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WHAT HAPPENED TO SCHOOL CAPITAL FINANCE

IN 2013?

(Judy Richardson)

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Remember Students FIRST? ! School capital finance system ! Enacted in July 1998 ! Response to AZ Supreme Court ruling that the

previous capital finance system was unconstitutional ! Premise – the State will provide funding to insure:

l  All school district facilities meet and are able to maintain state standards

l  New schools are provided in time to meet enrollment growth

! The Great Recession eliminated most of the funding ! Legislation in 2013 made some major changes

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Soft Capital Allocation (SCA)

! Statute repealed ! Formula amount added to Capital Outlay Revenue

Limit (CORL) formula ! New combined limit renamed District Additional

Assistance (DAA) ! DAA can be spent for capital or M&O

l  Eliminates funding dedicated to short-term capital items to meet State standards

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Soft Capital Allocation (SCA)

! For FY 2014, statewide DAA reduced by the amount needed to reduce equalization assistance by $238,985,500 l  Reduction equal to the combined CORL & SCA

reduction in FY 2013 l  Total spending reduction is greater when cuts to non-

state aid districts are added l  Governor wanted to make reductions permanent in

statute l  Future funding levels uncertain

l  Formula capital funding is now less than in 1998

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Building Renewal

! Building Renewal (BR) Statute was repealed l  FY 2014 BR formula would have been $260,009,700 l  Repeal included BR formula and district BR Fund l  Best to spend any remaining BR money by end of

year u To eliminate any uncertainty due to repeal

u Prevent legislators from claiming more BR funding is not needed

!  $16.7 million appropriated for BR Grants for FY 2014 l  About $1.6 million currently available for new projects

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Building Renewal

! BR grants are limited l  Only academic buildings l  Only projects needed to meet minimum standards

! BR grants suppress State costs because most districts don’t apply for all their needs l  Use local money or ignore needs

! SFB wants project-based BR funding based on useful life of building systems l  This would cost the State more because all needs

would be identified

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New Construction

! Previous moratorium on new construction was NOT continued

!  $672,000 appropriated for new construction in FY 2014; limited to facilities approved before 1/1/13

! Formula modified to require a district to be over capacity in the current school year in order to qualify for land and new construction funding in the following fiscal year

! Timeline requires overcrowding for two to four years before new school is available

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New Construction ! This timeframe violates statutory minimum square

footage standards unless the district has locally-funded space

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Bond Limits

!  To compensate for inadequate State funding, bond limits were increased l  Permanent increase in the statutory bond limit from 10%

to 20% of SAV (USD) and from 5% to 10% (ESD or UHSD)

l  The increase applies to bonds approved before the effective date of the act

!  Attempted referendum to repeal was not successful

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What Hasn’t Changed?

! SFB continues to operate ! Minimum state standards are still in place

! Emergency Deficiency Corrections Fund continues l  Few projects qualify l  No appropriation – funded by “extra” money from

New School Facilities Fund - only $200,000 is currently available

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Summary of Changes to Students FIRST

! Building renewal grant provisions and amount of appropriation are inadequate

! New construction formula is inadequate ! Formula funding for equipment is inadequate ! No source of funding for preventive maintenance ! Bond limits are still less than they were in 1998 ! Total state and local funding available for capital is

less than in 1998

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AFTER STUDENTS FIRST NOW WHAT?

(Tim Hogan)

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Changes to Students FIRST

1. Repeal of building renewal formula 2. New construction formula

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What can be done?

Objective is new legislation. Two strategies to do that. 1.   Legislation

2.   Litigation Not mutually exclusive or even necessarily sequential

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Not as simple as going to court and saying that the legislature changed and/or repealed Students FIRST.

!  We did that already and it doesn’t work. Roosevelt v. Hull (2003).

Legislature always had the authority to not fund Students

FIRST or even to repeal it. But the legislature must comply with the Arizona Constitution. Even prior to this year’s changes to Students FIRST, the

legislature was violating the Arizona Constitution.

What can be done?

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Because the Roosevelt case was closed in 1998 when Students FIRST was enacted, we have to start a new case.

Must show that the legislature is violating its constitutional duty to “provide for the establishment and maintenance of a general and uniform public school system...” Arizona Constitution, Article 11, Section 1.

What can be done?

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Because of the Roosevelt cases, we at least know what a “general and uniform” public school system means:

1.   The school finance system itself cannot cause gross disparities and/or

2.   The state must insure that school districts have the buildings, facilities and equipment necessary and appropriate to support the state’s academic standards.

How do we establish a constitutional violation?

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We have to show that school districts and students are harmed by the state’s failure.

Our burden will be to show school districts do not have the buildings, facilities and equipment necessary and appropriate to support the state’s academic standards.

How do we establish a constitutional violation?

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That means that we must show that there are buildings and facilities that do not meet the minimum adequacy guidelines of the School Facilities Board and that some school districts lack the resources to bring those buildings and facilities up to standard.

How do we establish a constitutional violation?

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Lack of Resources

Must show that we’ve exhausted available funds. ! That means:

1.   Must apply for and exhaust the building renewal grant fund.

2.   Must show that the District Additional Assistance is not sufficient to meet needs.

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How do we obtain this information?

! Survey to all school districts. ! Detailed information from select school districts.

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Dual Strategy

Use survey results to form the basis for a dual strategy. ! Legislative

! Litigation Need to identify a dedicated funding source regardless

of proposal.

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HOW DO WE ADAPT?

(Jeremy Calles)

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Additional Options to Consider

! Business and Community Relationships ! Advocacy

! Revenue Generation ! Collaboration

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Business and Community Relationships

!  In San Francisco, Salesforce.com founder donates $2.7 Million and leaves the checkbook open http://www.sfgate.com/education/article/Tech-titan-s-high-grade-gift-to-S-F-middle-4874292.php

!  In Kyrene: l  Capital Items Donated l  Kyrene Power Challenge

l  School Sponsored

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Advocacy

! AASBO, ASBA, ASA ! GPEMC – Dianne Smith

! EFRG – John Kaites, Meaghan Dell’Artino ! Your Legislative Team!

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Revenue Generation ! School Plant Fund

l  Cell Towers l  Auction Old Equipment l  Closed Schools/Vacant Land

! Community Education l  Youth Enrichment l  Summer & Breaks

! Print Shop l  Reduce Costs l  Generates Revenue l  Increased Morale

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Collaboration

! Reach Out to Colleagues ! Learn from the Success & Failures of Others

! More to come…

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Questions???