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FY10 BUDGET SUMMARY


(Fiscal Year 2010: July 1, 2009 – June 30, 2010)

This is a summary of the major budget and policy items in the negotiated FY10 deal
between Governor Brewer and Senate President Burns and House Speaker Adams.

TAXES
Sales Tax (HCR2037)
• Ballot proposition to voters at the November 3, 2009 election for one percent sales
tax increase to be in effect for three years starting on January 1, 2010 . The tax
money generated will be used with two-thirds going to K-12 and higher education
and one-third going towards health and human services and public safety. Any
revenues collected during FY10 (January 1, 2010 – June 30, 2010), must first be
used to decrease the reductions in state spending for education. (Estimated
revenue derived from this sales tax: $450 million available for FY10 with a total
three-year impact of approximately $3 billion).
Flat Tax (HB2653)
• Replaces the current graduated individual income tax with a flat tax rate of 2.8%
beginning in FY12. This is a loss of revenue to the state of approximately $450
million per year.

• Establishes a Task Force to determine the final individual income tax rate to be in
effect in 2012 (the charge of the Task Force would prevent the rate from exceeding
3%).
Permanent Repeal of the State Equalization Property Tax—aka the school tax
(HB2644)
• Permanently repeals the state equalization property tax. This is a loss of revenue to
the state of approximately $250 million per year.
Reduction of Assessment Ratio for Business’ Secondary Property Tax (HB2644)
• Phases down the assessment ratio for secondary property tax purposes on business
property from 20% to 15% beginning in tax year 2012.
o Tax year 2012 = 19%
o Tax year 2013 = 18%
o Tax year 2014 = 17%
o Tax year 2015 = 16%
o Tax year 2016 = 15%
There is no estimate for the loss of this revenue stream at the local level. As business’
taxes decrease, homeowner’s taxes must increase to generate the equivalent amount
of money for school district bonds and overrides.

Source: Arizona Education Association


June 27, 2009
p. 2

Vehicle License Tax (VLT) used to offset basic state aid (HB2644)
• Sweeps $22 million in VLT from cities and towns in FY10 to pay a portion of basic
state aid for education.
o Note: This amount is reduced from the $95 million VLT sweep found in the
budget that passed on June 4. The $53 million VLT sweep from the counties
is completely out. The $42 million VLT sweep from the cities has been
reduced to $22 million.

K-12 EDUCATION
Fails to actually fund the 2% inflation to school districts (HB2648)
• Section 9 in HB2648 sets the base level for FY10 at $3,267.72 which gives school
districts the full 2% inflation factor. However, in section 25, there is a
notwithstanding clause which then removes the 2% inflation to the base and instead
sets the base level at $3,201.89 for FY10. From a historical standpoint, here are the
base funding levels for the past two fiscal years:
o 2007-08 school year (FY08): $3,226.88
o 2008-2009 school year (FY09): $3,291.42
o 2009-2010 school year (FY10): $3,201.89 (this is the actual base level
amount per student that a school district will receive)
The $3,201.89 amount for FY10 results in an amount that includes the reduction of the
$121 million in education funding cuts that were part of the FY09 budget fix passed on
January 31, 2009.
Soft Capital Reduction
• Delays the $175 million additional cut to soft capital until January 1, 2010. The
general appropriation trailer bill (HB2643) restores this funding if sufficient excess
revenues are available by December 2009.
o School districts with fewer than 600 students will be impacted with only half of
this reduction.
o Of the remaining statewide allocation of soft capital funds (approximately $23
million total), a district may use their local share for any operating expenses.
No Funding for Utility Costs
• Fails to provide any funding for the new utility formula that was passed last session
for “excess utilities” (this is an $80 million cut to school districts that previously levied
for “excess utilities”).
Teacher Performance Pay
• Reduces the Career Ladder program funding by 0.5% for FY10 (from 5.5% to 5%)
and limits this program only to teachers who participated in FY09 (the 2008-09
school year).
• Reinstates the new but unfunded teacher performance pay program that was
established last session (the “Gilbert School District” proposal to provide the
additional Career Ladder funding to all school districts).
Overrides and Bonds
• Repeals the single ratio assessment for all voter-approved overrides and bond
elections found in the budget that passed on June 4.

Source: Arizona Education Association


June 27, 2009
p. 3

• Extends the timeframe during which a school district can issue a bond from six years
to ten years after obtaining voter approval (this is only for future bonds to be
approved by voters).
• Permits a school board to cancel an override election scheduled for November 2009
up to 10 days before the election.
• Raises the maximum budget increase a school district may request for a
Maintenance and Operations (M&O) Override from 10% of the Revenue Control
Limit (RCL) to 15% of the RCL.
• Establishes a Special Program Override by expanding the scope of the K-3 Override
to allow for a program to be designed for any or all of the K-12 students. Specifies
that the maximum amount a school district may request for an M&O Override is 10%
of the RCL if the school district also requests a Special Program Override.
• Authorizes a school district, for FY10, to conduct an election in March 2010 and
submit one of the following proposals to the voters of the district:
o A 15% M&O override that, if approved, replaces any previously authorized
M&O and K-3 overrides.
o An additional 5% M&O or Special Program override if the voters of the school
district authorize a 10% M&O override at the November 2009 election.
o A 17% M&O override for a common school district if an M&O and K-3 override
are still in effect on this bill’s effective date. The 17% override, if approved,
replaces any previously approved M&O and K-3 overrides and continues for
the number of years of the previously approved K-3 override.
• Permits a school district to issue Class B bonds for furniture, equipment, and
technology provided that the bonds mature within five fiscal years after the bonds
are issued.

Policy Changes Targeted Against Teachers & Association Members


• Prohibits school district employment contracts from including compensated days for
professional association activities.
• Prohibits a school district from adopting policies that provide employment retention
priority for teachers based on tenure or seniority.
• Removes the current prohibition against school districts reducing the salary of a
tenured teacher except under a general salary reduction applied equitably to all
tenured teachers.
• Removes the contract dates (between March 15 and May 15) in which districts are
required to offer teaching contracts for tenured teachers. Thus, there will be no date
in statute set for contracts and school districts will each set their own contract
notification deadline.
• Eliminates the May 15 statutory deadline for notice of salary reduction. Instead
allows each school district to set its own salary reduction deadline for teachers.
• Removes current statute that requires a school board to notify a provisional teacher
of nonrenewal by April 15; thus, there will be no date in statute set for this
notification.
• Removes the current statutory requirement for a school district to give a preferred
right of reappointment to a job for a teacher who has lost his/her job through the

Source: Arizona Education Association


June 27, 2009
p. 4

reduction in force (RIF) process if a job becomes available within three years of the
RIF process.
• Reduces the time frame for requesting a hearing on dismissal or long-term
suspension from 30 days to 10 days.
• Reduces the amount of a time a school district must allow a teacher to correct
inadequate classroom performance from 85 instructional days to 60 instructional
days after receiving notice.

Source: Arizona Education Association


June 27, 2009

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