Report: Ducey education plan would cost $1B in earnings

• The report largely confirms projections laid out in Ducey%27s education-funding announcement earlier this month
• Gov. Doug Ducey%27s proposal to add %242 billion to public education over the next decade through a ballot initiative would cost about %241 billion in lost investment earnings%2C a report released Friday said

Gov. Doug Ducey's proposal to add $2 billion to public education over the next decade through a ballot initiative could cost the state about $1 billion in lost investment earnings, a report released Friday said.

The Joint Legislative Budget Committee's analysis of Ducey's plan forecasts that the state land trust's valuations under the current distribution model will be $9.5 billion in 2026, compared with a $6.3 billion fund balance under Ducey's plan. The $1 billion difference refers to forgone investment earnings because of the lower fund balance under Ducey's plan.

The report largely confirms projections laid out by Ducey and his staffers in their rollout of the plan earlier this month.

Daniel Scarpinato, the governor's spokesman, said the office was pleased by the report, saying it was "pretty much on point" with details outlined by the governor, notably the additional money that would be generated for schools under the proposal.

For example, during the first five years of the proposal, the budget committee estimates increased funding of $1.72 billion for K-12 education, compared with Ducey's estimated $1.79 billion. The committee estimates the plan would generate an increase of $344 million a year, compared with Ducey's projection of $357 million.

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When asked about the potential for lost $1 billion in investment earnings, Scarpinato said, "We would rather use these resources at a time when our schools need them on Main Street, Arizona, than on Wall Street. We think the schools need this money — we're hearing it from parents, we're hearing it from teachers. This is a way to get a cash infusion in, and it protects the fund."

Under Ducey's plan, schools would get an extra $300 per student, per year, to boost per-pupil funding by the state from the current $3,400, which is the lowest in the nation. Before it can go to voters, however, the Legislature needs to pass a resolution to put it on the November 2016 ballot.

Ducey's proposal requires no tax increase but hinges on public support for increasing funding from the state land trust's permanent fund, from 2.5 percent to 10 percent, each year for the next five years. It would then drop to 5 percent before expiring at the end of 2026.

The plan builds on a previous ballot proposal that Ducey, as state treasurer, successfully promoted in 2012. That plan increased the amount of money coming to schools from the land trust's permanent fund to a steady 2.5 percent a year, which has equaled $80 million annually.

When it became a state, Arizona was given 9.3 million acres of land to be held in trust, primarily for the benefit of public education. The state invests proceeds from land sales and leases to grow the fund, which currently stands at $5.1 billion.

Some have questioned whether the plan would erode the state's long-term ability to use the trust to fund public schools, noting that a 10 percent annual withdrawal would reduce the fund's principal.

The JLBC report indicates the principle would grow as does Ducey's plan.