PR: School districts illegally stockpiled millions of dollars!

It’s great to see that some Republicans are fighting back against the lies and misinformation being propagated by the Arizona Education Association and their lobbyists down at the Legislature. Did I mention that the AEA does anything but represent the best interests of our school children?

FOR IMMEDIATE RELEASE: May 1, 2009

School districts illegally stockpiled millions of dollars 

(STATE CAPITOL, PHOENIX) – As the rest of the state struggles with devastating economic conditions with cuts, layoffs and the associated financial and emotional trauma, schools have been illegally and secretly stockpiling millions of dollars.  

“I am outraged at members of the education community for their blatant deception and hypocrisy. They have launched huge attacks against cuts to education to balance the budget, while they hid the fact that they were sitting on hundreds of millions of your taxpayer dollars,” declared Sen. Pamela Gorman, R-Anthem.  

The Annual Report of the Superintendent of Public Instruction indicates that school districts began the current fiscal year with more than $2.3 billion in the bank. A relatively small portion of this cash balance could be used to help balance the FY 2010 budget. 

This small portion of the cash balances that would be used to balance the budget resulted because districts deliberately and regularly overestimated their authorized property tax levy. This portion of the balances does not represent school district savings; it is not a rainy day fund that the districts prudently set aside for emergencies; it was a miscalculation of property taxes. Arizona statutes require the districts to refund this balance back to the property taxpayers. But many districts have ignored this law and accumulated this cash balance that they are not authorized to spend. 

Statutes even prohibit districts from increasing property taxes to account for estimated uncollected taxes. 

“Districts have been violating state law and illegally amassing larger and larger cash balances while crying out that we at the Legislature are decimating public education,” Gorman said. “It is shameless!” 

“At a time of Arizona’s worst fiscal crisis, we need facts not fiction. Taxpayers should demand to know why every fiscal year seems to be ending with a substantial surplus that nobody can really account for. Until those funds are accounted for, no one should be making reckless claims that education is underfunded without a full investigation,” said Dr. Vicki Murray, associate director of education studies at the Pacific Research Institute in Sacramento, Calif.  

The idea of using these funds to balance the budget is not new. In fact, the Legislature employed a very similar approach to balance the state budget in 1992.  

There is more information about K-12 education cash balances at: http://www.arizonatax.org/atra_special_reports.htm#Special%20Reports.

 


Comments

  1. Let me get this right. The article claims that only a small amount for the claimed $2.3 billion could be used to offset the budget. Exactly how much is a small amount ? Also, please explain how money that is claimed to have been gotten from incorrect tax estimates and supposedly must be returned to taxpayers can be used to help balance the state budget? If true, wouldn’t this just be another way of raising taxes which Republicans claim to be against.

    I also don’t buy the premise of this but will be interested to see more information backing this claim up.

  2. Maricopa GOP says

    Todd,

    If you want information, read the ATRA link.

    If that is not enough, look at this link: http://www.ade.state.az.us/AnnualReport/AnnualReport2008/Vol2.pdf Scroll down to Page 268.

    This is compiled from school district self completed annual financial reports as required by state law.

    The administrators have systematically ripped off the taxpayers, then squirreled away the money into slush funds while crying poverty. Their actions of keeping the money out of the classroom while padding their own paychecks is abhorrent.

    The legislature has increased appropriations to k-12 by over 40% from 2004 to 2008 while student populations have increased by less than 11%, yet the percentage of funds to the classroom are at an all-time low. This is in spite of Prop 301 and Prop 201 new income that was required to go into the classroom by public vote.

    They have so much money hidden away that the County Treasurer earned more in interest on the investments of that money than the cuts the legislature had to make.

    It is about time that the truth is starting to come out! The schools have been given the funds to do the job, but the teachers and students have been betrayed by their own local leaders.

  3. Very interesting report. Thanks for getting it out.

  4. If the law says the money is supposed to go back to the taxpayers, WHY IS THERE A QUESTION OF WHAT TO DO WITH THE MONEY??

  5. Maricopa GOP says

    If the legislature uses the money to eliminate the need for Point 5 of the Governor’s Plan – a tax increase – they are effectively returning the money to the taxpayer.

    I guess they could file a suit against the school districts to force the return of those funds and then raise taxes to balance the budget. The cost of all those financial actions would result in a net higher cost to the taxpayers. This proposal by the legislature appears to bring the schools into compliance to the benefit of all.

    PS: I wonder how many of the school district administrators would like to be charged with willful violation of state law instead coming into compliance with this common sense soluton.

