Arizona districts face potential funding losses under Prop. 320

By Stacy Mantle
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Arizona voters will decide in November whether certain school districts should be required to direct at least 60% of their operational spending to direct instructional expenses, a proposal supporters say would put more education dollars into classrooms and district officials warn could force difficult tradeoffs among services that support students. 

Prop. 320, referred to the ballot by the Legislature as Senate Concurrent Resolution 1032, would apply to districts with at least 7,500 students or districts operating in a county with at least 500,000 residents.

The Arizona Auditor General would be responsible for defining both "operational spending" and "direct instructional expenses". 

Districts currently below 60% would not have to reach the threshold immediately. Beginning in fiscal year 2027-28, they would have to increase the share devoted to direct instructional expenses by at least one-half of one percentage point annually until reaching 60%. 

The proposal came as Arizona's statewide instructional-spending percentage has fallen to 52.1%, according to the Auditor General's fiscal 2025 school district spending analysis. 

What counts as instruction remains unresolved

One of the central questions surrounding the measure is what the Auditor General ultimately will count as a direct instructional expense. 

That issue was a focus of a Sept 8 Litchfield Elementary School District Governing Board presentation by Superintendent Carter Davidson and Chief Financial Officer Michael Vaughn. The district emphasized that its analysis was intended to explain potential effects and was not an endorsement or opposition to the measure. 

Under the Auditor General's current reporting system, "instruction" is narrower than overall classroom spending. Classroom spending also includes student support and instructional support. 

Vaughn told the board that expenses falling outside the instruction category should not automatically be considered unrelated to students.  

“When we talk about spending that's outside the auditor general's instruction category, that does not mean the spending is unrelated to students or unrelated to educating students,” Vaughn said.

He noted that student support can include nurses, psychologists, speech services, occupational and physical therapy, behavior support and attendance; while instructional support can include coaches, curriculum, professional development, assessment, special education, English learner support and educational technology.

The distinction matters because Prop. 320 does not define “direct instructional expenses.” Instead, it directs the Auditor General to establish the definition.

Litchfield Elementary board member Scott Mikes said that uncertainty concerned him.

“We work very hard to budget and work our budget with what we know, and here we are talking about something that we don't know, trying to budget for that,” Mikes said.

He also questioned the basis for the 60% threshold and described “direct instruction” as a vague term until the state provides a definition.

During the presentation, a board member separately asked Vaughn whether he knew how lawmakers arrived at 60%. “The proposition itself simply just names 60% as the requirement,” Vaughn responded. “I personally have not come across any document or explanation as to where the 60% came from.”

Litchfield offers a look at potential impact

Using the Auditor General's existing methodology as an example, Litchfield spent about $61.6 million of about $107 million in operational spending on instruction in fiscal 2025, or about 57.5%.

That compares with a peer-group average of 51.8%, according to the district presentation.

Vaughn cautioned that Litchfield's 57.5% figure should not be interpreted as its future Prop. 320 compliance percentage because the Auditor General has not yet determined what will qualify under the measure.

For districts that do need to shift spending, finding large areas to reduce may not be simple.

Litchfield's administrative spending is characterized as very low compared with peers and its transportation spending as low, Vaughn told the board. Student-support spending includes services tied to disabilities and other legal obligations, while plant operations pays for such expenses as utilities, custodial work, maintenance, safety and insurance.

“There may not be one large category that can simply be reduced without creating an impact somewhere else,” Vaughn said.

About 81% of Litchfield's maintenance and operations expenditures were salaries and employee benefits in fiscal 2025, he said.

Material changes in the spending mix, Vaughn said, could ultimately involve “staffing levels, staffing models, or service delivery.” Possible options could include changes to transportation, instructional coaching and professional development, custodial and maintenance services, administration or some student-support spending, although Vaughn repeatedly stressed those were examples rather than recommendations.

Noncompliance could reduce Classroom Site Fund money

Prop. 320 would use the Classroom Site Fund as its enforcement mechanism.

