For the third straight year, state lawmakers will try to reach a deal to renew Proposition 123, the 2016 ballot measure that increased the amount of money public schools receive from the state’s land trust fund before it expired this year.
The measure increased K-12 public schools’ draw from the trust fund from 2.5% to 6.9% for 10 years to pay for an array of school district expenses. It expired last year as Republican and Democratic officials failed to come to an agreement to send a renewal proposal to Arizona voters.
When the measure expired at the end of June, public schools lost the roughly $300 million per year it added to their budgets. That cut wasn’t immediate, though, as the latest state budget included funds to backfill the lost revenue.
Lawmakers and Gov. Katie Hobbs have been talking about the need to renew the plan as far back as November 2023, when Republican legislators unveiled an proposal that would have used the money to give teachers a $4,000 raise.
Since that time, Republicans and Democrats have unveiled various dueling proposals and haggled over the details of what a new Prop. 123 would look like, including exactly how much money it should draw from the trust fund and what types of education expenses it should pay for.
Any proposal that makes it out of the legislature, where Republicans hold slim majorities in both chambers, would then go before voters on the ballot next November.
If at first you don’t succeed
Despite years of deadlock, officials from both parties said they were “hopeful” to make more progress in 2026.
“We're having conversations with the stakeholder groups, with the Republicans in terms of what their plan might look like,” Hobbs told KJZZ in November. “I don't know that we're in agreement yet, but I think when we really look at what our budget looks like, there's no question that we need that revenue for ensuring that we're paying teachers what they need to be paid, that we have quality public education.”
Lawmakers began filing bills for the next legislative session last month and, so far, no legislator has introduced a Prop. 123 renewal.
But Sen. J.D. Mesnard (R-Chandler), who sponsored a renewal resolution last year, said he is “hoping” to do that again in the next session, which kicks off in January.
He said he wants to be cautious, though, after negotiations last year were plagued by “a lot of starts and stops.”
“I don't want to keep suggesting to people that we're moving if we're not truly moving so I'm going to be a little more patient and a little more cautious,” Mesnard said. “That's not to say that I don't want to see a Prop. 123, but I just want to make sure that if we pull the trigger again that it's for real.”
The roadblocks
Midway through the last session, Republicans and Democrats appeared closer to a Prop. 123 deal after Hobbs after both sides seemed to settle disagreements over exactly how much money a new measure should take from the state land trust.
Hobbs initially sought a higher 8.9% draw, while Republicans looked to keep the number steady at 6.9% or even reduce it by a few percentage points over concerns that it could overtax the trust fund balance.
Eventually, both sides backed proposals that would keep the draw at 6.9%
But there were still other points of friction — several of which remain today. That includes disagreements over how the money should be spent.
Republicans have long insisted that all money from a new Prop. 123 should go towards teacher raises. Mesnard said that he believes that’s the best way to ensure a new Prop. 123 passes.
“I continue to believe if you want the voters to embrace this you really need to focus on teachers,” he said.
Democrats, though, would like to see the money spread around to pay for a broader range of expenses. Last year, Hobbs proposed raises for teachers and support staff along with security upgrades and other school expenses.
And then there’s the voucher question.
Mesnard indicated Republicans will again demand that any Prop. 123 renewal deal also include some sort of protections in the state Constitution for the state’s school voucher program, also known as Empowerment Scholarship Accounts — a position ardently opposed by Democrats.
“And I think when you muddy the waters with constitutional protections for the ESA program or whatever else, then you lower the chances of it passing at the ballot,” Hobbs said.
Mesnard said he would like to see protections for all educational opportunities currently available to Arizona residents, including vouchers, income tax credits for private school tuition and charter schools.
“There's a lot of interest in a broader conversation preserving much in education that we have today, especially as it relates to you know options for parents, so that's continued to be part of the conversation,” Mesnard said.
Hobbs said including that piece is “the biggest sticking point” for Democrats, who backed failed efforts to rein in the voucher program since Republicans expanded eligibility to all students in the state in 2022.
“If that were the case, it would be constitutionally protected,” Hobbs said, referring to the voucher program. “And I certainly have concerns about that.”
When she took office the next year, Hobbs said she wanted to roll back that universal expansion. But Republican lawmakers rejected that proposal and future efforts to restrict the program, which now serves nearly 100,000 Arizona students at a cost of around $1 billion.
Lawmakers don’t actually need Hobbs on board to refer a Prop. 123 renewal to voters, though the last time Prop. 123 passed — by a narrow margin — it benefited from political support from then-Gov. Doug Ducey, who actively campaigned for the measure.
