Accelify Blog

Arizona’s Public-School Funding Still Battered by Recession (AZ)

March 30, 2011

For the first time in two decades, Arizona is facing two, possibly three, consecutive years of declines in basic per-student funding for K-12 schools.

The Great Recession battered the state’s take from sales, property and income taxes and public-land sales, causing Arizona to chop its per-student funding, hike the sales tax and patch in with federal stimulus aid. Basic funding slipped in fiscal 2010 and 2011.

The stimulus money will vanish in 2012, likely forcing further budget cuts.

The state is trying to shore up K-12, but already it has dropped support of all-day kindergarten, cut funding for classroom equipment, and stopped kicking in money to maintain school buildings. Schools are making up for losses with property taxes and other federal money, yet still have laid off staff, trimmed salaries and raised class sizes.

The question that lingers for many schools and parents: Will A rizona’s funding support for K-12, perennially among the weakest in the nation, rebound to the levels of even a few years ago?

Many educators see signs of chronic frugality ahead. The economic recovery is only inching forward, and population growth, which brings new per-student funds to schools, has slowed. Laws are being floated to put in place more cost-saving approaches for K-12, such as offering more online education and graduating students sooner out of high school.

Arizona K-12 schools are looking for ways to survive, and succeed, with less money.

The pain of adjustment, however, is not being shared equally among the state’s 227 school districts and 510 charter schools. Schools are struggling in different ways and to different degrees.

To illuminate the issues, The Arizona Republic examined some typical financial situations playing out in traditional school districts in the Valley and outside Tucson.

Some Arizona districts have trimmed their budgets because voters in their communities decided to stop paying extra school property taxes.

Others are suffering declining enrollment, which causes revenue from per-student state funding to drop even as many of their fixed costs remain.

Schools that serve mainly poor families enjoy additional federal aid. But it comes with restrictions, and the money can’t always be used where it’s needed most.

Others are in good financial shape and are preparing for any eventual drops in enrollment and state funding.

Whatever their situation, all are hoping the state’s economic tide shifts for the better in the next several years. The demands for impro ved academic performance are only accelerating.

"Standards are higher for what we expect of a high-school graduate, but you wrestle with that at the same time you see your dollars being limited," said Gene Dudo, the Glendale Union High School District’s finance administrator.


Make or break

When schools lose students, they also lose per-student state funds while overhead costs, such as air-conditioning, food service and transportation, remain steady.

The Paradise Valley Unified School District grew this year by about 120 students, a small number but the first growth in six years. The recession has helped.

"A lot of our housing became much more affordable, and people want to be in this district," Assistant Superintendent Tom Elliot said about the northeast Valley district. This means its budget will grow a bit from last year and offers hope that in coming years it can fill its classrooms, operate more efficiently and avoid closing some schools.

Other districts haven’t seen a halt in their slide.

In west-central Phoenix, the Alhambra Elementary School District, which is 70 percent Latino, has lost 1,000 students, 6.5 percent of its enrollment, since 2007. Superintendent Karen Williams doesn’t blame the recession. She blames a 2007 state law that permits fining businesses for hiring illegal immigrants and the subsequent rancorous debate over immigration around the state. Williams says many parents moved out of Arizona.

"When that conversation, those guidelines, came into play, our enrollment started to decrease," Williams said.

But one of the district’s 15 schools is an exception: Alhambra Traditional School, which is K-8, is at capacity and has a waiting list of students from across the Valley. Half of the school’s students are from outside the district. Families seek out the 28-year-old alternative school because of its exceptional reputation, intensive curriculum, disciplined environment and required parent involvement.

It would seem smart for the district to convert more schools into the traditional model and start growing again.

But it’s not that simple.

Federal money makes up 24 percent of the Alhambra district’s budget, a relatively high proportion. The reason is the district’s high poverty rate: 90 percent of Alhambra’s students are eligible for free or reduced-price lunch. But federal money can’t be used to support specialty schools, such as Alhambra Traditional, that enroll many kids outside the district who aren’t poor.

The district cannot afford to create another such school using only the money it gets from the state, Williams said.

Federal money allows the district to pay for high-end learning programs and teacher training, but it can’t be used to replace state funds. When Williams builds her budget, hires teachers and pays for supplies and utilities, she uses only state money.

Without stimulus dollars next year and with a declining enrollment, Alhambra will shed 60 teaching positions, increase class size and freeze teacher and staff pay.


Voters grow wary

More and more, "overrides," or extra property taxes, are becoming critical for districts to improve or maintain quality. But more and more, voters are giving the taxes a thumbs-down.

In Maricopa County, for instance, 50 of its 57 school districts get revenue from overrides to help pay teachers, buy technology and keep nurses and librarians.

"It’s now something almost needed to be competitive," said Chuck Essigs of the Arizona Association of School Business Officials.

In November 2009, 20 of 36 override votes failed in the Valley. In November 2010, six of 16 overrides failed, and several others, including in Deer Valley and Peoria Unified, were only narrowly approved.

Override failures often force districts to cut budgets and rethink their outreach to voters.

In the Vail Unified School District southeast of Tucson, Superintendent Calvin Baker preached his management creed for two decades: Give a community excellence and innovation, and that community will support its public schools.

But in November, the superintendent’s faith was shaken. Voters said no to an override for the first time in 17 years.

"It’s a very difficult time," Baker said. "The biggest adjustment we’ve had to make is, frankly, an emotional one."

Vail was the first district to open its own charter schools and an all-laptop high school. The state has labeled its 17 schools excelling. Its schools have waiting lists, and no independent charter has opened its door to compete with the district.

