Finding school funding: Growing districts struggle to land state money amid changes

When the current school year kicked off at Crismon High School in Queen Creek, students began posting cell phone photos on social media showing hallways and a staircase clogged with students.

The school added an 11th grade this year and the student population hit about 1,700, up from 1,000 the previous year when the school opened its doors for the first time. This type of rapid growth is no surprise to QCUSD officials. After all, with the town’s booming population they call the district one of the fastest growing in the state and they have worked to get voters to approve bond measures to try to keep up with that growth and maintain existing schools.

Ideally, the state is supposed to help all school districts with new school funding. The School Facilities Board was created by the state Legislature in 1998 to fund that construction, as well as provide money for facility maintenance.

However, over the years the funding provided by the board has been depleted by the Great Recession and legislative whims. Plus, changing requirements for funding have made the process of applying for the money more onerous and uncertain for school districts.

A “general and uniform public school system”
Almost 30 years ago, the Arizona Center for Law in the Public Interest filed a lawsuit against the state to force it to follow the Arizona Constitution’s requirement that the Legislature “enact such laws as shall provide for the establishment and maintenance of a general and uniform public school system.”

The center and its fellow plaintiffs reached a settlement with the state in 1998, resulting in the Students Fair and Immediate Resources for Students Today, or Students FIRST legislation “to provide annual funding from the state’s general fund to all school districts to address their school facilities’ needs,” according to a 2019 report from the Arizona Center for Economic Progress.

“In the two decades which have followed, the Students FIRST legislation has been gutted, leading once again to huge differences in funding and quality of school facilities in low property wealth urban and rural communities compared to wealthier areas,” the Arizona Center for Economic Progress report continued. “It has resulted in higher local property taxes and many missed opportunities to create jobs in some of Arizona’s most economically struggling rural communities.”

As a result, in 2017 the Arizona Center for Law in the Public Interest once again filed suit against the state “on behalf of public school districts across the state challenging the state’s failure to adequately fund public schools,” a 2017 press release from the center stated. “The state … transferred its constitutional obligation to fund public schools to local taxpayers. As a result, the school system throughout the state is not ‘uniform’ as the constitution requires.”

The lawsuit is going to court in 2024.

In an interview with the Independent, Arizona Center for Law in the Public Interest Executive Director Danny Adelman said there have been some positive, if minor, changes made by the Legislature that have restored some monies to the SFB, particularly for the Building Renewal Grant fund that provides money to districts to maintain school buildings.

“The negative is it is still not indexed to inflation, so it’s been restored in nominal dollars but in real dollars it’s still only a fraction of what it was 20 years ago,” Adelman said. “There have been some improvements to school construction and that’s positive but with inflation it still is insufficient to build a good school.”

New school facilities
As part of the 1998 settlement, the School Facilities Board would be distributing money to districts from three funds: Building Renewal for maintenance, Emergency Deficiency and New School Facilities. The Independent examined SFB annual reports from 1999 to 2022 to determine how funding for the board has changed over the years.

For fiscal year 1999, the Legislature appropriated $200 million from the state general fund to the New School Facilities Fund. In FY 2002, the state treasurer transferred $250 million from the state general fund to the New School Facilities Fund.

By fiscal year 2003, the state treasurer transferred no money from the state general fund. Instead, the Legislature authorized the board to enter lease-to-own transactions valued at $400 million. But in fiscal year 2006, the Legislature directed the state treasurer to transfer $250 million from the state to the general fund after a state statute prohibited the board from entering any lease-to-own deals. In FY 2006-2007, the Legislature appropriated $250 million for the state general fund for the SFB.

Then the economy crashed and from fiscal year 2008 through fiscal year 2013 the Legislature placed a moratorium on new school construction except for projects already in the lease-to-own pipeline. In fiscal year 2011, the state was able to get back in the lease-to-own business as it had the SFB issue Qualified School Construction Bonds through the federal American Reinvestment and Recovery Act of 2009. The SFB sold $91 million worth of bonds to finance lease-to-own transactions that funded new school construction and expansions.

