Prop. 123 education funding renewal effort falls short

With Proposition 123, an additional education funding stream through the State Land Trust fund, set to lapse at the end of the next fiscal year, both parties brought out sweeping plans to retool and renew the measure.

Republicans got out in front with a plan to send the money solely to teachers’ salaries, which was followed by a counter plan from Gov. Katie Hobbs and the Democratic caucus to extend a pay raise plan to all school personnel, with a higher draw from the state land trust.

But negotiations stalled, and any and all measures to continue Prop. 123 lost momentum given a lack of collaboration with education groups and discordance among lawmakers, both along party lines and within the Republican caucus, leaving Prop. 123 to likely be decided by a new Legislature next year.

“It was rolled out and then left for everybody to react to,” Chris Kotterman, director of government relations for the Arizona School Boards Association said.

Prop. 123, passed by voters in 2016, increased a cut from the state land trust to schools from 2.5% to 6.9% for ten years. The measure was fashioned as part of a settlement agreement in a lawsuit brought by school districts against the state for failing to keep funding in step with inflation.

The July 1, 2025, expiration date left an opportunity for lawmakers to continue or revamp Prop. 123 and send a measure to voters in the 2024 general election to avoid a reset in the funding stream.

Republicans seized on Prop. 123 first and pitched a plan to keep the same 6.9% distribution rate, but allocate the funds solely to teacher pay.

Hobbs and Democrats followed with a plan to increase the distribution rate to 8.9% and allocate the funds to a pay raise for educator and staff, with other earmarks for general school funding and school safety and security capital projects.

State Treasurer Kimberly Yee lodged her opposition to both plans and recommended a 4% to 5% distribution rate.

In session, both plans from Democrats and Republicans materialized in legislation, but only Republican proposals made it through committee.

Senate Concurrent Resolutions 1034, sponsored by Sen. Jake Hoffman, R-Queen Creek, recommended the 6.9% distribution rate with a sole allocation to teacher pay but defined an eligible teacher, with teachers in the two lowest performance evaluation categories ineligible for increased pay.

The measure passed the Senate Education Committee but saw opposition from education groups and Democrats for tying the pay raise to performance and for failing to include additional school staff.

In the House, House Concurrent Resolution 2047, sponsored by Rep. Matt Gress, R-Scottsdale, made it through committee, too, but was amended to reduce the distribution rate to 5.5%.

The measures never made it to the floor, with no path to success among the Republican majority and a steady opposition from Democrats and school groups.

“No one was really behind the effort enough to push it across the finish line and send it to voters,” Kotterman said.

Marisol Garcia, president of the Arizona Education Association, noted a lack of stakeholder input through the entire formation of legislation around the continuation of Prop. 123 gave the appearance of “a campaign stunt for people who are running for office.”

“When we asked where is this money coming from? Did you work with multiple stakeholders? Do you have different groups at the table?” Garcia said. “None of that happened. Good policy should be able to withstand people who are critical of it.”

Democrats and education group leaders noted a desire to wait until the next session, given a potential swing to a new majority at the Legislature.

Beth Lewis, executive director of Save Our Schools Arizona, said she thought the failure to advance any Prop. 123 alternative “is for the best.”

“The entire education community is relieved because nobody wanted Prop. 123 that was unfair or had provisions that would be hurtful to public schools Getting out of session with nothing happening was a good thing,” Lewis said. “I'm optimistic that should the Legislature flip or get new leadership that a really good package could go to voters.”

Kotterman added the failure to renew it led to “sacrificed momentum,” which will prove to be a challenge in eventually getting the next iteration of Prop. 123 across the finish line.

In 2016, Prop. 123 was narrowly approved by voters and required large swaths of bipartisan and industry support, leaving lawmakers and education groups emphasizing the importance of a large coalition behind the measure in order to see it through.

And timing is of the essence, too, given the July 1, 2025 deadline, prompting talk of a special election.

“It's an easier ask to ask the voters to continue that stream,” Kotterman said. “There's a desire to sort of strike while the iron is hot. It’s on people’s minds.”

 

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