Future of Prop. 123 school funding is uncertain. AZ chamber CEO wants voters a get a 'clean' bill

A voter-approved measure that brings around $300 million a year into Arizona’s public school system from the state land trust expired last year, as lawmakers and the governor couldn’t agree on what to send back to the ballot.

They did agree, however, to backfill that money from the state’s general fund, so schools didn’t lose out.

But with the state budget picture looking leaner this year, there’s renewed talk about asking voters to renew Proposition 123.

Those conversations, though, still include some of the same debates from last year. There are placeholder measures that’ve been approved through committees at the Legislature, but their futures remain uncertain.

Danny Seiden is advocating for a "clean" referral — basically, asking voters to extend the same provisions they did — barely — in 2016. Seiden is president and CEO of the Arizona Chamber of Commerce and Industry. He joined The Show to talk about it.

Full conversation

MARK BRODIE: Danny, it seems less likely that the state will be able to backfill from the general fund this year. So what are the prospects right now for getting something on the ballot this fall?

DANNY SEIDEN: You're right. The state has a lot of money. People maybe weren't as concerned with this as they should have been. You know, there was a lot of debates about how they wanted to extend Prop. 123 over the past few sessions. There's no question that it was a good policy that worked. The attempts to tack other things onto it is what has kind of like slowed it down.

And not necessarily bad things, just things that are worthy of their own policy discussions elsewhere. You know, there was a big contingent of Republicans who wanted to make sure that that money that came in from Prop. 123 went to teacher pay. They want teachers to get paid more money. And that is noble and supportive.

You know, I've got three kids in public schools. The difference between a good year or a bad year is their teacher. And you want them to get paid well. I get that completely. However, it's very difficult to do that, not just from the state land trust, but the state level. That's always been a local issue. We've learned the hard way in some of our past policy attempts back when I worked for Gov. Ducey. So we know that. So that was kind of an issue.

The other is a question around ESAs and charter reforms and could we throw that in there as well, which then makes it very complicated. And when you're talking about the land trust — I always have to remind people, even 10 years ago when the state was even more of budget crisis than we are right now, Prop. 123 barely passed. So it's a great idea, but people get very itchy when it comes to the land trust. They care about it. Arizonans are big into conservation. They want to make sure we're good stewards. And so that had slowed it down as well.

But now that we find ourselves in this year looking at budget shortfalls and getting worse as it goes on in time, the time is ripe to discuss [Prop.] 123 as a way to close that. Because instantly we're talking about $300 million a year that can go into the K-12 formula that you don't have to backfill out of state budget. And that protects other programs, that protects, you know, DES and developmentally disabled folks. It protects our CTEs, our JTEDs, a lot of these other things — dual enrollment, even education that we've come to love.

Gage Skidmore/CC BY 2.0

BRODIE: Well, so you mentioned some of the policy disagreements and ideas that have been floated. There's also of course disagreements about how much should be taken out from the land trust. There are disagreements about maybe should the money just go to teachers? Should it also go to support staff and librarians? And I know that you just want sort of a straight what we've done, let's do it again.

Do you think there's a chance though that some of those other ideas could really come back? Or if you're a lawmaker, is this your chance to get some of that stuff enacted?

SEIDEN: Gosh, again, I feel like the way the courts have interpreted things like single subject, it's very risky to tack on too many different policy discussions around something like Prop.123 and how we distribute the land trust. And, again, this is really complicated. And you could do a weeklong radio show explaining how our state land trust endowment works.

And so to attempt attack on things that, again, I never want to disparage. These are worthy discussions. Are we paying our teachers enough? Absolutely not. Could we be doing a better job of how we regulate charters or how we protect ESAs? Those are all good discussions to be having, but I would advocate doing those separately than with Prop. 123.

So, again, I think history has proven you can do this, you can do it responsibly. And we should all kind of like put aside politics for one minute and say this is the right thing to do, protects the state budget. And then we can go fight it out on where that money can go to, where if there has to be cuts, where they can go to, but this is responsible and, again, it's what it's there for.

BRODIE: So what have your conversations with lawmakers been like on this? Because as you alluded to, it's both parties that are having disagreements, both between them and sort of within themselves about all sorts of different issues. So I'm curious what you're hearing.

