LESC staff recommends major SCG overhaul, committee endorses bill to shift to family‑income index and boost secondary funding

LESC fiscal analyst Daniel presented the committee with a staff recommendation that would change how the state funds K‑12 schools, proposing to repeal three existing indicators used in the at‑risk index (Title I status, English‑learner status and mobility) and replace them with a family income index to set the poverty indicator in the State Equalization Guarantee (SCG). Daniel said the approach increases the poverty threshold to 130% of the federal poverty level and uses state‑collected data "rather than using federal data that we can't audit," an argument staff made for greater local auditability and accuracy.

The staff proposal also creates a separate, transparent factor for English learners (estimated at $120,700,000) and raises the factor for grades 6 through 12 to 1.3, adding roughly $91,200,000 in flexible funding that districts and charter schools could use for career and technical education (CTE), secondary fine arts, behavioral health or other locally determined needs. Daniel told the panel the net SCG cost for those unit changes would be about $132,600,000 in FY26.

Why it matters: the package is intended to direct more flexible, recurring state support to schools while enabling clearer local targeting of services for English learners and older students. Staff framed the changes as responsive to the Martinez‑Yazzie litigation’s focus on gaps for low‑income students, English learners and Native American students.

Compensation, hold‑harmless and categorical moves: the recommendation includes a 3% increase in personnel compensation ($101,400,000) and a proposal to raise minimum teacher salary tiers (to $55,000/$65,000/$75,000; estimated at $7,400,000). Staff also proposed moving universal school meals into the categorical appropriation (about $55,700,000) rather than leaving it below the line, a reclassification that increases categorical totals but does not change day‑to‑day operations of the meal program. The draft SCG bill contains a one‑year hold‑harmless to prevent districts and charters from seeing immediate cuts if program units fall as the formula shifts.

Debate and concerns: some committee members pressed staff to be explicit about how this new secondary weight would be used for CTE rather than allowing agencies to repurpose dollars. Senator Brandt warned that money earmarked for CTE previously had been used for other initiatives and called for clearer legislative control; he said, "We keep giving away our authority and letting the executive do whatever they want to do." Staff and the director responded that the proposed structure preserves at least the same total funding for CTE supports (when counting both below‑the‑line pilot funds and the new SCG secondary weight) but acknowledged the need for clearer programmatic safeguards and evaluation.

Endorsement and next steps: the committee voted to add the SCG bill to LESC endorsements (motion by Senator Stewart, second by Vice Chair Soules; no objections recorded). Staff will refine the draft and bring a final recommendation back for committee approval in January; Director staff also emphasized the need for the large spreadsheet reviewers to understand district‑level winners and losers under the formula changes so lawmakers can target any further fixes or hold‑harmless refinements.

Formal actions at this meeting: the committee formally endorsed the LESC staff SCG bill to revise the funding formula. The committee also directed staff to continue analysis and return a refined recommendation and fiscal detail before committee approval in January.