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Hunting: Az must find more revenue streams for education

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Hunting: Az must find more revenue streams for education

Shortly after new data was released showing that Arizona ranks last in the nation for per-pupil instructional spending, teacher salary and school administration expenditure, Gov. Doug Ducey announced a plan for an additional $300 per pupil for K-12 education over the next five years.

The governor wants to pull more money out of the Permanent Land Endowment Trust Fund (PLETF), increasing funding for the state’s schools without requiring a tax increase. It’s important to put that $300 per-pupil increase in context. An additional $2 billion spent on education over the next five years sounds like a lot of money, but what does this really mean?

Arizona’s education funding peaked in 2007. Even in those heady days when money was pouring into state coffers from a real estate boom, Arizona ranked 48th in the nation for per-pupil instructional spending. Then, to balance the budget amidst plummeting tax revenues, education funding was then slashed. These cuts translated into a General Fund reduction of $1,000 per student between fiscal year 2007 and FY 2016.

The governor’s plan restores less than one-third of funding cut from education since 2007, when Arizona ranked 48th in the nation.

If the state is serious about lifting itself from the bottom of the educational rankings, it must look at more than just an incremental change to a small corner of State Trust Land funding. Revenues from Trust Lands represent only about 5 percent of total state K-12 funding. Meaningful changes to our education funding system will have to look to other funding streams, as well.

Looking to State Trust Lands to solve the state’s education finance woes is an innovative, yet partial solution. Few people appreciate just how far behind the nation Arizona lags in its commitment to K-12 education. To bring us to the national average for per-pupil spending, it would take about $3.5 billion annually, and that amount would need to continue indefinitely. Since not even the most wild-eyed tax-and-spend liberal is about to propose a tax increase of that magnitude, we need to look for alternatives that will gradually close the funding gap.

State Trust Lands are an under-performing asset, and there are possibilities for reaping more revenue from land the state holds in close proximity to the metro areas of Phoenix and Tucson. Reforming the antiquated rules governing trust land is a daunting task that will take many years but may generate some revenue without the need of a tax increase.

State leaders also may want to investigate broadening the sales tax base. We live in a modern economy where the service sector represents a large share of our spending, yet our current system relies on the taxation of goods – not services. Sales tax revenues have fallen as our spending habits have changed. It may be time to reconsider what gets taxed and what doesn’t.

Finally, it may be time to consider revisiting our income tax structure. As a percentage of the economy, our income tax is over 25 percent lower than it was 20 years ago. We need to decide if we’d rather have those tax dollars in our pockets, or if we’d like to improve our schools. It’s not realistic to think we can do both.

The state of Arizona spends nearly one-third less than the national average to educate our children. Our spot at the bottom of the educational rankings is the result of decades of policy choices. The governor’s plan is but one step. Climbing out of the deep hole we’ve dug over the years will take many more years of sustained commitment to funding solutions.

Morrison Institute for Public Policy is a leader in examining critical Arizona and regional issues, and is a catalyst for public dialogue. An Arizona State University resource, Morrison Institute uses nonpartisan research and communication outreach to help improve the state's quality of life.

Dan Hunting is a Senior Policy Analyst at Morrison Institute for Public Policy.

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