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PolitiFact Sheet: What you need to know about Proposition 123

By Anthony Cave May 9, 2016

Headed to the polls to vote on Proposition 123 May 17? Here’s what you need to know:

The proposal: Proposition 123 would add $3.5 billion to state education funding over the next decade by diverting money from the state’s land trust.

What are state trust lands? When Arizona was on the verge of statehood in 1910, the federal government "trusted" the state with more than 9 million acres of land. The state is able to earn revenue on this land from selling portions of it.

What does this have to do with public education? The State Land Department, created in 1915, came up with 13 beneficiaries for the federal land. K-12 education is the lead beneficiary.

Every year, 2.5 percent of the money earned from the land trust goes toward K-12 education.

Usually that money comes from the revenue generated off the land sales. Prop 123, which would increase the contribution to K-12 education to 6.9 percent, could force the state to eat into its principle, experts say.

The trust currently stands at more than $5 billion.

"It’s like taking the land itself," Arizona State University real estate expert Mark Stapp said. "You’ll be distributing funds greater than what it’s earning."

So where does the money go? It’s important to note that the $3.5 billion, if Prop 123 passes, is not specifically designated to go into the classrooms. According to the bill passed in the state Legislature, the money is defined as "basic state aid." So, school districts can spend the funds however they see fit. However, the money must still be used for public education.

The money allocated to districts would vary and be based on a complex formula, including the tax-base and number of students.

What about per-student funding?  Prop 123 is estimated to increase total funding, including state, federal and local sources, from the average of $8,599 per student to $8,917 per student, about $300. That’s still less than the national average of $12,380.

At least 20 school districts in Maricopa County, based on fiscal year 2015 data, fund students less than the state average. Take a look at the map below:

Is the money guaranteed? For the most part. If the economy were to tank, the inflation on the money could be stopped by the state.

"There are some triggers that would allow them to stop paying the inflation," Arizona Department of Education spokesman Charles Tack said.

What happens after 10 years? That’s the argument for many who are against Prop 123. Critics argue that it depletes the state’s land trust, which could hinder future generations of funding children. After the decade, funding levels would vary "based on market conditions," according to ASU policy analyst Dan Hunting.

What else does Prop 123 do? This law would settle a lawsuit filed by school districts in 2010 who claimed they did not receive mandated public education money from the state during the recession. Schools did not receive the inflation increases, which could total more than $1 billion, that they were entitled to during the recession. The original money was borne out of Proposition 301, which passed in 2000, allowing for an additional 0.6 percent sales tax.

What if Prop 123 doesn’t pass? According to Hunting, the lawsuit against the state would continue in court. The court battle could take years.

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Our Sources

Interview with Arizona Department of Education spokesman Charles Tack, May 3-4, 2016

Interview with Arizona State University policy analyst Dan Hunting, May 4, 2016

Interview with Arizona State University real estate expert Mark Stapp, May 3, 2016

Arizona House of Representatives, "House Concurrent Resolution 2001," accessed May 9, 2016

Arizona State University, W.P. Carey School of Business, "State Trust Lands and Education Funding," accessed May 9, 2016

ABC15, "Governor Doug Ducey pushes Prop 123 education plan," accessed May 9, 2016

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PolitiFact Sheet: What you need to know about Proposition 123