arizona business and education coalition

2004 Principles of Agreement

School District Budget Capacity | School Capital Finance | Voluntary All-Day Kindergarten
Proposition 301: Performance-Based Pay | Back to Policy Briefs

Arizona's General Fund Budget, 2004

The Arizona Business & Education Coalition (ABEC), a statewide organization of business and education leaders, is committed to a long-term collaboration in support of a superior education for Arizona's K-12 students. ABEC members believe that there is a direct link between a strong K-12 public education system and economic development. ABEC is also committed to sharing responsibility for continuous improvement in student achievement. ABEC recognizes that:

Arizona's continuing general fund shortfall will require very difficult decisions;
Although economic growth is occurring, Arizona continues to experience difficulties; and
Arizona's needs continue to be widespread and include higher education as well as health and human services.
Schools and school districts are held increasingly accountable for student achievement through state and federal laws. While funding for Arizona's school building needs has increased, the increase in funds for school operations continues to lag behind dramatic population growth, the needs that exist in the classroom, and the standards to which Arizona's schools will be held accountable through the federal law, No Child Left Behind.

However, ABEC believes that:

Investing in education is an investment in both the present and the future;
The return on that investment is the foundation for economic growth;
Arizona faces critical challenges as a result of rapid growth, changing demographics and increasing diversity of needs, from culture and language to special education and poverty; Arizona cannot continue to depend on the importation of talent to meet our goals for economic success; we must grow our own.
While funding does not guarantee a school will be successful, just as surely a lack of funding does nothing to promote school success. Maintenance of adequate funding is an essential element to ensure that schools can work toward meeting state academic standards of performance.
Successful businesses invest in continuous improvement, employee training, and research and development to ensure that they are prepared to meet and succeed in the face of new challenges and opportunities, and the state should maintain the same philosophy of investment and expectation for improvement in school and student achievement;
Quality education cannot be achieved by focusing solely on academics. A child who is hungry or abused will not be adequately educated regardless of curriculum, testing, or any other academic strategy.
The K-12 system is the essential element in a P-20 (preschool through workforce preparation) system.

Key conclusions:

K-12 education has historically suffered funding cutbacks when the school finance formula has not been fully funded.
Education and economic development are interdependent. Economic growth is advanced by a well-supported and accountable K-12 public education system. And the education system reaps more funding and reward by the presence of prosperous citizens and businesses engaging in economic activity.
Policy makers, educators, and business leaders must hold each other jointly accountable for improvements in the financial and academic condition of our schools by working proactively to create long-term funding that supports long-term investment in Arizona and its future.

Short Term:

Continue level of funding: Anything less than the current level of funding for 2004-05 denies adequate investment in Arizona's future. Educators must continue to seek efficiencies to see that the maximum dollars are going to the classroom.
Include growth and inflation factors: This current level of investment must support growth and inflation in order to promote continuous improvement.
Consider effects on economic development: Efforts to review or develop current or future funding mechanisms to fully fund the needs of the education system must be pursued consistent with principles of long-term economic sustainability for a diverse business sector.
Identify funding sources and begin the funding of phased-in voluntary all-day kindergarten.
Review Budget Capacity: Modify the current school finance formula to enable appropriate budget capacity for school districts to provide for the elements to meet adequacy in the K-12 system for all Arizona students.

Long Term:

Determine adequacy: Future investments in education should be based on economic data and sound educational research and practice. The state should determine what constitutes an adequate funding level to get a maximum return on its investment.
Revise the School Finance Formula: Arizona's School Finance Formula is complex and more than 20 years old. Review and revise the school finance formula to better reflect capacity needs for the present and the future.
Continue to review Arizona's tax system: To the extent that additional revenues are needed for education, we believe that the tax burden should be shared in an equitable manner by all taxpayers, and not place an undue burden on any one community or constituency. A complete and thorough review and revision of the adequacy and equity issues is in process. ABEC is eager to participate in further discussions and actions as appropriate.

School District Budget Capacity 2004

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ABEC believes that an adequate funding formula is one that includes all of the funds a district needs to cover its costs with a minimal reliance on primary property tax levies to meet costs. Arizona's school funding formula is two decades old and badly in need of revision. Besides being arcane, difficult, and nearly impossible for the general public to understand, it does not give school districts the funds they need to cover routine costs. This has led the formula to be further complicated by a series of overrides which, while masking the true cost of running our public schools, also puts undue pressure on property tax rates.

The "excess utilities" element of the school funding system is due to be phased out in 2009 per Proposition 301, and this will have a dramatic negative effect on school districts' ability to cover M&O costs. ABEC supports the excess utilities position of the Arizona School Administrators (ASA), which calls for the replacement of the current funding provision for utilities (a 1984-85 baseline adjusted for inflation) by a rolling average that takes into account the real utility costs incurred by districts. Utilities funds must be adequate to cover the opening and staffing of new schools, transitioning to modern equipment (e.g. air-conditioning to replace evaporative cooling), and growth. Utilities must be funded in a fair and equitable way.

Regarding administrative costs, ABEC advocates that the greatest effort always be taken to have the maximum funds possible spent in the classroom. ABEC also recognizes that Arizona's administrative costs, according to a report by the Arizona Auditor General, are in line with - in fact below - the national average for other states.

