AZ Treasurer Yee Splits Republican and Democrat Teacher Pay Proposals

Arizona’s Treasurer, Kimberly Yee (R), came out strongly against Democrat Governor Hobb’s plan to raid the state’s Permanent Land Endowment Trust Fund Prop 123 extension proposal. The proposition was initially approved by voters in 2016 in response to a lawsuit brought by Arizona schools over the State’s failure to maintain school funding in the face of inflation. It increased K12 school receipts of the trust fund’s five-year value from 2.5% to 6.9%, but the proposition ends in 2024, leaving schools in a financially uncertain position. If lawmakers fail to act, the funding will revert to the state’s mandated 2.5% level, dramatically impacting school budgets.

Hobbs’ plan increases the withdrawals from the trust to 8.9%, including 2.5% for general school funding and 0.5% for safety/security capital projects. The remaining 5.9% will be split among teachers and staff, including bus drivers, maintenance workers, school nurses, office staff, and classroom support staff. Hobbs’ plan is a nod to earlier teacher contract demands that other staff receive pay raises along with the teachers.

Unsurprisingly, Republicans disagree with Hobbs, recommending a 6.9% limit reserved solely for teacher salaries. They argue that diluting the fund would be a grave mistake given Arizona’s failing educational outcomes and hemorrhaging of qualified teachers to higher paying states and jobs.

Treasurer Yee splashed cold water on both sides, advising that fund usage be limited to a maximum of 5% to ensure its long-term survival. In a statement on January 16, 2024, Yee addressed Hobbs’s plan: “It would break the bank. Governor Hobbs wants to raid the land trust to cover for her mismanagement of the state budget and overzealous spending plans in an ever-increasing inflationary environment.”

Both Democrats and Republicans see teachers as a juicy pie in the upcoming election and are tripping over themselves to be seen as the “education team.” And the fat plum, the state’s Land Trust, is the source of their fiscal desire. The trust’s 2023 end-of-tear value was $7.88 billion, with an annual return rate of just over 7%. More importantly, the fund’s overall value has nearly doubled in the last eight years, making it appear extra juicy for funding-hungry politicos at the capitol. However, Yee is sounding the alarm. In light of current inflationary market pressures, she insists that the rate of use settle at 4%-5% at the most. Anything more could threaten the trust’s base value. A 5% cap would ensure the principal remains steady while allowing modest growth even during a market downturn.

Senate President Warren Petersen appears unmoved by Yee’s recommendations.  He responded to Hobbs’ proposal with a polite but blunt statement. Petersen said, “I appreciate that the Governor is embracing our idea to use a proposition to provide teachers with pay raises. When Republicans passed 20 percent teacher pay raises in 2018, the Democrats voted no. And while we appreciate her input on the matter as a referral to the ballot, the issue is solely at the discretion of the Legislature, subject to voter approval.”

Neither side has submitted a proposal for legislative consideration, so for now, Prop 123’s looming end remains a ticking fiscal timebomb, with Arizona’s educational future its potential victim.