Horizon, Host: Ted Simons

July 30, 2008


Host: Ted Simons

The Cost of School Utilities


  • Facing the loss of $94 million they use to pay utility bills, some Arizona school districts were concerned that they would have to cut teachers and programs. But now, a provision in the new state budget provides financial relief. We take a look at how it helps.
Guests:
  • David Peterson - Associate Superintendent of Operations, Scottsdale school district
Category: Education

View Transcript
>>Ted Simons:
In April we showed you why Arizona school districts were faced with losing millions of dollars they use to pay their utility bills. Some school districts were considering program cuts and teacher layoffs. Now it appears they won't have to go to those extremes because state lawmakers have provided a new source of utility funding. In a moment we'll hear from a Scottsdale school official about the new source of money. But first, David Majure shows us what school districts were up against.

>>David Majure:
$94 million. That's how much money Arizona School Districts plan to get this year from local property taxes to cover part of their utility bills. That money will soon be disappearing, but the bills will not.

>>David Peterson:
I hate to be the dooms day person but it's going to be catastrophic. We are going to have to do some major reductions in force.

>>David Majure:
David Peterson is assistant superintendent of operations for the Scottsdale unified school district. To avoid cutting teachers or programs, he's been working hard to make the district more energy-efficient.

>>David Peterson:
The fruits of our labor, if you will, is last year we reduced our energy consumption by 1.2 million kWh.

>>David Majure:
Enough to power about 80 homes for a year. But not enough to make a dent in the district's utility bills.

>>Franchesca Thomas:
We can't conserve our way out of this problem.

>>David Majure:
Franchesca Thomas is a mother of three boys enrolled in the Scottsdale district.

>>Franchesca Thomas:
Local communities, local citizens, should not have to pay for the basic operating costs of public school.

>>David Majure:
But in 1985, state lawmakers says otherwise. Funding for schools was not keeping pace with the rising cost of utilities. So the legislature came up with something called excess utilities. They told districts to use their actual 1984-85 utility expenditure as a baseline. In subsequent years, if utility rates increased faster than their budgets did, districts could use local property taxes to make up the difference. Enter prop 301. Approved by voters in 2000, it raised the state sales tax for teacher salaries. But it also set a date of 2009 after which school districts may no longer use local property taxes to pay for excess utilities.

>>David Peterson:
Our excess utilities for this year is a little over $5 million.

>>David Majure:
That's $5 million Franchesca Thomas believes the state should be responsible for.

>>Franchesca Thomas:
It's the right thing to do for children in the state of Arizona.

>>Ted Simons:
In June, state lawmakers adopted a plan to help school districts pay for their excess utilities. Yesterday I spoke with David Peterson, associate superintendent of operations for the Scottsdale school district about that plan. And David Peterson, thank you for joining us on horizon.

>>David Peterson:
You're welcome.

>>Ted Simons:
Quick overview. The excess utility program. What are we talk about here?

>>David Peterson:
Excess utilities was a program that allowed schools to actually pay for their utility bill. Back in 84-85, utility costs were skyrocketing, sort of as they are now. And school districts had a hard time keeping -- keeping up with the funding. The legislature had a more difficult time making sure funding was there. They came up with a formula for excess utilities that basically took what you paid in 84-85 as a baseline, and any costs above that baseline, it was adjusted each year as our increases went, you had a special tax. So you could tax your taxpayers for that additional cost for utilities.

>>Ted Simons:
And it was set to sunset, and yet there was legislation in the house to keep it going, correct?

>>David Peterson:
That is correct. Yes. It would have -- as of June 30th of this coming year, it would have gone away.

>>Ted Simons:
If it had gone away, how would the Scottsdale school districts, unified in particular, how would they have been affected?

>>David Peterson:
We would have been devastated. It was a little over $5 million in additional funding that as funding as difficult as it is to get, we would have probably had to lay off 120 teachers.

>>Ted Simons:
My goodness. All right. Now as far as the legislation is concerned for extending the program, changing the program, starts in the house. Sat there for quite awhile. And then all of a sudden it's kind of rescued in the senate. Talk us about that.

>>David Peterson:
Represent Reagan initially had the bill in the house to the commerce committee. She did a wonderful job and then it sat there. It got down to the 11th hour and truly probably 11:30 the budget needed to be passed for the state. They were ending the year. And Senator Allen from Scottsdale stepped up to the plate. She was truly our white knight. She took it on and said "I have to make this happen because it's important for schools. We cannot impact children." and so she pushed it through, steadfast with Senator O'Halleron from the Sedona area and Senator Bee along with the Governor made it happen in the senate. They agreed. It went to the house. The house initially weren't going to have it go through. Representative Reagan stepped back up again and said "I have the votes to make it pass." they said, if you have the votes put it to a vote. She put it to a vote and sure enough it passed. So here we are. We're finally going to be rescued.

>>Ted Simons:
Okay. Rescued. It passes. What passed? What is different now with this new formula as opposed for what you had?

>>David Peterson:
There's some significant differences. First of all, the formula now will fund basically 90\% of the excess utilities. Prior to that, excess utilities, what you spent above your baseline, you had a tax for, your local taxpayers paid for that. Now it's going to be funded under the state's general fund. So it goes into our normal budget. It's 90\%. Again one of the reasons it's 90\% is some legislative people, rightly so, said schools have to make a good faith effort. We have to conserve. So we have a 10\% component that we have to try to conserve those dollars in order to show that we are doing our part.

>>Ted Simons:
Can you do your part with energy -- I mean, energy costs are rising across the board. I mean, what are you doing to try to conserve and is it working?

>>David Peterson:
It's going to be difficult. We've done a lot of lighting upgrades in Scottsdale, we've changed temperature settings. I can tell you that from January to June of this year, we actually cut our consumption by 1.92\%. Almost 2\% consumption. But our actual costs went up 8\%. So I saved 2\% of use but I paid 8\% more to do it. And part of that is because of the rising costs of utilities. And we have to fund those things.

>>Ted Simons:
There had been some talk from other legislators about override votes and these sorts of things. Why was that not a good idea?

>>David Peterson:
To me, that type of legislation was just bad law. First of all, you have districts that can not pass an override. So how do you expect an override to actually pay for a basic cost of instruction? So we're asking our voters to go and pay for an override or vote in an override for something that first of all should be a basic component of instruction. And if the district can't pass it, how would they keep their lights on? They'd have to turn their lights off because they can't pass their override.

>>Ted Simons:
You get the new method of costs here and trying to control these costs and pay for these things. How long before this one sunsets?

>>David Peterson:
Right now it will go on through when proposition 301, which is probably another, gosh, it's another 11, 12 years. We should be in good shape. But hopefully by then some folks that are working on some new finance formulas will finally step up and we will have a new finance formula in Arizona so that we can see how schools will be funded in the future.

>>Ted Simons:
Very good. David, thank you so much for joining us. We appreciate.

>>David Peterson:
Thank you for having me

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