Trial that could change how AZ funds school facilities is over, but ruling months off

A ruling on a 2017 lawsuit challenging Arizona’s funding of school facilities likely won’t come until early 2025, a Maricopa County Superior Court judge said at the trial’s conclusion on Tuesday.

“This case deserves a wholesome review of the evidence," said Judge Dewain Fox. "They’re not easy issues. This is not a slam dunk on either side.”

The case , brought by several school districts and school groups, could change Arizona’s funding system for school facilities and put the state on the hook to provide more help for repairs and replacements.

The plaintiffs blame the state for underfunding the agency responsible for doling out school facility grants . The defense, which the Republican leaders of the Legislature mounted, blames an overwhelmed funding system on districts that lack the know-how to file appropriate requests and are unwilling to dip into their own funds when possible.

Here are some key takeaways from testimony presented during the monthlong trial.

Arizona school capital funding has increased, former schools chief says

Former Superintendent of Public Instruction Lisa Graham Keegan was called by the defense to give testimony about the evolution of school facilities funding in Arizona. She took office in the wake of the 1994 Arizona Supreme Court decision that ruled the existing school facilities funding system was unconstitutional because it created “substantial disparities” among districts by relying heavily on local property taxes.

The Arizona Department of Education had taken a defensive approach against the ruling prior to Graham Keegan’s tenure, she said, but she worked to reverse that. She agreed the system needed fixing and supported the plaintiffs who argued as much.

Graham Keegan helped draft suggestions on how to solve the problem, she said. The resulting legislation established minimum adequacy guidelines for school facilities and required the state to provide funding to maintain existing facilities and build new ones. The legislation also required the state to fund “soft capital” like textbooks, computers and buses.

Graham Keegan is arguing against the plaintiffs in the 2017 case, though, saying their stance — that the funding system is back to where it started in 1994 — is misguided.

Graham Keegan concluded the state’s support for public school capital needs has “strengthened significantly since 2019.”

The School Facilities Division distributes discretionary money through the state’s Building Renewal Grant program , which is used to maintain existing schools, and the new school facilities fund , which allocates money for new school buildings based on a formula.

Graham Keegan said the grant program regularly ran out of money, and the division annually asked for supplemental dollars to fulfill outstanding requests. Two years ago, the state Legislature doubled its grant fund appropriations to about $200 million so the division wouldn’t have to ask for supplements later.

School Facilities Division has $220M in backlogged projects

Before the new fiscal year has even begun, the School Facilities Division already lacks sufficient funds to cover the year’s needs.

According to Assistant Director Callie Tyler, called by the defense, the division has $227.3 million in backlogged projects heading into the new fiscal year, exceeding its annual allocation by tens of millions. Those projects are approved for funding once funding becomes available and would address school facility deficiencies per state guidelines.

The plaintiffs suggested the backlog is because many new schools were built at the turn of the century, when the funding system was last revamped. Those 20-year-old buildings require more maintenance as they age, and construction costs continue to climb.

Graham Keegan offered another explanation. Citing data from the Joint Legislative Budget Committee, she said state spending on the School Facilities Division increased by 86% between 2014 and 2024.

With increased funding came increased interest.

“I think that’s human nature,” Graham Keegan said. “There’s an announcement that there's much more money available in this grant fund, then the applications will go up. I’m not saying they're not necessary, I'm just saying that's what happened.”

School Facilities Division is understaffed, employees say

School Facilities Division employees called by the defense said operations in the department are stretched thin.

Tyler, the division's assistant director, testified that she requested state funding to add four new liaison positions for next year. The division is currently budgeted for six liaisons, who visit schools and help secure grant funding.

That request was denied. The division will instead face a 3.4% decrease in operational funding.

Liaison Mary Morrison, who works with about 40 districts, said her workload complicates her ability to meet with schools, and it is impossible to visit every one of her assigned districts within a year.

Shawn Masel, another liaison, said it is also tricky to devote the necessary time to training new school leaders on the grant process. She said liaisons do their best under the constraints of their workload.

