For the first time in Arizona history, public education is operating without a budget.
And if one isn't approved for the 2009-10 fiscal year before July 15, Arizona's 220 school districts may not get a $330 million payment due to them.
Public education - kindergarten through 12th grade - makes up about 42 percent of the state's budget. While state lawmakers passed a budget to Gov. Jan Brewer in the wee hours of Wednesday morning, she vetoed several items, including the portion that appropriates funding to public schools.
Lawmakers cut too much from education, Brewer said in a prepared statement Wednesday.
With her veto, she also called them back to the State Capitol at 1 p.m. Monday to work out a new budget.
Arizona Education Association president John Wright, speaking from the National Education Association's convention in California, praised Brewer's step.
"We really want to thank her for keeping her word. ... She stuck to her guns, and we want to support her to bring the Legislature around to do what they need to do," Wright said.
Arizona's school districts will get a $602 million payment Thursday that was due to them on July 1, State Treasurer Dean Martin said. That money was to be paid in May and June state aid payments to school districts but was delayed to help the state deal with cash flow.
At that time, several Arizona school districts started borrowing money to pay bills, including Mesa Unified School District, the largest in the state, which borrowed about $2.5 million, the district's chief financial officer, George Zeigler, said.
Several East Valley school districts - including Mesa Unified and Gilbert Unified - have been working to increase their lines of credit in preparation for what might happen to state aid payments.
Both districts receive a majority of their funding from state aid.
In Arizona, legislation dictates how much money school districts may spend based on enrollment. But the revenue source for those funds varies from district to district, depending on property values and business values. Some districts, such as Gilbert, receive 60 percent of their funding from state aid while others, such as Scottsdale, receive just a fraction of that due to higher property values.
Mesa Unified has a more than $408 million operating budget proposed for the 2009-10 school year. That budget includes expected funds from the federal stimulus plan.
But no one knows when those federal dollars will begin to flow into Arizona's coffers, Martin said.
After Thursday's $602 million payment, school districts will not receive another one until the lawmakers pass a budget, Martin said. After that, a payment could come within 24 hours, but Martin said lawmakers could also write language in the legislation that postpones the payment to a specific date.
At one point during the recent legislative session, school officials were worried they might not get another payment until late August or September.
"They could skip July or double it up or spread it out over 12 equal payments," Martin said. "The devil's in the details."
Arizona's 475 public charter schools did receive a payment in June but also face the possibility of not getting a July 15 payment. There are about 100,000 students in Arizona charter schools and more than 1 million in Arizona's public school districts.
Martin said the state has enough money to cover the $602 million school payment as well as Thursday's $85 million state-employee payroll.
"All payrolls will continue," he said.
In fact, the state should be OK financially in July and August, but borrowing may start in September depending on revenue and the federal stimulus dollars, Martin said.
"The state is living paycheck to paycheck," he said Wednesday afternoon. "We're going to have to establish overdraft. It may be a billion or more we may have to establish for the state."