Gov. Katie Hobbs says public education is woefully underfunded, but fiscal reporting indicates districts are flush with cash.
According to the latest Arizona Department of Education annual financial report, public school districts carried forward more than $8.3 billion in unspent funds from the 2024-25 fiscal year.
That is nearly equivalent to total appropriations that the state allocated for public education in the 2024-25 fiscal year: $8.9 billion, which goes beyond K-12 schools to include the Board of Regents, community colleges, and universities.
That $8.9 billion accounts for 55% of total appropriations out of the state’s general fund, which amounted to more than $16.2 billion in the 2024-25 fiscal year.
Within the $8.3 billion carried over from the 2024-25 fiscal year:
$1.6 billion for bond building
$1.3 billion for maintenance and operations
$1.2 billion for “other” funding
$941,000 for the Classroom Site Fund and Instructional Improvement Fund
$884,000 for unrestricted capital outlay
$708,000 for federal projects
$672,000 for bond principal deduction
$393,000 for debt service
$248,000 for food service
$150,000 for adjacent ways
$147,000 for school plant
$41,000 for state projects
The emergency deficiencies correction, building renewal, and new school facilities funds had negative balances of approximately $395,000, $19 million, and $33 million, respectively.
Last fall, the Common Sense Institute estimated that school districts hold more than $20 billion in combined cash reserves and underutilized real estate.
Public school district enrollment has declined steadily since 2008, more so in recent years after the state allowed universal enrollment for the ESA program in 2022.
Hobbs has advocated for lawmakers to revive Proposition 123, which would take around $300 million every year from the State Land Trust Permanent Fund and give it to education. $300 million is equivalent to a drop in the public education fund bucket: approximately 3% of what the state allocated from its general fund in the 2024-25 fiscal year.
Hobbs credited Prop 123 as providing “critical funding” for districts and educators in her State of the State address earlier this year. The governor said the funding provided by the proposition curbed the budget shortfall and would enable teacher pay raises and prevent future tax hikes.
The governor and lawmakers have failed to reach a consensus on renewing Prop 123. The proposition expired in June 2025.
Teresa Leyba Ruiz, the Democratic nominee for superintendent of public instruction, wants to claw back another 3% from a potential funding source. As reported earlier this week, Ruiz proposed reverting the $350 million set aside in Empowerment Scholarship Account (ESA) program funds back to public schools.
32% of educators reported having an external job and 21% of educators indicated additional paid responsibilities and a second job outside their school, according to a 2024 report by Hobbs’ Educator Retention Task Force issued in partnership with the Arizona State University Morrison Institute for Public Policy.
That same report identified inadequate salary, unpaid duties and hours, pay differences, and salary compression as issues impacting retention. The report estimated that only 16% of educators agreed that their salary was satisfactory and motivated them to stay in their professions.
A more recent poll of more than 9,300 educators during the 2025-26 school year by the Arizona Department of Education also found that teacher pay was one of the biggest sources of dissatisfaction for educators.
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At the May 5 Higley Unified Governing Board meeting, the Board approved a lease agreement with AZ Aspire Academy to utilize a portion of Power Ranch Elementary.
I think it’s a good thing that the district is looking for ways to generate additional revenue from unused space. When enrollment is declining and budgets are getting tighter, we should absolutely be looking for creative ways to make better use of district assets.
But let’s be honest: leasing a portion of one building doesn’t solve the bigger problem.
Higley currently has more than 10,200 vacant seats sitting empty across our schools. Several campuses are operating at less than half of their physical capacity. Power Ranch is only about 32% utilized. Centennial is around 31%. Cortina, Chaparral, and Cooley Middle are all below 50%.
While we are making difficult budget and staffing adjustments because enrollment is declining, we have not had the same level of discussion about what it costs taxpayers to maintain thousands of unused seats.
Those numbers should prompt a serious conversation about how we plan for the future.
Every building costs money to operate whether it’s full or half empty. We still pay for utilities, maintenance, landscaping, repairs, insurance, security, and countless other expenses. The cost doesn’t disappear just because the students do.