  6. Maricopa GOP Says:,
    I had looked at the ATRA link. They make the case the $329 million are being held by districts illegally. I would certainly like to hear districts side of the story as I have not found ATRA to be a reasonable source of information.

  7. Maricopa GOP says

    “reasonable” is in the eye of the beholder. In this case, ATRA’s foundation lies in the statutes which are clear and unambiguous.

    Going past that fact, doesn’t it seem somehow unreasonable that any entity funded by the taxpayers should have billions in “rainy day funds” – according to their biggest defender in the legislature – while the most vulnerable among us (DDD and Autistic children, disabled seniors, etc.) are having their critical life support services taken away?

    There is just not enough revenue (February revenues DOWN 46.3% from two years ago) to fund “rainy day” fund balances and necessary services.

    In addition, from the first of April to the end of September, school districts will receive almost $350 million in federal stimulus funds just from Title I, while they will have realized almost $300 million in interest earnings in the last 18 months.

    Where is their sense of contributing to the solution for those most vulnerable among us? Aren’t they public servants who care about the families of the children? Sen. Gorman is right – their actions are rife with blatant deception and hypocrisy.

  8. Maricopa GOP,
    You should read the ATRA report because even they point out that most of the money is for debt service on bonds or there for federal grant projects (to be eligible for Title I funds) and building repairs, etc. These aren’t rainy day funds but funds required by law or necessary for maintenance and upgrades during the year. The money ATRA is complaining about, ATRA doesn’t even claim the districts don’t have a legitimate use for, but they claim they were collected illegally.

  9. Maricopa GOP says

    Ok – lets look at the actual numbers founded to nearest million out of $2.331 billion.

    $76 million in Building Renewal
    $71 million in Adjacent Ways
    $540 million in Debt service
    $48 million in Federal Projects
    These total $735 million for brick and mortar, debt service and Federal Projects.

    ATRA identifies $329 million held illegally. ATRA does NOT say that the legislature is restricted to using only those illegal funds. The Legislature used funds out of these accounts in 1992 and did not even raise the issue of legality for school districts to hold the funds.

    We are in a major fiscal crisis. I don’t believe you are arguing that we should take critical services from DDD, Autistic children, disabled seniors who have contributed to our society for over a half century while keeping these hundreds of millions undesignated in fund balances.

  10. Maricopa GOP,
    I would still like information on what the fund balances are meant to do and how they are used. What makes me skeptical of the claims that what is happening is illegal or even odd is for two reasons. The first is that if this has been going on for years why was this not raised before this when the legislature cut k-12 funds in February. Secondly, does this mean that every county school superintendent has been doing something illegal and no county attorney or anyone has sought a court order for this to stop. My hunch is that ATRA has the opinion that this is illegal but in fact this is not the reading of the law others have.

    I still find it odd that you can argue that taking the money that ATRA claims is illegally held by the districts is ok. It would seem to me that the only way to remedy this would be to return the money to the taxpayers. If the state takes this money under the idea that the districts don’t have a right to it ,it is unclear how the state has anymore right to it than the districts.

  11. Maricopa GOP says

    First there are two separate and distinct areas under discussion. There are those funds that the schools have retained ILLEGALLY and placed in their “rainy day funds” and there are those funds that they have obtained legally but are not allowed to spend as that would compound their problem by exceeding expenditure limits.

    There is $329 million in ILLEGALLY retained funds, there is another $400 million or so in fund balances that school districts are not allowed to spend because of expenditure limits and there is the $200 million or so that the schools have reaped in interest.

    As to why these funds were not tapped in February, I have been told that leadership was made aware of these funds after the FY2009 fix was crafted earlier this year.

    Education has the biggest lobbying and most active constituency in the state and has been looked on as the third rail in state politics just like social security has been looked on as the third rail in national politics. Some people speculate that until we were in the worst fiscal crisis in state history, it wasn’t worth the kick back to confront this.

    As to the state authority, the state has the authority and the responsibility to remediate the illegal actions of its subdivisions and the k-12 school districts are subdivisions of the state. They have taken such actions on numberous occasions when school districts illegally exceeded their expenditure limits.

    I can’t figure why you are so opposed to cleaning up the overtaxing. Unless the legislature implements this option, the taxpayers will be overtaxed again in the next fiscal year since the property tax levy will still be too high and the state will have to create “revenue enhancements” otherwise known as tax increases to balance the state budget. The people of Arizona and the state economy is already in crisis and you seem to think that both need to be further damaged by overtaxing.

