Arizona public schools are $200 million short this month. Here’s why

This month, Arizona’s public and charter schools are $200 million short of their regular state aid money. 

On June 4, Arizona Department of Education (ADE) CFO Tim McCain sent a letter to district and charter school leaders across the state, warning them to “prepare for a potential partial payment” this month.

The letter warned of a $200 million shortage for the “Basic State Aid Payment fund,” which makes statutorily required payments to public and charter schools.

The letter states that “if a budget is not passed, or a separate supplemental appropriation is not approved by June 13th, ADE will not have sufficient funds to make the full June payment” and would “make a partial payment to all districts and charters of approximately 60% of the regular monthly payment.”

The state legislature does not appear to be close to a final budget vote, so this 40% cut to public and charter schools in June is all but certain. 

“We are constantly in a state of fear. We are constantly in this state of chaos of what funding we may or may not get,” said Marisol Garcia, president of the Arizona Education Association, the state’s largest teacher’s union, in a phone call. 

What’s the cause?

The shortage is partly triggered by ballooning Empowerment Scholarship Account (ESA) voucher costs, which are set to surpass $1 billion in the upcoming fiscal year.

“It’s been exploited and grown to a point that…I certainly believe the point of the program is to decimate our public schools,” said Beth Lewis, director of Save Our Schools Arizona, a nonpartisan, pro-public school advocacy group, in an interview.

Any time a state agency or department expects to be underfunded, they have to request supplemental funding from the state budget, which is submitted months in advance.

In this case, the supplemental funding request was partly for the ESA voucher program, at $52 million, due to higher-than-anticipated usage of the voucher program—combined with the lack of limits on the program, said Lewis. 

The shortfall was also triggered by higher public school enrollment, and rising costs for a career and technical education program.

Lewis called the drain the voucher program is placing on the state budget a “one-two punch,” because lawmakers assumed more students would take advantage of the voucher program, and overall public school enrollment would be lower. 

That was not the case, Lewis said. “There’s not enough switchers…and so it continues to be a program that’s heavily utilized by people who were already in private school or home schools, not people leaving public school.”

And, the deficit partly caused by the ESA vouchers is more heavily affecting public schools, because ESA vouchers are funded before public schools, due to its quarterly payment system.

READ MORE: Arizona Republicans want to tie school vouchers to public education funding, jeopardizing Prop 123

And while public schools and charters have to wait for their funding—the ESA voucher program has not experienced any reduced or delayed payments, and probably won’t in the future, Garcia said. 

Without a state budget, it’s difficult to plan hiring numbers and pay scales, what programs can be offered—and it keeps teachers in limbo on their salaries, Garcia said. 

“‘Every time, this time of year, we’re like, ‘Oh, are we getting paid? Are we not getting paid? Do I get a 2% [inflationary] raise? Am I going to lose money?”’ Garcia said.  

Contingent on the state legislature

Paul Tighe, executive director of the Arizona School Administrators, said there are a few scenarios for schools with the delayed or absent payments. 

If the state legislature does an appropriation for the supplemental funding request in their upcoming budget negotiations, the money will be paid, but still delayed, to schools in July as part of the next budget package.

In this situation, the delay won’t be a huge issue for most districts—except those with low cash reserves.  

Larger school districts usually operate with a “rainy day fund” to prepare for situations like this.

For districts that have little savings, they can open a line of credit with a bank—but that adds additional expenses of interest and fees, Tighe said in an interview. 

Most school staff have already been paid, because they are considered 10-month employees—but monthly bills like utilities, pre-purchased curriculum, books, and school supplies, could be affected. 

And, if the legislature does not approve the $200 million supplemental funding request, then schools just won’t receive the money that they had budgeted for, Tighe said. 

Districts like the Isaac School District in Phoenix could be disproportionately affected due to their vulnerable status. 

The district was placed under state receivership earlier this year after it faced a multimillion dollar cash deficit due to the mismanagement of school funds.

In January, the Arizona Auditor General marked the school district among the highest-risk districts for the fifth year in a row, and reported it to have low budget limit reserves—making it highly vulnerable to state funding shortfalls.

Other rural districts, like Antelope Union High School District in Yuma County, McNary Elementary School District in Apache County, and Peach Springs Unified School District in Mohave County, among others, have been marked as high risk by the Arizona Auditor General. 

While this funding shortfall would be much worse had it happened just a few months prior when classes were in session, “it is still definitely going to make a rocky summer for some of these schools,” Lewis said. 

“I don’t think people understand how precarious Arizona schools are situated right now,” Lewis said. “Anybody that’s not thinking about federal cuts while making the state budget is either being intentionally obtuse or not reading the room.”