At the same time, enrollment continues to decline.
For FY2027, Higley is projecting ADM of approximately 11,250 students, down from 11,695 in FY2026. As enrollment drops, so does funding. The district’s M&O budget limit is projected to decline from approximately $118.9 million to $111.5 million, a reduction of more than $7 million in a single year.
Because school funding is largely driven by student enrollment, staffing levels must eventually align with the number of students being served. The district has already reduced M&O-funded staffing from approximately 1,243 positions to about 1,203. While these reductions are difficult, they are a necessary response to declining enrollment and reduced revenue. The district’s maintained M&O reserve is projected to fall from approximately $17 million to about $13 million.
Yet despite making these necessary adjustments in staffing and operations, we continue carrying the costs associated with significant excess building capacity.
We also cannot forget that taxpayers are still paying approximately $3.5 million annually for the two middle schools. Those payments will continue for roughly the next 27 years. Whether a building is full or half empty, the debt payment remains. That makes it even more important that we have a long-term strategy for utilizing our facilities efficiently and aligning them with current enrollment realities.
This isn’t just happening in Higley. A recent report from the Common Sense Institute, Echoes in the Halls: Arizona School Districts’ Growing Problem with Empty Buildings and Empty Buses, highlighted a growing statewide challenge. School districts across Arizona built facilities during years of rapid growth and are now struggling with declining enrollment while taxpayers continue paying to maintain underutilized schools.
The report should serve as a wake-up call.
Too often, whenever school funding is discussed, the conversation immediately turns to needing more money. Before asking taxpayers for more, we should make sure we are using existing resources as efficiently as possible.
As board members, our responsibility is not simply to spend money. Our responsibility is to ensure taxpayer dollars are being used wisely and producing the best possible outcomes for students.
That means asking difficult questions:
What is the district’s long-term plan for aligning facilities with enrollment trends?
Are there additional opportunities to lease unused space?
Are there community partnerships we should pursue?
Are there alternative educational or community uses for underutilized facilities?
How can we maximize the value of existing facilities while minimizing unnecessary costs to taxpayers?
What is Higley going to do with the vacant land voters approved to sell or lease?
These are not easy discussions. But avoiding them doesn’t make the problem go away.
The district currently maintains approximately $13 million in M&O reserves and nearly $6.5 million in capital carryforward. Those reserves provide stability, but they are not a substitute for long-term planning. If enrollment continues to decline, reserves alone will not solve the challenge of maintaining significant excess capacity.
Taxpayers deserve a district that plans ahead instead of reacting after the fact. They deserve transparency about enrollment trends, building utilization, and long-term costs.
The lease approved on May 5 is a positive step. It brings in revenue and puts some unused space to productive use. But one lease agreement is not a long-term facilities strategy.
I believe the next step is for the district to begin a formal long-range facilities planning process. Whether through a board committee, community task force, or strategic planning effort, we need to start having honest discussions about enrollment trends, facility utilization, future land use, and the long-term costs associated with maintaining excess capacity.
The goal should not be to predetermine outcomes. The goal should be to develop a thoughtful 10-year plan that aligns our facilities with the students we serve and the resources available to support them.
Those conversations should happen before circumstances force decisions upon us.
Most importantly, taxpayers deserve confidence that every possible dollar is being directed toward students rather than maintaining excess capacity.
The goal isn’t to preserve buildings. The goal is to educate students and use taxpayer dollars wisely in support of that mission.
When we keep that priority in mind, the path forward becomes much clearer.
Every year, a horde of school district officials and their lobbyists come before the state legislature, rattling their tin cups, begging for more money for their supposedly underfunded schools. They tell sob stories about crumbling buildings and underpaid teachers who had to pay for school supplies from their own pockets. Their schools, they say, are financially starved.
Hogwash.