    If I were in charge, I would also take the over $200 million that the schools have accrued in investment earnings from these ill-gotten slush funds. For them to reap a bonus 150% times the amount of the FY2009 budget fix in interest from their $2.331 billion in fund balances while crying poverty is shameless, as Senator Gorman correctly stated.

  12. Maricopa GOP,
    It is truly fascinating to see this situation unfold. It seems to me we have a small group of Republican legislators who are 100% wedded to the idea of no tax increases and not even voting to but it to a popular vote because of their ideological position. The rest of the caucus is less than 100% adherent to this ideology but are more concerned that if they vote for a tax increase they will get their clocks cleaned in the next primary. Because of this they are searching for every possible scheme to avoid increasing taxes – even going to the level of using money that they all of a sudden claim has been illegally collected and by law should be returned to the taxpayers. Even taking money from towns and cities will not avoid tax increases since the localities will need to recoup the losses, but this all avoids the direct vote on the issue and so they avoid getting pummeled by the Club for Growth and AFP.

  13. Maricopa GOP says

    It is even more fascinating to read those who want to grow government to the detriment of the citizens who pay the piper.

    If you handled your personal budget the way you are arguing the legislature should handle the state budget process:

    You have money in a savings account that pays .5% interest, have your pay reduced by 46.3% and decide to take out a long term loan with a 15% interest rate instead of using the money from the savings account. As a part of the process you hide the savings account money under your sister’s name so you can file bankruptcy and stick someone else with the debt.

    Of course, the state cannot file bankruptcy, its only recourse is to confiscate more from the taxpayers and other contributors to the economy. That worked in the USSR – – – – oh, that’s right, it didn’t work did it?

  14. Maricopa GOP,
    If you want to go with this analogy, then a more accurate one based on what is being said in this press release would be that you want to use money your child received by stealing it from a neighbor.

  15. Maricopa GOP says

    Actually, what you want to do is give the money back to the neighbor today and then confiscate that money plus twenty five per cent more from the same neighbor tomorrow. Remember, all of the funds come from the same taxpayers. The legislature is trying to use the money that has already been taken from the property owners in order to keep from taking even more from those same taxpayers by another tax.

    BTW, are you a K-12 financial officer? You seem awfully interested in keeping those illegally obtained funds in the hands of those people.

  16. Parent X says

    Sorry to jump in the middle of the Todd/Maricopa GOP conversation, but this article really raises some alarm bells for me.

    First of all – shouldn’t it bother us that our State Senate office is posting an article that is:
    –making accusations without providing specific information
    and
    –citing two special interest groups rather than taxpayer-funded agencies.

    You may support ATRA personally, but it should bother all of us that a leading Senator is quoting from such a biased ‘resource’. Our Senators have access to a non-partisan research office in the legislature, the JLBC, the Auditor General, etc. Not that any of these avenues are infallible either, but whatever information you get from them would be waaaay more balanced than some small-government special interest group in San Francisco (PRI).

    Also – I have spent time pouring over my local school district’s books ever since this budget crisis started and I don’t see any dodgy numbers-crunching. The carry-over funds, account with the county, etc. are all above board accounting practices. I agree with Todd – Gorman’s article was very thin on facts and I am very leery over seeing any huge, sweeping accusations that seem to condemn all school districts and anyone working in education. (Which, BTW, I’m not..public school district records are freely available to anyone who wants to check them out.)

  17. Maricopa GOP says

    Do you think that this has not been vetted through JLBC, House and Senate Research Offices, etc. prior to releasing?

    Leadership – of which Senator Gorman is a member – and the Appropriations Chairmen have obviously been looking at this issue for weeks as it was in the draft budget proposal.

    Post #11 – “Education has the biggest lobbying and most active constituency in the state and has been looked on as the third rail in state politics just like social security has been looked on as the third rail in national politics.”

    This would not have been advocated if not researched and verified. The political price is just too great to make unverified allegations. To that point, there are rumors that the AEA is already preparing to lead recall efforts against those who have brought these issues to the light of day.

    Just because you do not like the answer does not mean the ATRA, PRI, JLBC, Research staff, etc. are all wrong and the school administrators right. School officials are the people who have increased funding to the adults outside of the classroom to the detriment of the children.

    To demonstrate that many – thankfully, not all – of the school administrators are capable of violating the law, the percentage of tax dollars to the classroom is at an all-time low in spite of Prop 301 and Prop 201 which required supplementing – not supplanting – of money to the classroom. Here again, those school administrators are in violation of the rule of law as passed by the voters.

    School fiscal procedures are a rats nest.

  18. Chris Wagner says

    School districts illegally stockpiled millions of dollars

    ….”Arizona statutes require the districts to refund this balance back to the property taxpayers.”….