State is responsive to feedback, Rep. Matt Gress says

The Arizona Auditor General previously reported four-month delays between districts submitting applications and receiving grant awards because the former School Facilities Board met only once a month to consider applications, testified Rep. Matt Gress, R-Phoenix, who was called by the defense.

Gress said his office helped craft legislation responsive to feedback from school districts and state employees while he was state budget director under former Gov. Doug Ducey.

Arizona replaced the board with the School Facilities Division and consolidated it under the Arizona Department of Administration. The move improved efficiency and got dollars to schools more quickly, Gress said.

Division employees likewise described dramatic improvements in recent years.

The division instituted sweeping updates to the online portal through which they communicate and track applications, Morrison and Masel said. Launched in 2023, the new platform allows districts to track the status of their applications and identify outstanding action items, access training videos and communicate directly with their assigned liaison.

Districts testified that the process is still “inefficient at best,” however, and money comes far too slowly.

Liaisons said some procedural complaints come from districts that don’t understand the types of projects allowed under the grant. Others inadvertently cause delays by submitting incomplete applications or failing to submit requisite forms altogether.

School Facilities Division program manager Kerry Campbell estimated 25% of districts struggle with submitting required reports on time. Campbell was called by the defense.

Districts can use other funds for maintenance needs, defense argues

In the absence of state funding, the defense suggested schools should explore other available funding sources to address deficiencies or preventive maintenance concerns.

What’s more, the defense argued, districts are not required to demonstrate financial need or prove their own funds are insufficient to address an issue before applying for a grant. That means some districts could be tapping into state funds and contributing to the backlog when they’re capable of fixing a problem on their own, the defense said.

Districts can shift funding from maintenance and operations funds to an unrestricted account that can help build buildings, repaint, purchase alarm systems and provide other replacements, the defense argued.

The defense challenged Crane Elementary School District's decision to raise employee salaries by 4% next school year, which will cost more than $3 million amid maintenance concerns. Crane Elementary serves the Yuma region. The same was said of Tolleson Elementary School District, which raised teacher salaries by 1.5% to become one of the highest-paying in the state.

Districts also have access to additional funding streams, such as carryforward, unspent funds from previous years, that can address health and safety concerns not covered by the School Facilities Division, the defense said. Tolleson Union has the largest-ever carryforward balance in Arizona history at $73 million, testified Superintendent Jeremy Calles, a witness for the plaintiffs.

The defense suggested the existence of carryforward funds, especially those worth millions, indicate districts are adequately funded.

Bonds and overrides are key, districts say

School leaders said bonds and overrides are critical to providing a safe and comfortable learning environment due to a “slow and cumbersome” grant program.

Bonds and overrides are voter-approved measures that grant districts additional funding beyond their state-allocated budgets via secondary property taxes based on limited property values. Schools couldn’t cover capital needs without them, leaders testified.

This system creates disparities between districts that pass school bond and override measures and those that do not, the plaintiffs said.

Bowie Unified School District, a rural district in southeastern Arizona, has no access to bond dollars, said Superintendent Daniel Erickson, a witness for the plaintiffs' case. Three roof repairs and a fencing project remain unfunded.

But in Yuma, Crane Elementary is using bond dollars at two schools where moisture caused tile flooring to "bubble." The state's School Facilities Division, which administers funding for building renewal, said the flooring "had not failed because it wasn’t a tripping hazard,” according to Crane Elementary’s chief of finance and operations, Dale Ponder, who the plaintiffs called to testify.

“We didn’t want someone to get hurt. I’d feel like that’s negligence if there’s something that I know is a potential liability and I don’t do anything to address that,” Ponder said.

Eric Hanushek, a senior fellow at the Hoover Institution of Stanford who has studied per pupil spending and district capital for decades, testified that there is no consistent relationship between student achievement and the amount spent on schools. The amount of money schools receive matters less than how they spend it, said Hanushek, who was called by the defense.

Hanushek noted that some researchers have drawn opposite conclusions, however.

Reach the reporter at nicholas.sullivan@gannett.com .

This article originally appeared on Arizona Republic: Trial that could change how AZ funds school facilities is over, but ruling months off