School bureaucrats don’t want you to know it, but school spending is at an all-time high, and Arizona’s school districts are sitting on more than $20 billion in cash reserves and buildings they don’t need while student achievement craters. A new report from the Common Sense Institute (CSI) reveals the shocking scope of waste plaguing our traditional public school system, and it’s time taxpayers demanded answers.
The numbers are staggering. As has been documented, Arizona’s school districts are already hoarding $7.8 billion in cash reserves, up $1 billion since the prior fiscal year. Now we learn they’re also sitting on $12.2 billion worth of excess real estate—78 million square feet of unused and underutilized space that could house 630,000 additional students. Combined, that’s over $20 billion in resources that could be put to better use serving Arizona’s children.
Since 2019, district school enrollment has declined 5% statewide, yet these same districts increased their building space by 3% and boosted capital spending by a jaw-dropping 67% to $8.9 billion. As CSI has documented, districts have added 499 new buildings while losing 47,500 students. This isn’t just inefficient, it’s fiscally reckless.
The massive spending on new buildings might be justifiable if schools were overcrowded or expecting a huge influx of new students, but they’re not. In fact, Arizona’s district schools are already significantly overbuilt, operating at just 67% capacity while charter schools run at 95% capacity and private schools at 75%. CSI estimates that the excess space in district schools could accommodate 630,000 additional students—nearly half the current statewide district school enrollment.
The excess capacity comes at an enormous cost. CSI estimates that the market value of excess district space alone—$12.2 billion—could fund a decade of capital expenditures. Alternatively, eliminating maintenance costs for unused space would save taxpayers $1 billion annually. That’s real money that could reduce taxes, improve education, or address Arizona’s other pressing needs.
There are plenty of willing buyers. Indeed, the fastest-growing school systems—charters and private schools chosen by increasing numbers of Arizona families—struggle to find adequate facilities. Yet school districts often go to incredible lengths to avoid selling buildings to them, such as when Tucson Unified School District sold an unused building for 25% less than what a Christian school had offered, just so that a “competitor” wouldn’t have it.
In response to such cases, Gov. Doug Ducey signed a law requiring school districts to sell buildings to the highest bidder, even if it’s a private or charter school. Now, rather than comply, school districts are just letting their underutilized space languish and forcing the taxpayers to pay the bill.
The wastefulness is also a slap in the face to teachers and students alike.
As we noted previously, the districts have enough cash reserves to raise the average teacher pay from $64,420 to more than $80,000 for 10 years and still have funds left over. If they sold off all their underutilized space, they could raise the average teacher pay to $100,000 for a decade and still have billions left over.
There is no evidence that spending on buildings is contributing to student learning. As the buildings have gone up, math scores have gone down, plummeting 25% since 2019. As CSI documents, the lowest-performing schools have the most excess space, operating at just 19% capacity, while high-performing schools run at 70% capacity.
This isn’t about helping kids learn; it’s about protecting a bloated bureaucracy that puts institutional self-interest above student needs.
Fixing the problem will require realigning incentives. CSI recommends more transparency—including a “Facilities Condition Index” that would give policymakers and the public objective information about the quality of existing school facilities—and more state oversight of severely underutilized facilities. In the meantime, any funding requests from the school districts should be greeted by state lawmakers with a healthy dose of skepticism.
Arizona’s children deserve better than a $20 billion monument to government inefficiency. They deserve a system that puts their education first, not one that hoards resources while performance plummets. If local officials can’t or won’t deliver, then state lawmakers will have to step in.
Jason Bedrick is a Research Fellow and Matthew Ladner is a Senior Advisor for education policy implementation at the Heritage Foundation’s Center for Education Policy.
A bill designed to direct more tax revenue toward Arizona’s K-12 classrooms has been vetoed by Governor Katie Hobbs, prompting criticism from Republican lawmakers who say the measure would have strengthened public education funding.
SB 1050, sponsored by Senator Vince Leach (R-LD17), sought to amend the Government Property Lease Excise Tax (GPLET) program by prohibiting the abatement of school district-designated tax revenues. Under current law, cities and towns can lease government-owned property to private developers with reduced tax obligations, an incentive intended to promote commercial development.
