A PRIMER (draft)

The public elementary and secondary schools of Arizona are governed by the Arizona Constitution and Title 15 of the Arizona Revised Statutes (A.R.S.).

The legislature has required that the Arizona Department of Education and the state's Auditor General interpret Title 15 and design the state's Uniform System of Financial Records (USFR) which is used in maintaining local school district financial records and preparing reports. Two USFR manuals exist, one for school districts and one for charter schools. The USFR prescribes the accounting system and includes a detailed description of the legally established funds. The USFR and Memorandums are available to download from the Auditor General's site (www.azauditor.gov). The USFR includes a calendar, chart of accounts and other valuable information.

In 1980-81 the Arizona Legislature refined the school finance system to provide equal dollars per weighted pupil for school district operations through a balancing of the local qualifying property tax rate and State and County equalization assistance. This concept, commonly referred to as the "equalization formula" allowed school districts throughout the State of Arizona to experience similar "effort" in raising educational dollars for their students irrespective of the property valuations within their boundaries. This equalization formula is utilized in funding a district's Revenue Control Limit (RCL), Capital Outlay Revenue Limit (CORL), and its Soft Capital Allocation.

In 1994, the Arizona Supreme Court ruled that the state's statutory formula for funding school facilities and equipment violated the Arizona Constitution. A four-year struggle to create a new capital finance system ended July 9, 1998 when the legislature passed and approved Students FIRST (Fair and Immediate Resources for Students Today) legislation. Students FIRST created a completely new capital financing system aimed at creating minimal adequacy standards for capital related issues in public schools. This system more tightly controls the capital funding as compared with the past when it was typically financed by the sale of general obligation bonds. The Students FIRST program is governed by the School Facilities Board.

In 1995 the Legislature authorized charter schools - a new educational option. In the first years, charter school funding was based on the RCL, CORL and Capital Levy Revenue Limit (CLRL), which was calculated in the same manner as the districts. Over the years, the funding has evolved to include Additional Assistance, which replaced the CORL, CLRL and Transportation funding, plus additional monies in lieu of capital funding from School Facilities Board (SFB).

A school district budget covers a one year period from July 1st to June 30th.

The Expenditure Budget contains categories from which school districts can expend monies. These categories (funds) fall into these major classifications:

The Maintenance & Operations (M&O) Fund budget is where most of the day to day expenditures take place. Typical budgeted expenditures include: salaries, employee benefits, supplies, utilities, maintenance and repair, and miscellaneous expenditures not of a capital nature.

This basic Maintenance and Operation Expenditure Budget includes the following formulas:

A.R.S. §15-945 and §15-946 provide increased budget limits for districts that transport or contract for the transportation of students to-and-from school. There is additional funding for academic, vocational and athletic trips. The subsections provide details on the computation of the transportation limits.

The money to support the Revenue Control Limit, Capital Outlay Revenue Limit, and Soft Capital Allocation, as set forth in the preceding sections, are obtained from two main sources - state and county equalization assistance and property taxes.

The school finance formula attempts to ensure that each district has equitable budget capacity compared to others in the state. Equalization assistance helps to ensure that the revenues available for district budgets are shared equitably.

A major portion of school district financing in Arizona comes from local property taxes on real and personal property. The funding for the Revenue Control Limit, Capital Outlay Revenue Limit, and Soft Capital Allocation for each district is based upon what a tax rate raises in each district. This system results in districts with high taxable property values per pupil paying a higher percentage of the total cost with local taxes. In contrast, school districts with lower taxable property values per pupil pay a lower percentage of the total cost. Items outside the RCL and CORL that don't have a dedicated funding source are from the local property tax levies of each district.