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What is the aggregate expenditure limit?

Arizona schools and the state legislature have been in the news recently over the aggregate expenditure limit, but what does that really mean? To fully understand we must go back to 1980, when Arizona voters passed a measure that limits how much Arizona schools (K-12) can spend within a school year. This became known as the aggregate expenditure limit. However, we must also understand that this limit fluctuates each year depending on enrollment and inflation, and that most school funds are counted towards this limit, but federal monies are excluded. It is also important to note that charter schools are not included in this spending limit since they are relatively new to Arizona and were not around when this measure was passed in 1980.

For many years this was not at the forefront of the news because it did not affect schools as greatly as it could today. A few reasons this is in the news today is due to the COVID-19 pandemic. Most schools in the state of Arizona have seen a decrease in their enrollment since the pandemic began. As previously noted, enrollment is a factor in determining the aggregate expenditure limit. Another issue for schools is Proposition 301 funding. This was passed by voters in 2000 to levy a six-tenths of a cent sales tax to support education. This was set to expire in 2020, but instead was extended in 2018 by the governor and the legislature. However, in 2002 voters passed Proposition 104 to exclude Proposition 301 funding form being included in the aggregate expenditure limit calculation. Unfortunately, when Proposition 301 was extended in 2018, a Proposition 104 extension was not included. Since Proposition 301 generates $600 million in funding, these monies are now included in the 2022 aggregate expenditure limit.

Fortunately for Arizona schools, legislature still has the power to allow schools to exceed the aggregate expenditure limit for the current school year. This can be done one year a time, with a two-thirds vote needed to pass. Legislature has until no later than March 1, 2022 to pass this allowance for the current year. By doing so, Arizona schools would have the authority to spend monies they already have. In total Arizona schools have about $1.1 billion in jeopardy for 2022. If schools are unable to spend these monies it would be difficult to avoid lay-offs and cuts to programs or services provided to students. While the legislature has the power to help in 2022, a longer-term solution should be considered and introduced into legislature in the near future.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

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