AN ACT AMENDING TITLE 15, CHAPTER 9, ARTICLE 1, ARIZONA REVISED STATUTES, BY ADDING SECTION 15-917; RELATING TO SCHOOL DISTRICT BUDGETS.
Be it enacted by the Legislature of the State of Arizona: Section 1. Title 15, chapter 9, article 1, Arizona Revised Statutes, is amended by adding section 15-917, to read: 15-917. Operational spending; direct instructional expenses; enforcement; waivers

A. EACH SCHOOL DISTRICT THAT HAS A STUDENT COUNT OF AT LEAST SEVEN THOUSAND FIVE HUNDRED OR THAT OPERATES A SCHOOL IN A COUNTY WITH A POPULATION OF AT LEAST FIVE HUNDRED THOUSAND PERSONS SHALL SPEND AT LEAST SIXTY PERCENT OF THE SCHOOL DISTRICT'S OPERATIONAL SPENDING ON DIRECT INSTRUCTIONAL EXPENSES. BEGINNING IN FISCAL YEAR 2027-2028, ANY SCHOOL DISTRICT THAT SPENDS LESS THAN SIXTY PERCENT OF THE SCHOOL DISTRICT'S OPERATIONAL SPENDING ON DIRECT INSTRUCTIONAL EXPENSES SHALL INCREASE THE PORTION OF THE SCHOOL DISTRICT'S OPERATIONAL SPENDING THAT IS SPENT ON DIRECT INSTRUCTIONAL EXPENSES EACH YEAR BY AT LEAST ONE-HALF OF ONE PERCENT PER YEAR UNTIL THE SCHOOL DISTRICT IS IN COMPLIANCE, SUBJECT TO THE FOLLOWING:

1. IF A SCHOOL DISTRICT INCREASES THE PORTION OF THE SCHOOL DISTRICT'S OPERATIONAL SPENDING ON DIRECT INSTRUCTIONAL EXPENSES BY MORE THAN ONE-HALF OF ONE PERCENT PER YEAR, THE SCHOOL DISTRICT MAY COUNT THE PORTION OF THE INCREASE THAT EXCEEDS ONE-HALF OF ONE PERCENT TOWARD ANY INCREASE THAT IS REQUIRED IN A SUBSEQUENT YEAR.
2. IF A SCHOOL DISTRICT REDUCES THE PORTION OF THE SCHOOL DISTRICT'S OPERATIONAL SPENDING ON DIRECT INSTRUCTIONAL EXPENSES, BOTH OF THE FOLLOWING APPLY:
(a) THE AUDITOR GENERAL MAY NOT CONSIDER THE REDUCTION WHEN CALCULATING THE AMOUNT OF THE ANNUAL INCREASE THAT IS REQUIRED BY THIS SUBSECTION FOR THE SCHOOL DISTRICT.
(b) THE SCHOOL DISTRICT MAY COUNT ONLY THE PORTION OF AN INCREASE IN OPERATIONAL SPENDING ON DIRECT INSTRUCTIONAL EXPENSES FOR A SUBSEQUENT YEAR THAT RESULTS IN AN INCREASE S.C.R. 1032 ABOVE THE PORTION OF OPERATIONAL SPENDING BEFORE THE REDUCTION.

B. IF THE AUDITOR GENERAL DETERMINES THAT A SCHOOL DISTRICT DID NOT COMPLY WITH THE REQUIREMENTS PRESCRIBED BY SUBSECTION A OF THIS SECTION IN THE IMMEDIATELY PRECEDING FISCAL YEAR AND IF THE SCHOOL DISTRICT RECEIVES MONIES FROM THE CLASSROOM SITE FUND ESTABLISHED BY SECTION 15-977, THE DEPARTMENT SHALL REDUCE THE SCHOOL DISTRICT'S ALLOCATION PURSUANT TO SECTION 15-977, SUBSECTION G FOR THE BUDGET YEAR BY THE FOLLOWING AMOUNTS:
1. IF THE SCHOOL DISTRICT DID NOT COMPLY FOR ONE YEAR, AN AMOUNT THAT IS EQUAL TO TWENTY-FIVE PERCENT OF THE AMOUNT THAT WOULD OTHERWISE BE ALLOCATED TO THE SCHOOL DISTRICT.
2. IF THE SCHOOL DISTRICT DID NOT COMPLY FOR TWO YEARS, AN AMOUNT THAT IS EQUAL TO FIFTY PERCENT OF THE AMOUNT THAT WOULD OTHERWISE BE ALLOCATED TO THE SCHOOL DISTRICT.
3. IF THE SCHOOL DISTRICT DID NOT COMPLY FOR THREE YEARS, AN AMOUNT THAT IS EQUAL TO SEVENTY-FIVE PERCENT OF THE AMOUNT THAT WOULD OTHERWISE BE ALLOCATED TO THE DISTRICT.
4. IF THE SCHOOL DISTRICT DID NOT COMPLY FOR AT LEAST FOUR YEARS, AN AMOUNT THAT IS EQUAL TO THE AMOUNT THAT WOULD OTHERWISE BE ALLOCATED TO THE DISTRICT.

C. THE STAFF OF THE JOINT LEGISLATIVE BUDGET COMMITTEE SHALL INCLUDE MONIES THAT ARE NOT DISTRIBUTED BECAUSE OF REDUCTIONS REQUIRED BY SUBSECTION B OF THIS SECTION IN THE CARRYFORWARD FOR THE PURPOSES OF SECTION 15-977, SUBSECTION G, PARAGRAPH 1.
D. THE SUPERINTENDENT OF PUBLIC INSTRUCTION MAY WAIVE THE REQUIREMENTS PRESCRIBED BY SUBSECTION B OF THIS SECTION FOR A SCHOOL DISTRICT SUBJECT TO THE FOLLOWING:
1. THE DURATION OF A WAIVER PURSUANT TO THIS SUBSECTION MAY NOT EXCEED ONE YEAR.
2. THE SUPERINTENDENT OF PUBLIC INSTRUCTION MAY NOT ISSUE MORE THAN TWO WAIVERS FOR A SCHOOL DISTRICT DURING ANY TEN-YEAR PERIOD, EXCEPT AS PROVIDED IN PARAGRAPH 3 OF THIS SUBSECTION.
3. IF THE SUPERINTENDENT ISSUES A SECOND WAIVER FOR A SCHOOL DISTRICT MORE THAN FOUR YEARS AFTER THE DATE ON WHICH THE SUPERINTENDENT ISSUES A FIRST WAIVER FOR THE SCHOOL DISTRICT, THE SUPERINTENDENT MAY ISSUE ANOTHER WAIVER FOR THE SCHOOL DISTRICT AT ANY TIME DURING THE TEN-YEAR PERIOD THAT BEGINS ON THE DATE THAT THE SUPERINTENDENT ISSUES THE SECOND WAIVER.
E. THIS SECTION DOES NOT REQUIRE THIS STATE OR AN OFFICER OR AGENCY OF THIS STATE TO MAINTAIN THE CLASSROOM SITE S.C.R. 1032 FUND ESTABLISHED BY SECTION 15-977 OR ALLOCATE MONIES FOR A CLASSROOM SITE FUND EXCEPT AS OTHERWISE PROVIDED BY THE LAWS OF THIS STATE.

F. THE AUDITOR GENERAL SHALL DEFINE "DIRECT INSTRUCTIONAL EXPENSES" AND "OPERATIONAL SPENDING" FOR THE PURPOSES OF THIS SECTION.

2. The Secretary of State shall submit this proposition to the voters at the next general election as provided by article IV, part 1, section 1, Constitution of Arizona.