The bill would have excluded school-related tax revenues from such incentives, allowing those funds to flow directly to local school districts instead of being waived under development agreements.
“This was a missed opportunity by the Governor,” said Leach. “She says she supports education funding, but her veto suggests otherwise.”
In her veto letter, Governor Hobbs explained that SB 1050 could “stunt Arizona’s economic development” by weakening a tool used by local governments to attract private investment. The GPLET program, though controversial, has been credited with revitalizing parts of urban Arizona by lowering upfront development costs in exchange for long-term gains.
Arizona schools continue to face funding pressures despite recent increases to the state’s education budget. Republican lawmakers have often pushed for reallocating existing tax revenues, while Democrats have generally sought new funding sources or changes to the state’s tax structure.
SB 1050 passed both legislative chambers before being vetoed, signaling at least some bipartisan concern about the balance between development incentives and education funding.
Senator Leach and other supporters of the bill may pursue similar legislation in future sessions or attempt a veto override, although success would require significant bipartisan support. Meanwhile, the broader debate over how to equitably fund Arizona’s public schools is likely to continue.
“This is about priorities,” Leach said. “We should be making sure our tax dollars are going to classrooms, not corporate subsidies.”
The Governor’s office has not indicated whether alternative proposals to increase school funding through tax reforms are in the works.
Jonathan Eberle is a reporter for AZ Free News. You can send him news tips using this link.
School funding is a hot topic at the Arizona Legislature as the 57th Regular Session prepares to launch into its second month.
Arizona lawmakers and the Governor’s Office are wrestling over the looming expiration date for Proposition 123, which has helped fund the state’s K-12 schools since it was established under the previous Ducey administration.
One legislator in particular, Senator J.D. Mesnard, noted this deadline in the weekly newsletter published by Arizona Senate Republicans, saying, “With a new session comes a new opportunity to work on bills that may not have reached the finish line in the year prior. As such, I’m again working on a Proposition 123 extension plan to send to the ballot. This measure was first approved by voters in 2016. It allows a larger percentage from the state land trust to be distributed to our K-12 schools. Prop. 123 is set to expire this summer. With this in mind, Republicans backfilled the money allocated each year to K-12 schools within the last state budget, nearly $300 million, so there are no disruptions to this funding stream.”
Mesnard added, “The new Prop. 123 I’m proposing would be additional dollars on top of what we backfilled. My colleagues and I would like this money to go directly to teacher pay raises, with a goal of each educator receiving an additional $4,000 annually. I will keep you posted on the progress of Proposition 123 as well as other commonsense legislation that will hopefully receive the Governor’s signature.”
In Governor Katie Hobbs’ recent State of the State address, she touched on the vital importance of Prop 123, saying, “We must address the impending expiration of Prop 123, which provides critical funding for public schools and teachers. Renewing it is essential. If we fail to act, we are throwing away an opportunity to fund teacher pay raises and give Arizona’s children the opportunity they deserve – all without raising taxes on a single Arizonan. When Prop 123 originally passed, it was a bipartisan success and proved that Republicans and Democrats could come together and do the right thing for our students, teachers, and parents. So let’s put our kids first again and provide the certainty they and our schools need. Let’s address the Aggregate Expenditure Limit to make sure schools stay open. Let’s pass a Prop 123 extension to fund our schools without raising taxes.”
Following the Governor’s speech to both chambers of the Arizona Legislature, Senate President Pro Tempore T.J. Shope offered one of the Republican responses to her proposal. He said, “We will take action to equip our K-12 schools with quality educators at the front of every classroom by using a Proposition 123 renewal to increase teacher pay above the national average.”
Arizona Superintendent of Public Instruction Tom Horne has also weighed in on the Prop 123 debate. Earlier this month, he posted, “We must renew Prop 123 and increase the income from the land trust, which is overflowing with money, to increase teacher salaries.”
We must renew Prop 123 and increase the income from the land trust, which is overflowing with money, to increase teacher salaries. #Arizona#Education
