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Updated Sep 26, 2013 - 3:58 pm

Arizona high court: Schools must get inflation boost

PHOENIX -- The Arizona Legislature must give schools an annual funding increase, even in lean years, to account for inflation, the state Supreme Court ruled Thursday.

The high court upheld an appellate court decision that said the voter-approved law raising sales taxes and directing lawmakers to make annual school funding adjustments is covered by the Voter Protection Act.

The decision means schools, which say they lost an estimated $250 million in inflation adjustments in the three budget years before the appeals court ruling, are guaranteed the yearly funding boosts again. The Legislature added extra money in this year's budget to cover the adjustment as the state appealed the decision.

The 2000 ballot measure known as Proposition 301 raised the state sales tax by 0.6 percent and required the Legislature to adjust school funding by about 2 percent per year to allow for inflation. The law said it would apply to base funding, transportation costs and other special funds.

The Legislature went along until the budget crunch of 2010, when it funded only an increase in transportation and not basic school funding. Lawmakers pointed to the use of the word "or" in the law to show they could decide against funding every part of the education budget.

The Supreme Court upheld the lower court's finding that materials given to voters and the legislative history of the law showed the Legislature must fund all parts.

"When you have a unanimous decision in the Court of Appeal, followed by a unanimous decision in the Supreme Court, I think it's pretty clear that when the voters pass a proposition the Legislature is bound by those," said Timothy Ogle, executive director of the Arizona School Boards Association, which participated in the lawsuit.

Ogle said the funding that was cut was just the basic "sustenance" for the schools.

"This does not really even touch anything having to do with school reform on increased accountability that schools have been involved with," he said.

Republican Rep. John Kavanagh of Fountain Hills said the Legislature was relying on the actual wording in the proposition when it funded only the transportation portion and always intended to resume funding all parts when the economy improved.

The state included $81 million in new funding in this budget year's education funding because of the appeals court ruling, Kavanagh said. An additional $77 million is expected in fiscal year 2015, which starts July 1, followed by $100 million in each of the following two years.

But the mandate from the Supreme Court will blow a hole in a projected budget deficit in fiscal year 2017, he said.

"What was going to be a quarter billion (dollar) structural deficit in '17 has now grown to a half a billion,' he said. "The economy's coming back, it's just coming back very slow. This speeding up of education funding will ultimately slow returns (to pre-recession levels) in other areas of government."

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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