    “Statutes even prohibit districts from increasing property taxes to account for estimated uncollected taxes.”

    Should legislators be required to keep their paychecks in a separate location and unspent monies be returned to the taxpayer. I do believe the ‘Taxpayer” is not the general fund as Senator Pamela Goreman states and quoted above. But she wants to “steal” it as in her quote, “A relatively small portion of this cash balance could be used to help balance the FY 2010 budget.”

    Also Senators should know to site ARS when making such statements.

    Using the Senators words I am outraged at members of the education community (replace with “Senate”) for their blatant deception and hypocrisy.

    So maybe the Senators NEWS RELEASE should read “Republicans to Steal more of your money” And for that matter, it would not be News.

    And I always find it interesting that people such as ‘Maricopa GOP’ hide behind a name. Or maybe he/she/it represents the Maricopa GOP which i believe is not true.
    Chris Wagner
    Queen Creek

  19. Maricopa GOP ,
    No I am certainly not a k-12 financial officer nor involved in k-12 education.

  20. ” Here again, those school administrators are in violation of the rule of law as passed by the voters.”

    According to the Auditor General’s Report which was signed off by the Joint Legislative Audit Committee headed by Sen. Vershoor, 99.9% of these expenditures have been legal.

  21. Parent X says

    Maricopa GOP (#17) said: “Do you think that this has not been vetted through JLBC, House and Senate Research Offices, etc. prior to releasing?”

    The answer – no. I’m quite certain that it couldn’t have passed muster with the JLBC. Senator Gorman would have had to include a fact or two along with her sweeping accusations in order to be taken seriously by a budget committee.

    Looks like there is already some backpedaling going on – Gorman’s comments have been taken off the Senate site. http://www.azleg.gov/FormatDo%20%20cument.asp?inDoc=/press/Senate/49leg/1R/CASH+BALANCES+RELEASE.DOC.htm

    Todd’s comment (#20) is also correct. The AZ Auditor General clearly states that Arizona’s schools spend much less than the national average on administrative expenses (9.2% in AZ vs. 11% in the US). The report also states that 99.9% of Prop 301 money is spent appropriately.

    And as for Maricopa GOP’s comment: “The political price is just too great to make unverified allegations.” Here’s the disappointing thing – no it isn’t. There is no rule in the Arizona legislature that prevents a seated official from lying. So what do some legilators do? They throw a bunch of stuff on the wall to see what will stick. Senators like Gorman spew forth unsubstantiated allegations and hope that we all just eat it up – and many of us do. Even when they get caught lying, many voters give them a pass and continue voting them back in office because of their political party or the general low expectation we have of the people who are supposed to be representing us.

    Time to start fact-checking people! We are facing a very serious, potentially long-lasting economic crisis in our state. It should be 100% completely unacceptable to all of us that our legislators are playing games right now and tossing out special-interest group allegations in an attempt to further their agendas.

  22. Liberal Bloggers need to get a job!

  23. Maricopa GOP says

    Both Todd and Parent X (who is not reprimanded by Todd for using a pseudonym – maybe it is OK if you agree with Todd and of course there is only one Todd in Arizona so he is transparent) know only enough about the process to appear knowledgeable.

    Nothing gets in the BRBs or presented in public as a Budget Proposal without it being scored by JLBC.

    Get a life, liberal district school monopoly apologists. If you think that you pay too little to support the actions of the district school administrators who are taking care of their administration offices instead of the classroom, just make personal contributions to their slush funds.

    I do not want to pay extra taxes for their malfeasance. If they provided education to the children at the same level as they do their marketing for more money, we would have a world class education system in AZ.

    Now I must go and try to make a dollar in this economy you want to further destroy with increased taxation. Even Obama knows now is not the time for increased taxes.

  24. Maricopa GOP – Why would I reprimand anyone for using a pseudonym? I have never done so.

    Again, the point of this discussion was Gorman’s press release which was thin on any details and was accusing districts of acting illegally. It was further strange because of the suggestion she was making that the supposed illegally gotten tax revenues should go to fix the state wide budget deficit instead of back to taxpayers in whatever counties this activity was taking place. I find this an odd argument coming from a conservative but not when considering the desperation they are experiencing in finding any way to avoid a tax increase.

    As Parent X has pointed out, this press release has since disappeared from the legislature’s site so perhaps the evidence is not as strong as you claim.

    Finally, I hope people note that facts and information has been provided by myself and others in this thread to counter unsubstantiated claims. When confronted with this you respond with claims that I am seeking personal gain or go off on tangents about other issues.

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