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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)
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Ballot proposition to voters at the November 3, 2009 election for one percent salestax increase to be in effect for three years starting on January 1, 2010 . The taxmoney generated will be used with two-thirds going to K-12 and higher educationand one-third going towards health and human services and public safety. Anyrevenues collected during FY10 (January 1, 2010 – June 30, 2010), must first beused to decrease the reductions in state spending for education. (Estimatedrevenue derived from this sales tax: $450 million available for FY10 with a totalthree-year impact of approximately $3 billion).
Flat Tax (HB2653)
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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 $450million per year.
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Establishes a Task Force to determine the final individual income tax rate to be ineffect in 2012 (the charge of the Task Force would prevent the rate from exceeding3%).
Permanent Repeal of the State Equalization Property Tax—aka the school tax(HB2644)
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Permanently repeals the state equalization property tax. This is a loss of revenue tothe state of approximately $250 million per year.
Reduction of Assessment Ratio for Business’ Secondary Property Tax (HB2644)
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Phases down the assessment ratio for secondary property tax purposes on businessproperty from 20% to 15% beginning in tax year 2012.
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Tax year 2012 = 19%
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Tax year 2013 = 18%
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Tax year 2014 = 17%
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Tax year 2015 = 16%
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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 amountof money for school district bonds and overrides.
Source: Arizona Education AssociationJune 27, 2009
 
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Vehicle License Tax (VLT) used to offset basic state aid (HB2644)
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Sweeps $22 million in VLT from cities and towns in FY10 to pay a portion of basicstate aid for education.
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Note: This amount is reduced from the $95 million VLT sweep found in thebudget that passed on June 4. The $53 million VLT sweep from the countiesis completely out. The $42 million VLT sweep from the cities has beenreduced to $22 million.
 
K-12 EDUCATION
Fails to
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fund the 2% inflation to school districts (HB2648)
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Section 9 in HB2648 sets the base level for FY10 at $3,267.72 which gives schooldistricts the full 2% inflation factor. However, in section 25, there is anotwithstanding clause which then removes the 2% inflation to the base and insteadsets the base level at $3,201.89 for FY10. From a historical standpoint, here are thebase funding levels for the past two fiscal years:
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2007-08 school year (FY08): $3,226.88
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2008-2009 school year (FY09): $3,291.42
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2009-2010 school year (FY10): $3,201.89 (this is the actual base levelamount 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 onJanuary 31, 2009.
Soft Capital Reduction
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Delays the $175 million additional cut to soft capital until January 1, 2010. Thegeneral appropriation trailer bill (HB2643) restores this funding if sufficient excessrevenues are available by December 2009.
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School districts with fewer than 600 students will be impacted with only half of this reduction.
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Of the remaining statewide allocation of soft capital funds (approximately $23million total), a district may use their local share for any operating expenses.
No Funding for Utility Costs
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Fails to provide any funding for the new utility formula that was passed last sessionfor “excess utilities” (this is an $80 million cut to school districts that previously leviedfor “excess utilities”).
Teacher Performance Pay
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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 2008-09school year).
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Reinstates the new but unfunded teacher performance pay program that wasestablished last session (the “Gilbert School District” proposal to provide theadditional Career Ladder funding to all school districts).
Overrides and Bonds
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Repeals the single ratio assessment for all voter-approved overrides and bondelections found in the budget that passed on June 4.
Source: Arizona Education AssociationJune 27, 2009
 
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Extends the timeframe during which a school district can issue a bond from six yearsto ten years after obtaining voter approval (this is only for future bonds to beapproved by voters).
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Permits a school board to cancel an override election scheduled for November 2009up to 10 days before the election.
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Raises the maximum budget increase a school district may request for aMaintenance and Operations (M&O) Override from 10% of the Revenue ControlLimit (RCL) to 15% of the RCL.
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Establishes a Special Program Override by expanding the scope of the K-3 Overrideto allow for a program to be designed for any or all of the K-12 students. Specifiesthat 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.
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Authorizes a school district, for FY10, to conduct an election in March 2010 andsubmit one of the following proposals to the voters of the district:
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A 15% M&O override that, if approved, replaces any previously authorizedM&O and K-3 overrides.
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An additional 5% M&O or Special Program override if the voters of the schooldistrict authorize a 10% M&O override at the November 2009 election.
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A 17% M&O override for a common school district if an M&O and K-3 overrideare 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.
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Permits a school district to issue Class B bonds for furniture, equipment, andtechnology provided that the bonds mature within five fiscal years after the bondsare issued.
Policy Changes Targeted Against Teachers & Association Members
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Prohibits school district employment contracts from including compensated days for professional association activities.
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Prohibits a school district from adopting policies that provide employment retentionpriority for teachers based on tenure or seniority.
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Removes the current prohibition against school districts reducing the salary of atenured teacher except under a general salary reduction applied equitably to alltenured teachers.
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Removes the contract dates (between March 15 and May 15) in which districts arerequired to offer teaching contracts for tenured teachers. Thus, there will be no datein statute set for contracts and school districts will each set their own contractnotification deadline.
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Eliminates the May 15 statutory deadline for notice of salary reduction. Insteadallows each school district to set its own salary reduction deadline for teachers.
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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 thisnotification.
 
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Removes the current statutory requirement for a school district to give a preferredright of reappointment to a job for a teacher who has lost his/her job through the
Source: Arizona Education AssociationJune 27, 2009
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