Assigned to ED FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR S.C.R. 1040
permanent school fund; distribution; uses
Purpose
Subject to voter approval, statutorily requires, beginning in FY 2026, the State Treasurer
and the Arizona State Land Department (ASLD) to annually transfer Permanent State School Fund
(Permanent School Fund) monies to provide guaranteed financing for common schools to acquire,
construct, refinance or improve capital facilities before transferring Permanent School Fund
monies for any other authorized purpose.
Background
The Arizona State Land Trust supports Arizona public schools, universities and other
agencies by generating revenues via the sale and use of lands and the investment of proceeds
associated with acreage granted to the state. Each beneficiary has a separate permanent fund
comprised of expendable and permanent monies (Ariz. Const. art. 10 § 7; JLBC).
The Permanent School Fund is established as the permanent fund for Arizona common and
high schools (Ariz. Const. art. 11 § 8). If there is outstanding School Facilities Board debt services,
the State Treasurer and the ASLD must annually transfer an amount that is necessary to pay that
fiscal year's debt service from the Permanent School Fund before transferring an amount for any
other authorized use. If Permanent School Fund monies remain after the debt service obligations,
Permanent School Fund monies are subject to legislative appropriation to the New School
Facilities Fund. If Permanent School Fund monies remain after New School Facilities Fund
obligations, the Legislature may annually appropriate an amount toward basic state aid. Any
expendable receipts above $72,300,000 must be deposited into the Classroom Site Fund (CSF)
(A.R.S. § 37-521).
In 2015, Arizona voters approved Proposition 123 to increase, for FYs 2016 through 2025,
State Trust Land permanent fund distributions from 2.5 percent to 6.9 percent of the average
monthly market valuation of each permanent fund for the previous five calendar years. Proposition
123 requires, for FYs 2016 through 2025, Permanent School Fund expendable earnings that would
otherwise go to the CSF to be appropriated to Basic State Aid, including statutorily required
inflation adjustments, if those earnings are a result of an increase to the 2.5 percent permanent fund
distribution. Beginning in FY 2026, each permanent fund's annual distribution rate reverts to 2.5
percent.
If Permanent School Fund distributions for providing guaranteed financing causes the
amount of Permanent School Fund distributions for basic state aid to decrease, there may be a
fiscal impact to the state General Fund.
FACT SHEET
S.C.R. 1040
Page 2
Provisions
1. Adds, as a permissible use for Permanent School Fund monies beginning in FY 2026, the
provision of guaranteed financing for common schools, including debt obligations that are
issued on behalf of a school district or charter school, to acquire, construct, renovate, equip,
refinance or improve capital facilities that are consistent with Arizona laws.
2. Prohibits, beginning in FY 2026, the State Treasurer and the ASLD from transferring any
Permanent State School Fund monies for any other authorized use before meeting all the
obligations for providing guaranteed financing for common schools as specified.
3. Makes technical and conforming changes.
4. Requires the Secretary of State to submit the proposition to the voters at the next general
election.
5. Becomes effective if approved by the voters and on proclamation of the Governor.
Prepared by Senate Research
February 12, 2024
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