Voters to decide fate of Peoria Unified School District

District stands at a precipice with 2 funding measures

Posted 6/8/20

As the Peoria Unified School District moves into a new normal of educating its students, it is already dealing with financial struggles caused by the COVID-19 pandemic.

But the district will take an even bigger hit if an override on the ballot in November fails, experts say.

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Voters to decide fate of Peoria Unified School District

District stands at a precipice with 2 funding measures

Posted

As the Peoria Unified School District moves into a new normal of educating its students, it is already dealing with financial struggles caused by the COVID-19 pandemic.

But the district will take an even bigger hit if an override on the ballot in November fails, experts say.

The district’s current 13% maintenance and operations override funds people and programs — teacher and counselor salaries, nurses and K-12 kindergarten, to name a few.

If it is not renewed by voters in the general election, it will lead to massive cuts in these areas.

The district would be forced to layoff health care professionals and assistant principals at all district campuses, putting the district in a safety deficit.

RELATED: Peoria Unified bond could fix millions in needed facility upgrades

Officials say it would be devastating to the future of the district.

“As a superintendent [the bond and override] are both important. They are both critical,” Superintendent Linda Palles Thompson said. “But if had to pick, it would be the override. Not passing it will cause us great angst in what we will have to do.”

CFO Michelle Myers concurred.

If the override is not approved, the district will go into mandatory budget reductions beginning in fiscal year 2021, with $26 million cut annually, resulting in pay cuts for all staff members, she said.

“It could have long-standing consequences for the district for years to come,” Ms. Myers said.

The November ballot will offer two school funding related measures for voters to decide on at the ballot — a 13% maintenance and operations override, as well as a $125 million bond, which will fund facility improvements.

The district has long faced opposition for school funding measures from the senior citizen community and others who are against tax increases.

But this time around, the district is offering something different — if voters were to approve both the override and bond, it could net residents a combined tax rate decrease, according to PUSD officials.

Tax decrease?

The maintenance and operations override is funded from residents’ secondary property taxes within the Peoria Unified School District. This is not full cash value, or market price, as listed on Zillow or Redfin, rather limited assessed valuation.

In recent years, the district has experienced a decrease in combined secondary property tax rates related to the current 13% M&O override and existing bond sales — down from $3.26 per 100,000 of limited assessed value in fiscal year 2017 to $2.92 in fiscal year 2021.

Ms. Myers said the combined existing and new bond property tax rate are projected to decrease over time. As the district continues to pay off existing bond sales, and manages the size and amortization of future bond sales, assessed property valuation levels in the district will remain at least at fiscal year 2021 levels in the future.

She said that if both initiatives are approved by voters in November, the potential for the combined tax rates to continue to decrease exists.

However, she said, a tax decrease is not guaranteed because a flat or decreasing tax rate for the continuation of the override is dependent on external factors including the assessed value of property in the district, annual student enrollment, annual funding and other factors that can increase the revenue control limit and associated property taxes.

“The reduction in the bond and M&O override tax rates has in part been a result of the increased assessed valuation within the district’s tax base in recent years,” she said. “The M&O override tax rate calculation is a very conservative estimate due to the requirement to project the fiscal year 2022 revenue control limit with the prior year’s assessed valuation.”

Compromise

Bonds and overrides are common mechanisms districts turn to for additional funding.

Funding is about to run dry from PUSD’s last bond authorization, approved by voters in 2012.

The district has about $14.6 million left from that $180 million bond.

An override is in place for seven years.

The current 13% override was approved in November 2015 and went into effect in July 2016.

If this override initiative fails, the additional maintenance and operations annual funding from the override will begin to phase out and be fully eliminated over three years.

Last year, PUSD asked voters to approve a 15% override which would have put the district up to par with all other districts of similar size in the Valley. The attempt failed by 133 votes.

Matthew Bullock, Support Peoria Students PAC chairman and former PUSD governing board president, said that amounts to only four votes per campus.

Many educators and administrators say this year’s proposed 13% override and bond, which only addresses critical needs, is a compromise for those voters who don’t want a tax increase.

