August 10, 2020
By Timothy Sandefur and Matt Beienburg

What do you call an education initiative that would impose a nearly $1 billion tax increase per year, offer no promises for improved school quality, AND could not be repealed or changed? We’d call it a very bad deal for Arizona voters.

That’s why the Goldwater Institute today filed a friend-of-the-court brief in the Arizona Supreme Court case involving the “InvestInEd” initiative, which would add a new, permanent income tax “surcharge” on top of existing taxes, on people making $250,000 a year (even if that money is actually income to their small business)—and would automatically transfer that money from the state budget directly to school districts, without control by the people’s elected representatives.

On July 31, a trial court judge ordered the initiative removed from the ballot on multiple grounds, including the fact that the 100-word summary voters were shown made no mention of the initiative’s “supplant” provision—which would prohibit the legislature from transferring spending now devoted to public schools to any other program in the future, even if the initiative’s new taxes would make up the difference.

InvestInEd would dramatically boost taxes on individuals and small businesses—nearly doubling the state’s top tax rate and vaulting Arizona to one of the top 10 highest-taxing states in the nation—and tie the hands of legislators who may need to respond to economic necessities now or in the future. Just how out of touch are InvestInEd’s proponents with the economic impacts of their plans? As late as May (amid a plummeting economy and COVID-19), the InvestInEd campaign complained that “last session, [Arizona legislators] squandered a billion-dollar surplus, putting the majority of the money into a rainy day fund.” In other words, even as the state stared down a once-in-a-lifetime crisis, InvestInEd opposed the responsible stewardship taken by elected officials, characterizing a rainy day fund as “squandering” and aiming to eliminate representatives’ ability to take such steps going forward.

In practice, InvestInEd would simply feed teacher unions’ insatiable appetite for taxpayer money without any plans for actual reform, improvement, or accountability. After the legislature already pledged more than $1 billion in additional K-12 funding annually in 2018, via a 20 percent teacher pay raise and other increases, the union organizers behind InvestInEd suggested that those massive contributions amounted to “nothing.”

It’s unlikely the next billion would satisfy the unions more than the last billion did, and even less likely that it would translate into actual improvements in school quality. Consider the fact that despite spending over $15,800 per pupil, every single public school in places like the San Carlos Unified School District has remained at a D or F level of academic quality—while at the same time more than 100 of that district’s former students have found academic opportunity at far lower costs through the state’s Empowerment Scholarship Account program. 

But aside from whether InvestInEd is sensible education policy, there’s a fatal legal problem with the initiative: the so-called Voter Protection Act (VPA). The VPA prohibits the state legislature from repealing any initiative, or even from amending an initiative unless the amendment “furthers its purpose.” That means that initiatives automatically become something like constitutional amendments, which cannot be changed by the people’s elected representatives, or by the people themselves, unless they spend the $3 million or more that it costs to pass a second initiative. In other words, the VPA makes ballot initiatives to all intents and purposes unrepealable. Lawmakers can’t even fix technical errors or typos in an initiative without a virtually impossible three-fourths supermajority. And combining the VPA with the “supplant” provision would bar the legislature, even in times of emergency, from passing any law that might “cause a reduction in other funding sources”—such as tax breaks, or spending funds on an urgent and unanticipated need.

That’s an awfully important aspect of the initiative, and the law requires that any initiative be accompanied by a 100-word summary that covers its “principal” provisions. Yet the summary of InvestInEd made no mention of these consequences—concealing from voters the fact that the initiative’s tax increases and mandatory spending would become essentially permanent, and that elected lawmakers would be powerless to change them or even to fix technical errors in the initiative. 

The VPA’s hand-tying aspects proved important the last time this issue came up—two years ago—when the Arizona Supreme Court demanded to know why a.) InvestInEd claimed its tax increase would only amount to about 3 or 4 percent, when in reality it would raise tax rates by 76 or 98 percent and b.) why InvestinEd was scrapping inflation protections for all taxpayers despite not mentioning this in their voter-information materials. InvestInEd’s backers claimed that this was an accident—just a “technical error” they could fix later. But as the court concluded, “the legislature’s authority to restore income tax indexing, as the proponents insist they intended, would be greatly circumscribed by the Voter Protection Act, so that a substantive fix might well require a second initiative.”

Now, given a second chance, InvestInEd’s proponents have again failed to tell voters just how extreme their proposal really is. It would not only create a massive new tax increase and tie the hands of elected representatives in the future—but would also make these features permanent. Yet InvestInEd failed to tell voters this fact when asking for their votes. These efforts to disguise the nature of the initiative are troubling—and illegal. That alone is reason to remove the initiative from the ballot.

InvestInEd is an example of the kind of “ballot box budgeting” that has already wreaked havoc on California’s economy, helping to saddle that state with well over $1.5 billion in debt. The Grand Canyon State should avoid taking that path. InvestInEd is bad policy—and bad law.

Timothy Sandefur is the Vice President for Litigation and Matt Beienburg is the Director of Education Policy at the Goldwater Institute.

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