In a unanimous decision on January 15, 2013, the Arizona Court of Appeals ordered the legislature to uphold a ballot initiative requiring the state to increase education aid annually to keep pace with inflation. Cave Creek Unified School District v. Ducey and State of Arizona. Proposition 301, approved by voters in 2000, calls for “automatic inflation adjustments in the state aid to education base level or other components of a school district’s revenue control limit.” If the decision stands, schools should receive an additional $80 million this year to make up for unpaid inflationary increases in operating costs.

In 2010, a group of school districts filed a complaint after the legislature approved a budget for 2011 that raised levels for transportation but not for the base level aid. In previous years, the state had provided inflation adjustments for all components of the budget. Plaintiffs charged the state with violating Arizona’s voter protection clause, which prohibits the legislature from repealing a law passed through referenda or amending it unless doing so “furthers the purposes of such a measure” and it receives the support of at least three-fourths of each house. The trial court granted the state’s motion to dismiss, explaining that voters did not have the power to require the legislature to enact a law to execute the referendum or to require a specific appropriation. Plaintiffs appealed in March 2011.

In overturning the lower court’s decision, the three-judge panel considered the background, purpose and implementation of the statute. Appellees argued that the legislature’s budget was in line with the referendum since the proposition required inflation adjustments to the education base level or other components of a school district’s revenue limit. Writing for the majority, Judge Michael Brown rejected that reading. He explained that “requiring the legislature to increase all components of the revenue control limit is necessary because a contrary holding would contradict the intent of the legislature that drafted the provision and the voters who approved it.”

The plaintiffs have indicated that they are not asking the state to make up for the estimated $250 million it deprived schools over the past three years, but only to honor the voter initiative’s inflation increase requirements in the upcoming legislative session and in the ones thereafter. It is not yet clear whether the state will file an appeal.

February 11, 2013