Mr. Bullock said the highest percentage voting bloc in the district are most concerned about the tax implications.

He said this override will not raise the tax rate since it is just a continuance of the existing override, and the bond will actually be sold to create a tax rate decrease as the interest rate is now lower than the 2012 bond.

“The 2012 bond has been paid down by quite a lot, freeing up financial capacity for this new bond,” he said. “With the paying-down of the 2012 bond and favorable interest rates, the Peoria school district 2020 bond will result in a lower tax rate while still paying for necessary repairs and maintenance. This allows all sides to get what they want as no one wants to pay more than their fair share in property taxes and no school should be allowed to fall into disrepair.”

Tough time to tax

No person has been left untouched by the COVID-19 pandemic, which has pushed the economy into a spiraling downturn bringing with it an unemployment rate not seen since the Great Depression.

Bond and override committee members Rick Gutridge and Kirk Hobbs, seriously considered this as they weighed possible recommendations for a bond and override to the governing board.

They advocated for smaller funding requests: a 12% override and a $70 million bond.

Mr. Gutridge said they better balanced PUSD’s needs with those of the community, while the proposals headed to the ballot are likely to fail this November.

He said eliminating a single line item to pay for additional district staff salaries and benefits would have allowed for the 12% override.

“With such a move, PUSD could have demonstrated a little empathy for our community and helped garner support for passage of an override in November,” he said.

Mr. Gutridge said a small bond was absolutely needed to address the appalling conditions in some of the elementary schools in southern Peoria.

Families and small businesses have born the brunt of the COVID-19 shutdown and PUSD’s excessive bond and override amounts just ask too much of the community in this time of economic crisis and uncertainty, he said.

“Mr. Hobbs and I argued that the committee at least present this as an option for the governing board to consider. The committee majority, comprised mostly of PUSD employees, refused,” Mr. Gutridge said.

“Once again PUSD has asked for too much, especially right now. This is truly unfortunate, especially considering how hard Superintendent Linda Palles-Thompson and Chief Financial Officer Michelle Myers have worked to reach out to the community and consider their concerns.”

Voters will have the final say

Arizona school districts have a history of needing bonds and overrides to fill in the funding gaps where state funding falls short. PUSD asked for bonds in 2012, as well as in 2005 and 2002.

As far as funding for people and programs, the district has been supported by overrides for the last 24 years. District voters first approved a 10% override in 1996 and renewed it again in 2001, 2006, 2010. Most recently, voters approved an additional 3% in 2015.

However, PUSD has experienced a wave of failures at the ballot box in recent years — bonds failed in 2016 and 2018 and the 15% override failed last year.

Chuck Essigs, director of governmental relations with Arizona Association of School Business Officials, said PUSD has been trying to find something that will be acceptable to their electorate.

Overrides were originally put in place in the 1970s, and prior to 1980, overrides were permanent.

He said they used to be used for special purposes, but now they are used for day-to-day operations.

“It’s lost its special purpose over the years,” Mr. Essigs said. “Now it is used just to keep afloat.”

Arizona is 48th in the state, including overrides, for per pupil funding, according to the U.S. Census. Mr. Essigs said districts are operating on 1/3 less funding than the rest of the country. That is why overrides are so important — Arizona schools are already at the bottom and without overrides they would be at an even greater deficit, he said.

Additionally, property taxes in Arizona are lower than most states — some areas in the West Valley don’t even pay secondary property taxes — yet, Mr. Essigs said, raising them is very hard.

This has led some to consider long-term solutions to increase education funding such as a state-wide property tax or higher income taxes for those in high income brackets.

Bills have been considered at the Arizona legislature to replace and expand Proposition 301, which increased the state sales tax from 5% to 5.6%, dedicating the increased revenues to public education.

Mr. Essigs said schools that are not funded well drive away good businesses and decrease property values. Leaving school funding up to the voters could put children at risk, he said.

“It’s not the ideal way to fund schools,” he said.

 Philip Haldiman can be reached at 623-876-3697, phaldiman@newszap.com, or on Twitter @philiphaldiman.

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