Kyrene CFO outlines Gov. Hobbs' K-12 budget proposal and Prop 123 implications

Chris Herman, associate superintendent and chief financial officer, gave the Kyrene Elementary School District governing board a briefing on Governor Hobbs' January budget proposal and its potential implications for the district.

Herman listed the governor's education highlights: $173 million for inflation (using a 2% factor), $29 million to increase district and charter additional assistance (state-funded capital), and roughly $286 million to cover the basic state aid impact if Proposition 123 were allowed to expire. The governor's proposal also included $200 million for building renewal grants (described as $16.7 million ongoing plus $183 million one-time in 2026) and $3.8 million in ongoing funding for covering the co-pay for students eligible for reduced-price meals. The proposal included other items such as $45 million for new school construction and about $114 million in one-time funding for projects at seven schools. Herman described the governor's budget as a starting point for legislative negotiation.

Herman explained how the state's statutory process limits the inflation increase a district can receive: “school districts can receive an inflation increase based on the lesser of 2% or the annual change in the GDP price deflator,” he said, and noted the governor used a 2% factor in the proposal. He emphasized that the governor's proposal is not law and that the legislature must develop and pass a final budget; he noted the legislature's typical target is near the 100th day of session and that the district adopts its proposed and then final budget in late June and July.

Board members asked questions about Proposition 123 and the state land trust. Member Bunny Davis asked whether the presentation had covered the purpose of the state land trust and how it had been used; Herman summarized that Prop 123 originally increased land trust distributions and that current balances exceeded the low projections made 10 years ago. The board also discussed proposed reforms to the state's universal Empowerment Scholarship Account (ESA) program described in the governor's proposal, which would scale income caps and is estimated in the briefing to save roughly $150 million a year in state general-fund spending if enacted.

Herman and board members cautioned that amounts in the proposal may change during the legislative process and that some one-time items depend on separate legislative action or voter approval. He offered to return with additional analysis as the legislature and potential ballot timelines progress.