What is Prop. 123?
Prop. 123 is a referendum passed by the Legislature in October 2015 and approved by voters in a special election held Tuesday, May 17,2016. Prop. 123 is estimated to generate $3.5 billion over 10 years for Arizona schools. The majority will come from the increased payout of the State Land Trust. Additionally, $625 million will come from the general fund ($50 million for the first five years and then $75 million for the next five years).
Prop. 123 settles the inflation funding lawsuit that the Arizona Supreme Court ruled on in September 2013. It provides a dedicated revenue source for incremental inflation adjustments (as passed by the voters in Prop. 301 in the 2000 election). Schools will receive this funding starting in June 2016.
What is the State Land Trust?
When Arizona became a state, Congress granted land to the state that managed for the purpose of generating revenue primarily for K-12 education. It serves as a long-term savings account for Arizona education. Previously 2.5% of the proceeds were given to K-12 education; Prop, 123 increases that to 6.9% for ten years.
How can Prop. 123 funds be used?
Districts can decide how to use the funding. There are no strings attached to how the funding can be used.
What does this mean for Scottsdale Unified School District?
SUSD received $5 million in fiscal year 2016. This money was distributed to employees as a one-time stipend. Every employee received 3 percent of their salary ($3,311,560) and employees who have been with the District seven or more years received an additional 2.5 percent ($1,654,814).
SUSD continues to receive approximate $1 million per year which is used to help provide competitive salaries to all employees. The additional funding is set to expire June 30, 2025.
What are the Prop. 123 triggers?
There are contingencies in the Proposition language to protect the State Land Trust and the general fund. If the contingency plans are ever needed, the Base Level amount will still be reset to account for inflation. The triggers do the following things:
- Permits the Proposition 301 inflation factor to be suspended for any fiscal year that Transaction Privilege Tax (TPT) and employment growth are between one and two percent. Mandates that the Proposition 301 inflation factor be suspended if TPT and employment growth are less than one percent.
- Allows the Legislature, beginning in FY 2026, to suspend inflation payments and reduce K-12 funding if K-12 accounts for at least 49 percent of state General Fund spending. Stipulates that if it is 49 percent, the Legislature will be able to reduce K-12 spending by the amount that it was inflated in the prior year and if it is 50 percent or more of state General Fund spending, then the Legislature may reduce spending by twice the inflation amount from the prior year.