Tax on wealthy to fund Arizona schools spurs election fight

FILE - In this April 30, 2018, file photo, teachers rally outside of Arizona Gov. Doug Ducey's Executive Tower in Phoenix on their third day of walkouts. Public schools in Arizona that have weathered a decade of funding cuts with only partial restoration could see a big infusion of cash if a ballot measure backed by teachers and advocacy groups passes in November, but opponents say Proposition 208 will hurt the economy and only bring partial relief.

PHOENIX (AP) — Public schools in Arizona that have weathered a decade of funding cuts with only partial restoration could see a big infusion of cash if a ballot measure backed by teachers and advocacy groups passes in November, but opponents say Proposition 208 will hurt the economy and only bring partial relief.

The Invest in Education Act would impose a 3.5% tax surcharge on income above $250,000 for an individual or above $500,000 for couples. Proponents say it could raise about $940 million a year for schools, although the Legislature's budget analysts estimate comes out to $827 million a year.

Either way, it would be a big boost to school funding, with half the money earmarked for teacher raises. A quarter would go to raises for teacher aides, counselors, bus drivers and other support staff, 12% for career and technical education and the remainder on teacher training and retention programs.

The initiative is the latest outgrowth from a statewide teacher strike two years ago that highlighted low wages for educators and a slow rebound from budget cuts enacted during the Great Recession. The walkout secured higher wages for teachers, but many education interest groups said it fell short.

The state's K-12 schools will receive about $5.6 billion in state funding in the current budget year, about half the state's general fund spending. There are 1.1 million public school students in either traditional or charter public schools.

Proponents say the Republican-controlled Legislature and GOP Gov. Doug Ducey have had plenty of time — and fair warning — that education advocates planned to go to the voters for funding if they did not act. The Arizona Supreme Court blocked a similar ballot measure two years ago, and proponents said they would be back this year with a similar measure if the Legislature didn't come up with a plan to raise school funding.

“So our opposition had two years and really all the years before that to come up with a plan to fund our schools and they failed to do so,” said David Lujan, spokesman for the Yes on 208 campaign, and head of the progressive group Arizona Center for Economic Progress.

Business groups are leading the charge against the measure, arguing that it will hurt the state's economy and small businesses in particular. Most small business owners pay taxes at the individual level.

“Arizonans are going to have to ask themselves whether a dramatic income tax increase is the right policy prescription in the middle of a pandemic that has injected tremendous uncertainty into the Arizona and national economies," said Garrick Taylor, a spokesman for the opposition, which is backed by the Arizona Chamber of Commerce and Industry.

The tax is levied on income above $250,000 for an individual or $500,000 for a married couple. Currently, those taxpayers pay a 4.5% rate on money earned above that amount. The extra 3.5% tax would cost the average taxpayer earning between $500,000 and $1 million an extra $5,459 yearly, according to the Legislature's budget analysts.

The Legislature has pumped significant cash into schools in recent years, including a 20% percent pay raise over three years that was prompted by the strike. And voters also approved a referendum backed by Ducey in 2016 that increased funding out of the state land trust by more than $300 million a year for 10 years. That settled a lawsuit filed by school districts.

The final $125 million teacher raise was included in the state budget that was approved in March. Inflation-adjusted per-pupil spending is now above 2012 levels, but advocates argue schools have not been repaid about $2 billion in cuts over the past decade, and have had to shift cash from teacher salaries to other needs like building repair, buses and technology.

That's left Arizona with a teacher shortage and pay near the bottom nationally, even with the 20% raise.

Lujan argues it would take an additional $4 billion in spending to bring Arizona up to the national average for school spending, something no one believes is possible.

“But we feel if we can at least make a significant stride forward that our schools can do a lot with those additional resources,” Lujan said.

Taylor said the new tax will result in job losses and crimped economic growth. Opponents also argue that there's no additional accountability for the spending.

“This is an up or down vote in November whether Arizona should be thrust onto the top 10 income tax rates nationally,” Taylor said. “We would argue that that is bad policy and terrible timing.”

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