Desegregation funding for school districts must be more transparent and more targeted. It is ABEC's position that school districts should have the funds that they need to comply with federal Office of Civil Rights requirements. However, desegregation funds, where needed, must have appropriate oversights and controls to ensure that the funding goes to the real costs of desegregation programs.

School Capital Finance 2004

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ABEC believes that quality learning cannot occur without quality facilities. While ABEC acknowledges the work that the School Facilities Board and other state agencies have done to bring equity to school construction, there is still work that needs to be done to create a sustainable framework for school capital finance.

Funding responsibility for new facilities construction should, in the long-term, be balanced between local funding sources and the state's general fund. A total reliance on the state's general fund puts too much burden on the general fund and endangers other education funding from the general fund in times of fiscal shortfall.

A dedicated funding source for school capital finance should be created. ABEC believes that a good dedicated funding source would be one that consisted of a county-levied property tax on a statewide basis. The property tax should be one that makes progress toward equity between commercial (25% net assessed value) and residential (10% net assessed value) property tax rates, and should not exacerbate already existing inequities between the commercial and residential property tax rates.

Oversight of capital projects, with an emphasis on equity and strong standards, should remain at the state level. It is ABEC's position, though, that decision-making should be deferred to the local district level. Adjustments for rural school districts should remain in place.

Voluntary All-Day Kindergarten 2004

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ABEC supports a plan to phase in voluntary all-day kindergarten, statewide, beginning with those school districts with the highest percentage of students on the federal free and reduced lunch program to, eventually, every district in the state. All-day kindergarten is foundational to the education infrastructure that Arizona must build if it is to produce the quality workforce of the present and the future.

Concurrently, ABEC supports the adjustment of student attendance calculations to treat kindergarten students enrolled in an all-day kindergarten program as full students; this would include the formula used by the School Facilities Board to determine adequate square-footage allocations, along with all other capital allocations.

There is a wide range of research that shows that all-day kindergarten pays enormous dividends, particularly for students of poverty. Students who attend all-day kindergarten programs show higher levels of literacy, math competency, school attendance, and performance on standardized tests. These students also show lower levels of grade retention, crime, and welfare enrollment throughout their lifetime. In fact, one study has estimated over $80,000 in savings to the state for every enrollee in lower crime, lower welfare rates, and higher levels of education and income.

One of ABEC's primary goals is that all students read at grade level by the third grade. ABEC believes that offering students a voluntary all-day kindergarten setting, particularly students from the highest-risk areas, along with active coordination of efforts between parents, schools, and communities, is among the most effective means of promoting literacy. ABEC recognizes that many school districts already provide these programs without state aid, often at the expense of other programs. Funding for all-day kindergarten programs would allow those districts to re-direct funds to other student needs.

As Arizona builds the workforce of the future, it must take advantage of the best opportunities for investment—those that will provide the highest level of return for the state and for the public it serves. ABEC believes that fully funding phased-in voluntary all-day kindergarten for Arizona is one such opportunity.

While ABEC recognizes that voluntary all-day kindergarten programs will be a significant investment, it is a proven, cost-effective course for Arizona, the benefits of which far outweigh the costs. It is a vision for our state that moves us all in the right direction, beginning with those students who are most in need.

Proposition 301: Performance-Based Pay

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ABEC advocates that Arizona's teachers must be well-prepared, competent, certified in their subject area, and professional. Teachers should be treated as professionals - both in terms of the social esteem the position of teacher holds and in their pay level, in a system of ethics, and through an internally operating, peer-driven system of regulation that holds teachers accountable for their performance. As is true for members of other professions, teachers should have a predictable, steady level of promotion and pay increase based on their performance and experience. Further, it should be expected of teachers that the level of difficulty of their assignments increases with their pay and experience. Too often teachers with the least experience are put in front of some of the most difficult classrooms.

ABEC believes that a performance-based pay (PBP) system must include a threshold minimum of competency to determine if educators are meeting the key criteria that have an impact on student achievement. This includes, but is not limited to, assessments of the achievement of state standards.

Local school districts should take the lead role in determining how performance-based compensation funds are allocated. ABEC recommends that the criteria for Prop 301 funds tied to performance be tightened, and that those districts not in compliance with the strengthened criteria should have appropriate action taken against them.

A performance-based pay system must be aligned to support academic standards and accountability. A substantial percentage of performance-based compensation funds should focus on student achievement as measured by reliable, fair assessments that are aligned with Arizona academic standards. All student data used to determine if students have met these standards must be fair, accurate, valid, reliable, and timely, easily understood and reported.

ABEC supports a performance-based pay system that rewards student success while treating teachers as valued professionals. All stakeholders must have consistent input as to the structure and performance of the PBP model, in order to facilitate continuous improvement. The PBP model should encourage collaboration, cooperation, and equity, encouraging teachers to share successful techniques without feeling that their colleagues are "competitors." Multiple measures of teacher performance should be allowed, including standards-based teacher evaluation, keeping sight of the ultimate goal: increased student performance in meeting state academic standards.

The long-term goal of any PBP plan should be the development of a high-quality system that encourages: continuous teacher development and collaboration; a competitive level of pay to recruit highly qualified graduates to teaching, and a level of reward sufficient to improve teacher behavior and performance. With this in mind, ABEC recognizes that many districts have such programs in place, and encourages sharing of successful models statewide. Any changes to PBP funds associated with Proposition 301 should not affect career ladder criteria or fiscal support to current districts with career ladder programs.

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