Judge holds hearing on whether state must make back payments for school inflation funding

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PHOENIX — A judge in Phoenix on Monday began hearing testimony on whether Arizona must provide back payments to public schools for years the Legislature did not provide yearly inflation adjustments to education budgets.

Maricopa County Superior Court Judge Katherine Cooper is being asked by school districts to order Arizona to pay more than $1 billion for years when lawmakers didn't provide the annual funding boost required by voters when they approved a tax increase in 2000.

Lawmakers stopped providing the annual boosts in 2009, when state revenues were decimated by the Great Recession. Schools sued, and the state Supreme Court ruled last year that inflation adjustments were required.

Cooper then ordered Arizona to increase school funding in the current budget year by about $336 million and continue those boosts in future years.

Cooper is now taking testimony on whether the state must make back payments, now estimated to be just over $1 billion.

With the state already facing a deficit for the coming budget year and orders to pay future boosts, state lawyers told Cooper that the payments are impossible to make and would decimate taxpayers.

"It's too much to ask of the taxpayers, it's too much to ask of all citizens, it's too much to ask of their children and it's too much to ask of their future," attorney Bill Richards, the Legislature's trial lawyer, told Cooper. "It's impossible."

Lawyers for the school district disagreed, saying Arizona owes the money and can find ways to pay.

"We think it's quite possible," said Don Peters, the lawyer for the school districts. "There's several ways that the Legislature can provide the funding that we're after.

On the top of the list are corporate and other tax cuts the Legislature passed while they were cutting school funding that are being phased in. In the coming budget year, those cuts are estimated to cost the state $100 million in revenue.

"The people directed that this money be paid," Peters said. "We're asking the judge to make the Legislature do what they were required to do by their oaths of office and under the Constitution when the people give them the direction."

The Legislature is already appealing Cooper's July order, and any decision she reached on back payments is virtually assured to be appealed as well.

Cooper will hear testimony this week from school officials about how they need the money to repair facilities, invest in textbooks and technology and give teachers long-delayed salary boosts. The state will argue that a proposal to pay out the money over five years can't be done because of a limit on state debt and that other state services would be cut to make up for the retroactive school payments.

Peter Gentala, the general counsel for the House of Representatives, said the judge will need to consider whether the economic foundation that Gov. Jan Brewer and the Legislature set up by making the tax cuts "will be completely broken up as we try to emerge from a very, very difficult economic recession."

Cooper is expected to hear testimony through Friday and issue a written ruling later.

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