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Tight race for Proposition 118 on stabilizing trust land payouts

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Tuesday, Nov. 6, 2012
By Tian Chen
Cronkite News

PHOENIX – The fate of a ballot measure intended to stabilize trust land payouts to K-12 education in Arizona remained too close to call Tuesday night.

Unofficial returns showed Proposition 118 trailing by about 1 percentage point.

The proposition addressed the formula used to calculate the annual distribution amount to public schools from the State Endowment Trust Land Fund. The money comes from selling and leasing millions of acres of state trust land.

Arizona State Treasurer Doug Ducey sought the change, which was scheduled to take effect next year, saying it would provide a more reliable stream of revenue for schools.

Ducey suggested a formula that would base the payouts at 2.5 percent of the average market value of the fund for the past five years.

The current current formula relies on the fund’s five-year average rate of return less a federal inflation rate adjusted for changes in consumption patterns and multiplied by the fund’s average market value over five years.

That formula produces zero payouts when the adjusted inflation rate is equal to or greater than average returns.

The fund has generated about $377 million for beneficiaries over the past decade, but annual payouts have ranged from about $78 million in fiscal 2012 to nothing in fiscal 2010.

The Arizona Education Association, the state’s largest teachers union, argued that the change would help save teachers’ jobs and reduce uncertainty for schools.

“I hope it does pass,” said Andrew F. Morrill, the group’s president. “Educators in Arizona are suffering from a great deal of chaos on the malfunction of school funding and federal funding cuts.”

According to the Treasurer’s Office, the new formula would provide $60 million to $80 million of grants each year. For fiscal 2013, it projected, trust beneficiaries would receive around $75 million under the new formula and between $25 million to $30 million under the current formula.

Projected payouts using the current formula range from $170 million in fiscal 2015 and nothing from fiscal 2017 to 2021, assuming moderate returns on investments, according to the Treasurer’s Office.

Uses for the money in K-12 schools include teacher salaries, programs that help students prepare for the AIMS test, reducing dropout rates and professional development.

Other beneficiaries of the trust fund include public universities, state hospitals and schools for the deaf and blind.

Expect More Arizona, a group advocating for education, registered a committee supporting Proposition 118 and contributed $16,874 to the effort through Oct. 25, according to the Arizona Secretary of State’s Office.

There was no organized opposition to the measure.