Arizona’s schools are once again staring down a funding cliff and the culprit isn’t just political gridlock — it’s a decades-old formula called the aggregate expenditure limit.
Passed by voters in 1980, the spending limit was intended as a budgetary guardrail. It caps how much Arizona’s public school districts can spend each year, even if the Legislature has already approved those funds, such as those from Proposition 123, which increases the distribution from state trust land funds for education, or other sources.
The cap is based on student enrollment and inflation, but with a fixed baseline from 1980 — a time when overhead projectors and chalkboards dominated classrooms and school safety wasn't part of the general fund and long before Arizona school districts experienced huge amounts of growth.
Today’s classrooms look much different. Districts fund smart boards, mental health support, armed security and technology that wasn’t even imagined in 1980. But local school officials content the spending limit hasn’t kept pace.
The consequences
Unless the Legislature votes to override the limit with a two-thirds majority in both chambers — something it has done the past two years — districts are legally prohibited from spending all their approved budgets.
In fiscal year 2023, failure to waive the expenditure limit would have forced schools to slash 17% of their operating budgets. That would have impacted teacher salaries, halted after-school programs and eliminated new textbooks already purchased.
“Arizona’s schools need the assurance that their funding, which the state Legislature has already appropriated, won't be cut or become a bargaining chip during the crucial last months of the school year,” said Rebecca Gau, executive director of Stand for Children Arizona. “The outdated aggregate expenditure limit leaves that question up in the air every year. We hope the Legislature will waive the AEL in the budget and begin to prioritize a long-term fix rather than continually kicking the can down the road.”
The political divide
If the Legislature doesn't act to reform or repeal the AEL, any new funding mechanism — whether through Proposition 123 extensions, general fund boosts or school choice expansions — risks being functionally useless to public district schools.
"Without significant legislative action, the problems with the AEL calculation will continue in the future," said Chuck Essigs, director of governmental relations at Arizona Association of School Business Officials. "At a minimum, the legislature needs to override the AEL limit each year when the state budget is approved, so school districts know they will have authorization to spend all of their approved budget amounts."
Critics argue such a combination violates both policy logic and the Arizona Constitution, which prohibits bundling multiple constitutional changes into a single ballot measure. While education advocates have called for repealing or modernizing the AEL, conservative lawmakers remain cautious — or outright opposed.
“Education funding has exploded to historic highs in the last decade,” said Sen. Jake Hoffman, R-Queen Creek. “The AEL is taxpayers’ last line of defense against runaway government spending in this area of the state budget.”
Sen. J.D. Mesnard, R-Chandler, has pushed a broader proposal to pair a permanent teacher salary increase with constitutional protections for school choice programs. However, this makes Mesnard’s proposal internally inconsistent as it promises more money, but ignores the constitutional cap that prevents schools from using it.
The spending limit only applies to district schools, any across-the-board teacher pay increases risk being blocked for districts — while charters and private school ESAs remain exempt.
A broken formula
The AEL's core issue is it's based on 1980 spending levels. The Arizona Association of School Business Officials has called the formula outdated, pointing out it doesn’t account for weighted student funding or modern educational needs.
Since charter schools, private schools and ESAs are notably exempt from the AEL, the bill creates what some call a double standard in how education funding is governed in the state.
What reform could look like
Extending or expanding State Land Trust distributions without fixing the spending limit would still restrict how much districts could spend.
Any serious education funding fix in Arizona must deal with both the revenue side (like Proposition 123) and the spending cap together or schools will remain underfunded in practice, no matter what the ballot says
Fixing the expenditure limit permanently would require voter approval, either through a ballot referral from the Legislature or a citizen initiative. These options include:
- Resetting the baseline year from 1980 to a current fiscal year;
- Tying the formula to real-time cost-of-living metrics;
- Eliminating the AEL entirely and replacing it with a modern accountability system.
Polling shows that voters support a fix. But legislative consensus remains elusive, especially with partisan divides over school choice, ESA vouchers and budget priorities.
The bigger picture
Education advocates also are eyeing a more permanent fix to Proposition 123, which temporarily increased the state land trust distribution to public schools from 2.5% to 6.9%. That bump expires this month and efforts to craft a replacement collapsed in the 2025 session.
If the Legislature doesn’t act, education groups are preparing a clean citizen initiative for 2026 — one that restores the 6.9% rate and distributes funds on a per-pupil basis, leaving decisions to individual schools.
What comes next
For now, Arizona schools are once again waiting — for the next vote, the next negotiation, the next waiver.
"It is time to ask for voter approval to either repeal the AEL or to have a modern formula for the AEL," said Essigs. "Finally, is the AEL even needed since Arizona school district budgets are already limited by a legislative formula?"
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 send your comments to AzOpinions@iniusa.org. We are committed to publishing a wide variety of reader opinions, as long as they meet our Civility Guidelines.
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