Arizona Voters To Decide Final Outcome Of The Invest In Ed Movement With Proposition 208
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Two years ago, advocates behind a proposed income tax surcharge that aimed to raise money for public education — the Invest in Ed initiative — suffered a huge blow when the court ruled to remove it from the ballot. Arizona’s education funding hasn’t improved much since 2018, said Joe Thomas, president of the Arizona Education Association.
“We’re still ranked in the bottom five in per pupil funding,” he said. “We still have a shortage of people willing to work in our schools, and class sizes are too high, the support is too low and the pay is too low.”
The initiative was reintroduced this year and it was nearly removed from the ballot for a second time, but the Supreme Court let it stay.
Now the future of the Invest in Ed, Proposition 208, is in the hands of the voters.
This election comes as the state and country continue to battle the ongoing COVID-19 pandemic. Supporters say Arizona schools need this now more than ever, but opponents argue that it could hinder the state’s economic recovery and future growth.
A ‘Critical Piece’
Arizona has had a severe teacher shortage for at least six consecutive years, which Thomas said contributes to large class sizes, but COVID-19 pandemic may be exacerbating the problem. A recent survey by the Arizona School Personnel Administrators Association found that 326 teachers resigned or retired since the beginning of the school year due to COVID-19.
Thomas and others are hoping to solve these issues through Proposition 208. Projections by supporters estimate it would raise $940 million for public education in Arizona through a 3.5% income tax surcharge on taxable individuals incomes over $250,000 for single filers and over $500,000 for joint filers.
Three-quarters of the money will go toward hiring and raises for teachers and other personnel such as nurses, counselors, classroom aides and bus drivers. If Invest in Ed passes, it would be the first time the state has voter protected funds for classified staff in schools, Thomas said.
“The educators that I hear from, see Invest in Ed, as an absolute critical piece of making sure that we can reduce class sizes so we can have more socially distanced classrooms, so we can bring counselors and social workers to deal with the stress that students are under and the stress that educators are under,” Thomas said.
The rest of the funds will be used to fund programs such as Career and Technical Education and create a mentoring system for new teachers.
An analysis by the state’s Joint Legislative Budget Committee staff estimates that the amount raised in the first year of implementation would be lower — $827 million.
It said the amounts collected after the first year are also difficult to predict because revenues from high-income taxpayers tend to be more volatile year-to-year than individual income taxes in general. Other factors that add to the uncertainty include whether wealthy Arizonans will leave or shift income out of the state because of the new tax surcharge or higher tax rates will reduce business investment, the analysis said.
David Lujan, director of the Arizona Center for Economic Progress and one of the authors of the initiative, said he feels like the revenue source for Proposition 208 makes sense, particularly in an economic downturn like the one we're in.
“For people struggling, for struggling small business owners, they will not pay one cent in additional tax under Prop 208,” Lujan said. “This will only increase taxes on the wealthiest Arizonans, 1% of Arizonans, people that even during these difficult economic times are still doing very well so I think it makes a lot of sense as a revenue solution.”
A poll released last month by Monmouth University found that 66% of Arizona voters are in favor of the measure, while 25% are against it.
Bad Then, Bad Now
Opponents are continuing to push back with a series of ads and reports that question whether Proposition 208 will accomplish what supporters promise it will. The No on 208 campaign casts says half of those impacted by the proposed tax would be small businesses, which would be devastating for them and their employees.
“Small businesses across the country have closed their doors because of the COVID-19 pandemic, and now small business owners in Arizona may be dealt a further blow under Proposition 208,” said Goldwater Institute President and CEO Victor Riches. “Arizona should be focusing its efforts on creating a friendly climate for economic rebuilding and growth — not taking steps to hurt our state’s job creators and entrepreneurs.”
The opposition group includes state leaders such as Gov. Doug Ducey, Arizona State Treasurer Kimberly Yee, the Arizona Chamber of Commerce and Industry, and Jaime Molera, who served as the state’s superintendent of Public Instruction in the early 2000s. He’s been spearheading the fight against Invest in Ed since 2018.
“We believed it was bad then and it’s also bad now,” he said.
Molera said he and other businesses he works with agree that there needs to be ongoing investment in the state’s public education system, but in Molera’s opinion, it needs to be coupled with a look at other important issues such as accountability and educational attainment.
“This does nothing on any of that and it creates a very harmful economic structure,” he said, adding that he was surprised that the supporters moved forward with Invest in Ed despite the ongoing pandemic, a time when the state needs to recover as quickly as possible so it doesn't suffer large revenue decreases.
A report by the conservative think-tank Goldwater Institute says Proposition 208 could lead to suppressed wage growth, dampened business recruitment and result in loss of more than 100,000 jobs in its 10th year of implementation. The report estimates that this would result in a loss of at least $2.4 million in state and local tax taxes over the same time period.
“One of my bigger concerns is these monies will be protected,” said Jim Rounds, one of the report’s co-authors. “The economic losses will translate into tax revenue losses and that’ll hit the state budget which means it’ll have to make up those economic lost tax dollars somewhere else and it usually falls on the universities, but it could fall in any particular group.”
But the analysis by the Joint Legislative Budget Committee Staff found that Proposition 208 could have the opposite effect. It says increased spending on teachers salaries and other educational expenses may provide a fiscal stimulus, which may lead to higher General Fund sales and income tax collections.
“I’m really excited about what this will do for rural Arizona’s economy because you’ve got a lot more people in those towns who are going to have more money in their pockets to go to the local businesses and eat out in restaurants and do things obviously when our economy opens up again,” Lujan said.
The final outcome of Proposition 208 will be decided next month by Arizona voters. If it passes, the surcharge would be implemented beginning 2021. The revenue generated would be available to schools the following year.
