■ Chris Thomas, General Counsel/Director of Legal and Policy Services

1. Legal Update ■ Chris Thomas, General Counsel/Director of Legal and Policy Services Arizona School Boards Association | www.azsba.org

2. Legal Update School funding litigation Vouchers Recent legal questions of interest Arizona School Boards Association | www.azsba.org

3. School funding litigation – Cave Creek USD v. Ducey • Coalition of educational organizations led by ASBA challenging FY2010-11 FY budget in which the Legislature failed to fund inflation in the manner required by Prop. 301 (an inflation factor applied to base level plus other components of revenue control limit); $55 million difference in two approaches of calculating mandate. Arizona School Boards Association | www.azsba.org

4. School funding litigation – Cave Creek USD v. Ducey State’s position: Appropriations are inherently a legislative prerogative and the people cannot compel the Legislature to spend money from General Fund which must go through the appropriations process which is purview of Legislature and courts cannot second-guess this political process; also, Prop. 301 was neither an initiative nor a referendum Arizona School Boards Association | www.azsba.org

5. School funding litigation – Cave Creek USD v. Ducey Plaintiff’s position: The people are sovereign. The people, through the initiative/referendum process can direct the Legislature to spend money on issues that they believe in and the Legislature are bound to follow; Prop. 301 was a referendum, not an initiative. Failure to fund inflation violation of Prop. 105 Voter Protection Act. Asking Court for declaratory judgment that budget without inflation factor was unlawful – not asking for injunctive relief. Arizona School Boards Association | www.azsba.org

6. School funding litigation – Cave Creek USD v. Ducey • Plaintiffs lost at trial court (Judge Ken Mangum); appealed to Arizona Court of Appeals Division One • Unanimous Decision at AZ Court of Appeals for Plaintiffs • Statute requires Legislature to provide for annual inflation adjustments in each component of revenue control limit, including base level • “Or” does mean “and” • Prop. 301 was a referendum Arizona School Boards Association | www.azsba.org

7. School funding litigation – Cave Creek USD v. Ducey • An interpretation by the Legislature allowing for fewer increases would violate the Voter Protection Act of the Arizona Constitution • “The principal purpose of the VPA is to preclude the legislature from overriding the intent of the people… With the adoption of the VPA, voter-approved measures are now superior to enactments of the legislature…” • “Because we conclude that the VPA requires the legislature to follow the electorate’s decision to approve (inflation funding), we reject the argument that the people do not have the power to bind the legislature.” Arizona School Boards Association | www.azsba.org

8. School funding litigation – Cave Creek USD v. Ducey • Where do we go from here? • State has decided to appealusing that to justify not giving inflation again this year • No chance of getting funds back from 2010-11, 2011-12 and 2012-13 where inflation wasn’t funded, HOWEVER…our position is that should we prevail the basis of the funding for inflation should be if those increase HAD BEEN given Arizona School Boards Association | www.azsba.org

9. School funding litigation – Craven and Hobday lawsuits • Litigation brought by charter schools alleging overall funding disparity between charter schools and school district schools violates Arizona Constitution General and Uniform Clause (Craven) • Litigation brought by taxpayer alleging funding disparity in allowing school districts to exceed approved state funding through budget overrides (Hobday) Arizona School Boards Association | www.azsba.org

10. School funding litigation – Craven and Hobday lawsuits • ASBA intervenor and cross-claimant in case • From Roosevelt v. Bishop: “(T)he system the legislature chooses to fund the public schools must not itself be the cause of substantial disparities.” • Intervenors – the funding disparity in Roosevelt dealt with a disparity in funding among the same kind of educational institutions, i.e., school districts. No AZ court has said that the General and Uniform Clause requires any degree of uniformity in the funding of different kinds of educational institutions. Arizona School Boards Association | www.azsba.org

11. School funding litigation – Craven and Hobday lawsuits • Case trial court level – Maricopa County Superior Court Judge J. Richard Gama • Several procedural rulings – most significant one in favor of state; that differences in funding only have to have a rational basis for the distinction(instead of higher standard strict scrutiny); • Oral argument on cross motions for summary judgment occurred Friday, March 22 Arizona School Boards Association | www.azsba.org

12. Vouchers – Niehaus v. Huppenthal • Legality of education savings or empowerment accounts (vouchers) • 2011 legislation creating education empowerment accounts for students on IEP or Section 504 plan • allows parents to pay for tuition in private school or rehabilitation services or tutoring; • must agree not to enroll in public school; account is set up with 90% of base level support for student in empowerment account; • disbursements made from account to provider • Schools maintain choice of denying students; do not have to follow state accountability system • Students leave behind protections of federal law (IDEA, 504) Arizona School Boards Association | www.azsba.org

13. Vouchers – Niehaus v. Huppenthal • Program has since been expanded (HB2626 in 2012 session) • Attends a school or school district that has been assigned a letter grade of D or F by the Arizona Department of Education (ADE) based on the school or district’s achievement profile. • Previously received an Arizona Scholarship for Pupils with Disabilities. • Is the child or legal ward of a member of the United States Armed Forces. • Has been identified as a gifted pupil. • By one estimate, one in five Arizona students is now eligible for an ESA Arizona School Boards Association | www.azsba.org

14. Vouchers – Niehaus v. Huppenthal • Arizona Constitution, Art. IX, Sec. 10: “No tax shall be laid or appropriation of public money made in aid of any church, or private or sectarian school, or any public service corporation.” • Cain v. Horne (2009): “For all intents and purposes, the voucher programs do precisely what the Aid Clause prohibits. These programs transfer state funds directly from the state treasury to private schools. That the checks or warrants first pass through the hands of parents is immaterial; once a pupil has been accepted into a qualified school under either program, the parents or guardians have no choice; they must endorse the check or warrant to the qualified school.” Arizona School Boards Association | www.azsba.org

15. Vouchers – Niehaus v. Huppenthal ASBA is plaintiff in case, along with Sharon Niehaus, Continental ESD Board Member and Special Education parent, Arizona Education Association, Arizona Association of School Business Officials; NSBA has been approved as amicus in case John Huppenthal, State (AG) are defendants; Goldwater Institute and Institute for Justice has joined as intervenor Plaintiffs lost in Superior Court; Case went to AZ Court of Appeals on de novo review; Case argued on February 13, 2013 Arizona School Boards Association | www.azsba.org

16. Vouchers – Niehaus v. Huppenthal State/Goldwater: Money is aid to parents and parents have many options, including private schools Plaintiffs: Under Aid Clause if ANY money goes to private schools, it’s unconstitutional; also it is unconstitutional under religion clause and to require recipients to waive their constitutional right to a public education Decision could take months Arizona School Boards Association | www.azsba.org

17. Legal Potpourri from the “Mailbox” Charters and procurement Charters and public records Affordable Care Act Non-Discrimination of Health Plans and School District taxes Arizona School Boards Association | www.azsba.org

18. Questions? THANK YOU! Arizona School Boards Association | www.azsba.org