Arizona State Treasurer Kimberly Yee wasted no time in assessing Governor Katie Hobbs’ new Prop 123 funding scheme “dangerous and unsustainable.
On Tuesday, Hobbs announced her renewal plan for Proposition 123 intended to “raise compensation” for teachers and support staff.
According to Hobbs, the plan will “expand on the current Prop 123 funding to continue building a quality public education for the over 90% of Arizona children who attend public schools.”
“Governor Hobbs just announced her proposal to increase Prop 123 distributions to 8.9%,” said Yee in a press release. “The Governor’s proposal is dangerous and unsustainable. It would break the bank. Governor Hobbs wants to raid the land trust to cover for her mismanagement of the state budget and overzealous spending plans in an ever-increasing inflationary environment. That is irresponsible and doesn’t look out for the long-term vision of Arizona, and this land trust was put in place for our state’s future.”
“As Treasurer, I oversee the management of the Permanent Land Endowment Trust Fund (PLETF) and oppose the Governor’s egregious proposal,” continued Yee. “The purpose of the PLETF is to provide an ongoing revenue stream to the beneficiaries from the proceeds of any of the land entitled to the beneficiaries. That land is to provide an income stream to the beneficiaries and the Endowment was created to replace that revenue stream from the land holdings. Continuing at a 6.9%, or increasing the distribution to 8.9%, will likely dip into corpus and violates the terms of the Enabling Act, under which Arizona became a state.”
According to Yee, “Wall Street forecasters predict a 5.45% return for the next decade on a 60/40 portfolio like the PLETF. My office will continue to make the financial recommendation of a 4-5% distribution, as it is prudent and consistent with what most Endowments distribute annually. My office has not reported a 10-year return above 8.9% in nearly two years. Over the span of the last 10 years, only 32 months have had a 10-year return over 8.9%. In short, this means an increase to 8.9% is unfeasible based on past performance.”
As noted by Yee, Hobbs’ plan extends Prop 123 for ten years, increases the State Land Trust Permanent Fund distribution to 8.9%, and proposes this dedicated split:
- 2.5% of the distribution will continue general school funding ($257 million projected 10-year average distribution)
- 4.4% of the distribution will raise educator compensation ($347 million projected 10-year average distribution)
- 1.5% of the distribution will increase support staff compensation ($118 million projected 10-year average distribution)
- .5% of the distribution will invest in school capital for safety and security ($39 million projected 10-year average distribution)
“We have a once in a decade opportunity to invest in a public education system that gives every child the opportunity to succeed,” said Hobbs in her announcement. “We can increase compensation for educators and make schools safer for our kids, all without raising taxes on Arizonans. Or we can let billions of dollars accrue in a bank account and do nothing to address our immediate needs. The choice is clear. My plan is a critical step toward ensuring every Arizona child can get a quality and safe public education while addressing our teacher shortage. I look forward to working with Republicans and Democrats in the legislature to send Prop 123 back to the ballot and making these critical investments in public education.”
Prop 123 was crafted by former Governor Doug Ducey in an effort to settle a lawsuit over school funding. Then-Treasurer Jeff DeWit, along with the League of Women Voters and a bipartisan coalition, opposed the funding scheme that they claimed put the State Land Trust Fund at risk.
Voters narrowly approved it in 2016.
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