"T hen boom – taxpayers said no," Baker said.

Baker has no management magic to avoid laying off 45 teachers next school year, reducing pay for teachers and staff, increasing class sizes and cutting the number of music, art and physical-education classes. District enrollment was flat this year, so Vail enrolled more out-of-district students to keep classrooms full and running efficiently. It will grow next school year by about 2 percent, down from the 4 to 6 percent it saw each year up until two years ago.

Three years ago, the state approved money that the district can use to build a new school if it is confident the school will be needed when growth restarts. While it seems irresponsible not to accept the cash, some people in the district cannot comprehend why a district could lay off teachers at the same time it is building.

"It’s hard to explain," Baker said. "It seems like it’s in conflict."

Vail has not yet determined if it will ask voters for an override again in November. If it doesn’t or if voters say no again, Baker envisions stripping down courses in his four high schools to offer only state-required core classes. That would mean eliminating advanced courses that students need to prepare for college, such as second-year Spanish and Advanced Placement courses. He already is talking to Pima Community College about providing teachers and college-prep classes on Vail’s campuses, but those students will have to pay tuition.

"If the cuts continue to come, something has to give," Baker said.

Bonds: Maintaining buildings

Except for emergency funds, the Le gislature hasn’t put money in the school-building renovation and repair fund for three years. That means school districts must rely on voter approval to sell bonds in order to pay for maintaining campuses and offices, whether renovating older schools or repaving parking lots.

When districts sell bonds, they take on debt and interest payments. Lawmakers restrict the amount of debt districts can hold, based on a percentage of the assessed value of all the property within a district.

As property prices have plummeted, so has the amount of money that schools can generate through bonds.

The problem has become acute in the Glendale Union High School District.

The district believes its academic success can be attributed partly to having nine smaller neighborhood high schools. It also believes those nine campuses provide many, and so far free, extracurricular activities that keep students engaged in their schools. They provide students more opportunities to be involved in sports, band or debate clubs. But maintaining nine schools is expensive.

"We believe in small schools, and small schools have been supported by our community," said Dudo, the finance administrator. "We’re asking for bond funds in order to address the needs of those schools."

The district relies on bond sales to repair and renovate the nine schools. Its last bond sale was in 2003, the money has been spent, and the district’s buildings are in need. Glendale Union must get voters’ permission to sell bonds. It is addressing health and safety issues at its schools but doesn’t have the money to improve any buildings, Dudo said.

The most crucial needs for reconstruction and renovations a re at Greenway and Thunderbird high schools. In the past, the district’s bond sales have never reached its debt cap of 5 percent of assessed property value, but the plummeting value of the district’s property means it could get close next time, Dudo said.

"This time we may go out for the most we can, relative to where property values are," Dudo said. But "we’re trying to keep the impact to the average property owner to $25 to $27 a year."

What recession?

There are some school districts that have not suffered much from the recession.

In Chandler Unified, while overall student enrollment was flat in recent years, the district still has more students in its elementary grades than in its high schools. That gives it a growing amount of cash until 2017 if elementary enrollment stays level or grows, said Joel Wirth, the district’s chief financial officer.

"Our student growth pattern hasn’t been that much different than we’ve expected," Wirth said. It may be a little less because of slower growth and housing sales, "but we were pleasantly surprised," Wirth said.

He said Chandler has long known that growth will stop one day and has money-making ideas for when that day comes.

For example, the district has a $25 million "rainy day" fund it has built over the past 30 years for tough financial times. The district could charge fees to students participating in athletics but hasn’t needed to yet.

Chandler voters agreed to a bond sale in November and an override in 2008. But the district has neve r reached its override tax cap, and it could ask voters to raise their property taxes a little higher. It hasn’t yet.

"Chandler’s one of the lucky districts," Wirth said.


A way out for some

Arizona and other states are turning to online classes as a way to reduce costs.

For a decade, online courses have been popular with parents who home-school their children and can help them stay focused on the work. Researchers say only a small group of disciplined K-12 students can independently succeed in self-directed online courses.

For schools, the popular approach is "hybrid" or "blended" online learning, which involves K-12 courses that combine live teaching, perhaps for three classes a week, with online learning, perhaps for the other two classes.

Limiting the time students spend working with teachers and textbooks frees teachers to take on more students and can save districts the cost of replacing textbooks every five to seven years.

In 2009, Arizona law allowed any school in the state to offer online courses. The state so far has approved 28 online programs. Lawmakers give schools 85 to 95 percent of per-student funding for students who take online-only courses. A state Senate bill would require the State Board of Education to create a hybrid learning model for all schools and allow schools to be paid for students who successfully complete online courses, even if they are not physically at the school.

The stumbling block is the high upfront costs, such as designing the curriculum, ensuring Internet access and training teachers to work with the technology. Some districts can’t afford to make the change rapidly.

Paradise Valley Unified views online learning as the best way to survive in a future of slower growth and less cash. It has used override money over the past decade to buy technology and train teachers on how to use it in the classroom. Now, it’s poised to provide full online courses to families in and out of the district. About 7,000 students in the district attend dozens of charter and private schools or are home-schooled by their parents, said Elliot, the assistant superintendent.

"I think we can get some of those students back by having a strong online curriculum," Elliot said.

Alhambra’s Williams brushes off all the talk about the benefits of online classes. The district has been ahead of many others in adding technology and training teachers to use digital tools, such as interactive whiteboards. But Williams is not putting time or money into online curriculum.

"We know the importance of technology in our classrooms and exposing students to technology," Williams said. "But they don’t have it in their homes. Our families don’t have the Internet. They don’t own computers."