Attorneys for the state are making a last-ditch effort to deny public schools about $82 million a year in funding.
In legal briefs filed in the state Supreme Court, the lawyers are arguing that voters cannot mandate that legislators adjust school funding each year to account for inflation. And they contend the Court of Appeals erred in ordering lawmakers to come up with the cash for the new fiscal year that begins July 1.
But Donald Peters, who is representing the Arizona Education Association and schools districts that sued, said voters clearly told lawmakers in 2000 they want that annual inflation adjustment. He said legislators cannot simply ignore that mandate and divert the cash for what they believe are other priorities.
Since lawmakers started ignoring that requirement in 2010, schools have lost anywhere between $189 million and $240 million, depending on whose estimates are believed.
That money is gone. Even the appellate judges, while ruling in January that lawmakers were off base in withholding the dollars, refused to order reimbursement.
But the judges said the Legislature, which is still in the process of preparing a budget for next year, must include the inflation funding -- estimated at $82 million -- in that new spending plan.
At the heart of the fight is a 2000 ballot measure which boosted the state's 5 percent sales tax by six-tenths of a cent. It also requires the Legislature to increase funding for schools by either 2 percent or the change in the gross domestic price deflator, whichever is less.
Lawmakers provided that full funding until the 2010 budget when, facing a budget deficit, they decided to take a different view of what the law requires. That resulted in the lawsuit.
Key to the claim is the Voter Protection Act, a provision of the Arizona Constitution previously approved by voters, forbids lawmakers from tinkering with voter-approved measures without taking the question back to the ballot.
Assistant Attorney General Kathleen Sweeney conceded that point. And she even acknowledged that voters could direct that a specific number of dollars be allocated each year to a designated program.
But Sweeney said that 2000 vote essentially amounts to a direction to the Legislature, in preparing the budget, to give up its own discretion to set the funding priorities for the state. And she wants the Supreme Court to rule that the Voter Protection Act is not that broad.
That argument failed to sway the appellate court.
"Accepting the state's argument would render the (voter-approved) statute meaningless because the Legislature could ignore the inflation adjustment provision altogether, reasoning that a zero percent increase falls within its 'legislative discretion,' '' wrote Judge Michael Brown for the unanimous appellate court. And Brown pointed out that the 2000 ballot measure was not an initiative, but a referendum, referred to voters by the Legislature itself.
"It would be illogical to conclude that the Legislature may ask the voters to approve (the law) and then disregard their decision,'' he wrote.
Lawmakers clearly have the money to fund the inflation formula if they choose to do so voluntarily or lose the lawsuit. The staff of the Joint Legislative Budget Committee predicts the state will end the year with $642 million in the bank.
That, however, may be just a temporary situation.
Anticipated spending will outstrip revenues next fiscal year, at least in part because of the scheduled expiration on May 31 of the temporary one-cent sales tax surcharge which generates close to $1 billion a year. That leads to projections of a $290 million surplus at the end of next budget year, $15 million in the bank the following year -- and a $120 million deficit in the 2016 fiscal year.
Many lawmakers want to bank as much of the current surplus as possible, including the inflation funding, to deal with future budget issues.