If the Auditor General determines a district failed to comply in the preceding fiscal year, the district's Classroom Site Fund allocation would be reduced. The Classroom Site Fund currently helps pay for expenses including teacher compensation, class-size reduction, teacher development and student support services.

The proposition's language establishes escalating reductions of 25% after the first year of noncompliance, 50% after two years, 75% after three years and 100% after at least four years, subject to limited waivers from the superintendent of public instruction.

Litchfield's analysis points to a potential complication in using that fund as the penalty.

In fiscal 2025, Vaughn said, 99.96% of the district's Classroom Site Fund expenditures were classified as instruction.

Current Arizona Department of Education reports annualize Litchfield's fiscal 2027 Classroom Site Fund at about $10.1 million. Paradise Valley Unified School District's current annualized amount is about $25.9 million, while Agua Fria Union High School District's is about $12.6 million.

The reports =that the figures are annualized based on actual year-to-date revenue and statewide weighted student counts and can change during the fiscal year.

Using those current figures only to illustrate the possible scale of the penalties, a 25% reduction would equal approximately $2.5 million for Litchfield, $6.5 million for Paradise Valley and $3.1 million for Agua Fria.

Those are not projected losses. Any actual reduction would depend on passage of the measure, future district spending, whether a district failed to meet its annual compliance requirement and the amount of its Classroom Site Fund allocation at that time.

Supporters say more money should reach instruction

Supporters of the proposal argue Arizona districts should be required to direct a larger percentage of available resources toward classroom instruction rather than other operational costs.

The proposal emerged after years of reports showing Arizona's instructional-spending percentage below historical levels. The measure establishes both a target and an enforcement mechanism rather than simply encouraging districts to increase the percentage.

The measure does not increase the overall amount of state funding available to schools. Instead, it sets requirements for how covered districts allocate operational spending.

District board members raise concerns

Litchfield Elementary board member Michele Wallace said during the Sept. 8 meeting that voters need to understand how the spending categories work before deciding the measure.

“The public needs to be educated on exactly what they are going to be voting for here, because I believe this proposition is very misleading to the voter,” Wallace said.

She said the 60% framing could leave voters with the impression that the remaining 40% is being improperly spent when those dollars may support other services involved in educating students.

Wallace explicitly urged voters to oppose the proposition.

Another issue raised by the board is that the new spending requirement would apply to covered school districts but not charter schools, even though both can receive Classroom Site Fund money.

The district's presentation said charter schools would continue to compete with districts for students while operating under different Prop. 320 spending requirements.

Board President Melissa Zuidema questioned that distinction.

“If this was going to be good for students, we would do this for all students,” she said, arguing the requirement should also apply to charter schools if its purpose is to improve spending on students.

Prop 320 will appear on Arizona's Nov 3 ballot. 

Editor’s note:   A grant from the Arizona Local News Foundation made this story possible. The foundation awarded 15 newsrooms to pay for solutions-focused education reporters for two years. Please submit comments at yourvalley.net/letters or email them to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.

Stacy Mantle
Education Solutions Reporter

smantle@iniusa.org

Meet Stacy
Stacy Mantle is joining the team at Independent Newsmedia, Inc. as an Education Solutions journalist, thanks to a grant from the Arizona Community Collaborative. She has a long history in education that ranges from teaching junior high and middle school to developing curriculum and standards-based assessments.

Community: A longtime advocate for animal welfare, Stacy is deeply involved in rescue efforts and volunteers with several nonprofit organizations.

Random Fact: Once upon a time, she shared her home with a pet coyote and two wolf hybrids. The experiences were wild enough to become the subject of her first book!

Education: She holds a BA in English with a minor in Political Science, a Post-baccalaureate in Secondary Education, and an MBA with a emphasis on Marketing.

Hobbies: In her spare time, Stacy writes fast-paced urban fantasy novels, crafts small-batch artisan soap, and is always up for hiking or off-roading through the Arizona wilderness with her husband of 23 years.