SEIDEN: Yeah, and you know, we're not doing a, "We told you so," spike the football. Because for the last three years we've been saying, "Please just do a simple extension." It's easy. We'll work together on it. Now, because of the budget shortfall — potential budget shortfalls — we don't know the exact amount, right, Mark. Because we don't know the full level what we know as conformity. And is the state going to implement all of the One Big Beautiful Bill from D.C.? And if so, that changes those numbers drastically.

But with the budget crisis, crisis does breed opportunity. And that opportunity has been to sit down and revisit this very stable, very proven way to help close that budget gap in a way that doesn't force tough or unnecessary cuts. So our conversations with both legislative leadership and the governor's office have been much more positive.

And, again, we're trying to stay very much in our lane about budget health. In clear there's always the ESA reform discussion that creeps in. There's always the making charters more on a level playing field for them coming in. And, again, love those conversations. But on [Prop.] 123, we're staying in our lane.

BRODIE: So while I've got you here, let me ask you about something else in the news, especially given what it is you do for a living. ... I'm curious what you're hearing from some of your members about the issue of tariffs? Especially after last week's Supreme Court decision.

SEIDEN: No, no, great question. And this is all I'm talking about right now. So with members and elsewhere. But you at the chamber — I'll just start off here. ... We've been very clear from the very beginning, you know, whether you like them, don't like them, tariffs are, in fact, taxes.

Americans and companies that do business in America are the ones who pay for it. You know, the people who do the importing, they have to pay it. We have the receipts. We've said that the whole time. Going back to the Supreme Court hearing this case in November, it was clear from oral argument this was the likely outcome, that these tariffs were gonna be struck down, that the executive doesn't have the authority to do these types of tariffs. So we've been anticipating that.

The question is: What do we do going forward? Because this Supreme Court case, I would say it means that we need that clarity and durability of a tariff scheme, of how these can be applied. So that we have the reliability for things like pricing for things. You know, when you're making a trade deal, if the president can wake up, you know, one day — the joke used to be, and it was hardly a joke. You know, we're doing an interview right now. By the time this interview is done, the tariff rates could change. And that was happening. It was happening that fast.

And that's exciting and fun if you're just making the deal. But here's the thing — companies are spending billions of dollars to move here or manufacture goods here. They don't plan things out minutes at a time. They don't plan things out months at a time. It's years. We're talking about billions and billions of dollars.

And Arizona is now the No. 1 state in U.S. history for foreign direct investment, whether it's the TSMC, $165 billion and growing. We've got LG, we've got Amcor. We've got all these companies that are making these investments. The Netherlands has been here a long time. And our trade numbers, which are coming out this week, I think will reflect some changes in who our top trade partners are. That's all very exciting, but they need certainty.

So. we're excited for the decision. It backs up the fact there are, in fact, guardrails between the branches of government. However, going forward, we want to see how the president intends to use Section 232, which is something a lot of our members are even involved with.

You know, that is a lengthy process. You know, I always compare it, you know, put my prosecutor hat on from the olden days to a grand jury of sorts. You're behind doors. You are presenting evidence on whether or not something in your supply chain poses a national security threat. I think, on average, those have totaled about 270 days. That, again, that's a long period of time. That is not an instantaneous change. So, that in and of self, is a little bit more of a durable and reliable process.

BRODIE: Well, so when you talk about uncertainty, I wonder if in some ways these particular tariffs being struck down raises the specter of more uncertainty for some businesses waiting to see how the president and his administration will respond and what they might do next.

SEIDEN: You know, that's fair. Although I do feel like the Supreme Court case in the majority opinion is pretty clear that, you know, what the president's authority is under the acts of Congress. So, again, this is a good thing. You'll see this get discussed a lot with Congress.

I know there's some committee hearings coming up on potentially switching to, like a border adjustment tax. I know that's a plan from Congressman Schweikert. Which, again, changes whether you are the point of tax on an import or not and what can be deducted. There's a lot that goes into that, that's complicated. But what there is now is reliable that the channels of government are protected by our Constitution. The Supreme Court did its job, did it right.

If Congress wants to give the president more authority, they can. I think we're pleased with the decision. We look forward to working with the administration and our delegation going forward.