a school district that elects to use the SSF formula.
20. Specifies that school district does not include a career technical education district for the purposes of the authorization to elect to use the SSF formula.
Taxation
21. Sets the tax year 2023 QTR for a school district that uses the SSF formula at:
a) $2.0559 for a high school district or common school district within a high school district that does not offer instruction in high school subjects; and
b) $4.1119 for a unified school district, common school district not within a high school district or a common school district within a high school district that offers instruction in high school subjects.
22. Specifies that, for a school district that uses the SSF formula and is ineligible for equalization assistance, the minimum qualifying tax rate (MQTR) calculation is based on the applicable QTR for a school district that uses the SSF formula.
23. Requires the county school superintendent, at the time of levying the MQTR, to levy, for a school that uses the SSF formula:
a) a rate that would result in a levy equal to the amount not captured by the QTR as a result of property subject to the government property lease excise tax;
b) following the county school superintendent's recommendation and county board of supervisors' (county BOS) approval and if the school district is ineligible for state aid, a rate that would result in a levy equal to any legal amount not levied in the current year as a result of underestimated average daily membership or as a result of a judgment by the court of a property's full cash value; and
c) on the county school superintendent's recommendation and county BOS approval before adoption of property tax rates, a rate that would result in a levy equal to any separate state cash deficit from the prior fiscal year resulting from an anticipated or actual deviation in the property tax roll, including resolutions or judgments according to property tax appeals and correcting property tax errors.
Miscellaneous
24. Requires an empowerment scholarship account to be funded in an amount equal to 90 percent of the amount that would be calculated for that student under the SSF formula, rather than 90 percent of the BSL and additional assistance for that student if the student were attending a charter school.
25. Makes technical and conforming changes.
26. Becomes effective on the general effective date.
Revisions
· Updates the fiscal impact statement.
Prepared by Senate Research
February 24, 2023
LB/slp