The moratorium was lifted in fiscal year 2014. However, projects were canceled, and no new ones approved in fiscal years 2014 and 2015. New construction began slowly ramping up in fiscal year 2016 with projects being approved by the Legislature, but the projects were merely a handful compared with the early days of the SFB.

Along with the changes in funding, districts had to contend with changes in requirements to even apply for funds. In 2008, the moratorium was still in place, but the Legislature approved recognizing kindergartners as full students for funding purposes. In 2009, however, kindergartners were reclassified as half-students.

Perhaps the biggest change happened in 2013. Before then, the SFB could award funds for new construction up to three years in advance so schools could be designed, built and opened as needed by the districts. Starting in 2013, a district had to exceed capacity in the current year before the SFB would award funds for new space. In other words, a school would already have to be bursting at the seams with students before a district could could be awarded funding.

And throughout it all, districts had to work with a funding formula based in large part on the number of students enrolled in a school or district every day over a specified time period — the ADM or average daily membership. Determining the ADM is not merely counting heads. The SFB must take into consideration numerous factors including demographic, social and economic profiles from the U.S. Census and American Community surveys; housing completion and sales data; and population, housing and employment projections among other data. The ADM isn’t a blanket number that applies to all districts. Each district’s ADM per school must be calculated, resulting in a complicated process to be eligible for funding.

As complicated as that can be, there are other factors affecting the amount that goes to paying for new schools or maintenance of existing facilities, according to the Arizona Education Association.

The association points to repeated tax cuts as taking a toll on money going to education and school construction as well as legislative priorities such as vouchers, which allow students to take their money to any private school in the state.

“Oftentimes, when the governor and state Legislature do increase school funding, it comes with strings attached tying money to test scores, which we know is not an accurate way to measure student achievement,” the association said.

School bonds
Since the moratorium was lifted, the number of new schools and expansions around the Valley and state has been a trickle of what it was in the early days of the SFB. New projects from fiscal years 2017 to 2021 have been averaging five to six per year for the entire state.

In that period, the fast-growing Queen Creek Unified School District and the Chandler Unified School District collectively received about $159 million for new schools, expansions and land acquisitions. In 2021, QCUSD received $39.7 million to build Crismon High School, which by the start of this school year already needed to be expanded. The district has received funds and is currently constructing phase two of Crismon, which will add a two-story junior high building and 18 classrooms. The addition is set to be completed by July 2024.

Chandler Unified is not applying for new state construction funds this year due to its shrinking enrollment.

The fiscal year 2023 annual report still must be finalized, but Megan Rose, assistant director for statewide communications at the Arizona Department of Administration, told the Independent in an email the SFB has awarded $162 million in new construction and $30.6 million for land acquisition.

Of course, districts can’t predict if their projects will be awarded funds by the SFB, so they are increasingly dependent on bond money. Last year, Queen Creek residents voted down a $198 million school bond measure over five years. And in 2021, voters rejected a $286 million QCUSD bond proposal over 10 years. In June, the QCUSD Governing Board voted to place a $98 million bond for projects over the next five years on the Nov. 7 election ballot.

Those bond rejections have hit multiple school districts across the Valley in recent years, with several districts from around the region planning to have voters decide school construction issues this November.

Adelman of the Arizona Center for Law in the Public Interest said that when voters approve school bonds, districts can be proactive in building or maintaining their schools, but in “districts where they have failed the bond it is just much more difficult.”

“We shouldn’t put our thumb on the scale by making it so they can’t afford good facilities, or they have to take money away from a kindergarten program to fund decent facilities,” Adelman said. “If we’re going to be competitive let’s give the public district schools the resources, they need to compete on a fair playing field. They need that capital money, so even though I wish the state would provide adequate funding for capital, I support pretty much all bond measures because I know how much schools need it.”

Part Two of the Independent’s series on school financing will focus on how the School Facilities Board provides funds for facility maintenance. Part Two will be published in October.