The Education Aggregate Expenditure Limit is Bad Policy

December 15, 2022

The Education Aggregate Expenditure Limit is Bad Policy

Legislature needs to waive AEL and refer repeal to voters NOW


The Aggregate Expenditure Limit (AEL), which was added to the state constitution by voters in the early 1980s, is an albatross turned into a vehicle to hold kids hostage to advance political agendas. That’s wrong. If enacted on March 1 next year, it will strip $1.39 billion from $7.79 billion in state and local funding allocated by the legislature to Arizona district schools.

This report details six facts about the AEL.
FACT 1: The AEL is going to be breached EVERY year unless we plan to cut K-12 funding by 20%.
FACT 2: The AEL holds children hostage to political agendas.
FACT 3: A $1.39 billion cut to public education funding would reduce state GDP in the 2nd Quarter of 2023 by 1.4% and lead to the equivalent of 65,000 jobs lost, nearly doubling the portion of people in Arizona who are unemployed.
FACT 4: Closing schools has a devastating impact on student learning.
FACT 5: The AEL undermines the attractiveness of the state to corporate investment.
FACT 6: The AEL accomplishes nothing.
The AEL ties district school funding (state plus local) to the amount allocated in 1979-1980 adjusted annually by inflation (GDP implicit price deflator) and the student count in district schools. It was exceeded in 1986-87, but voters approved a permanent adjustment of 10 percent, so now base funding is 10 percent higher than in 1979-1980 adjusted for inflation and population growth.  Prop. 301, a 20-year 0.6% sales tax for education passed by voters in 2000, again led to the state surpassing the AEL in 2001-2002 with the additional infusion of funds. The legislature then approved exceeding the AEL with a ⅔ vote in both chambers and referred the issue to voters in the form of Prop. 104 to exempt Prop. 301 funds from the AEL in future years, which was approved.

However, in 2018 when the legislature extended Prop. 301 for another 20 years, they omitted language that exempted it from the AEL. The limit would have been an issue sooner if Arizona invested more in public education. Currently, Arizona is ranked 47th in the nation for per pupil funding for public schools according to the US Census Bureau.

The legislature has until March 1 each year to override the cap, but given how late that is in the school year failure to do so would wreak havoc, forcing massive layoffs, furloughs and possibly entire systems to shut down. This impacts families and could lead to latch key kids when parents are working, threatens 67,000 graduating high school seniors, and could be especially devastating in rural communities.  

For example, Chandler could see nearly 2,500 teachers at risk of job loss or furlough and a $74 million hit to their local economy in the second quarter of 2023. Yuma (Crane and Yuma Elementary plus Yuma Union HSD) would see about 1,150 teachers at risk of job loss or furlough and a $44 million hit to the local economy. Tucson area schools (Tucson, Sunnyside, Flowing Wells, Catalina Foothills, Amphitheater, Sahuarita and Vail) have 6,000 teachers at risk of job loss or furlough and a $178 million hit to the local economy (see Appendix for full listing of school districts).

The AEL unfairly punishes district schools, as charters and private school subsidy programs are excluded as they did not exist in 1980.

It also serves no practical purpose. It predates the 1992 voter approved change to  the state constitution requiring a ⅔ vote of the legislature to raise taxes and Prop. 132 that narrowly passed this year which will now require citizen initiatives that seek to raise taxes to garner at least 60% of the vote.

Outgoing Governor Ducey, who has frequently touted how much he increased K-12 spending, has apparently decided it’s fine to hold funding for district schools hostage while trying to get even more money for unaccountable, non-transparent private schools. 

Gov. Ducey should call the Special Session to waive the AEL that he should have called in July after the legislative session or in September after the primary or in November after the general election. Gov-elect Hobbs should go one further and echo the call of outgoing Superintendent of Public Instruction Kathy Hoffman and demand its repeal be referred to voters as one of her first actions in January.

Six Facts About the Aggregate Expenditure Limit


FACT 1: The AEL will be breached EVERY year unless K-12 funding is cut by 20%.

Year K-12 District Budget with Equalization Formula (State + Local) Aggregate Exp.
Percent Exceeding AEL Amount Exceeding AEL 
FY2023 $7.79 B $6.4 B 22% $1.39 B


The AEL increases by K-12 student population growth plus inflation (GDP price deflator) and will not ever catch up to the K-12 funding formula because that mandates that the base level of funding increase by the GDP price deflator or 2% whichever is less. If inflation were to persist at 5%, and the formula adjusted by 2% it would take seven years for the gap to be eliminated.  Not only is that scenario extremely unlikely, it assumes Arizona does nothing during that time to address the persistent under funding issues in K-12 education. Simple fixes like exempting the extended Prop. 301 dollars will no longer work as the cap has exceeded the projected $900 million in sales tax dollars by almost $500 million.

FACT 2: The AEL holds children hostage to political agendas.

Obtaining a ⅔ vote to override the AEL provides opportunities for political agendas to interfere with our children’s education. For years, proponents of vouchers claimed that vouchers saved the state money because they were set at 90% of the funding received by charter schools per pupil. That was always misleading — some voucher  students attend private schools whether or not a state subsidy exists and other voucher students would have come from district schools that were mainly funded by property taxes, not state dollars. Now voucher proponents are crying that they want a higher amount of funding because the voucher amount is not high enough and outgoing Gov. Ducey wants that if he is to call a special session to override the AEL.

Then next year what political agenda item will be used while children are again held hostage by the need for a ⅔ vote to override the AEL?  

FACT 3: A $1.39 billion cut to public education funding would reduce state GDP in the 2nd Quarter of 2023 by 1.4% and lead to the equivalent of 65,000 jobs lost, nearly doubling the portion of people in Arizona who are unemployed.

Economic models of expenditure impacts suggest a $1.39 billion cut from K-12 education would have a 1.8 economic output multiplier effect in the state, meaning an additional impact of between $1.1 billion.  However, this would be a dramatic cut in a short period causing a fairly dramatic impact in the second quarter of 2023.  The number of job losses during the second and into the third quarter will likely be 65,000, including both school personnel and teachers laid off or on furlough as well as impacts on local businesses who either lose out on contracts with the schools or businesses supported by people who work at the schools. In all, 50,000 teachers are at risk of job loss for the rest of the school year or some kind of furlough. Rural areas of the state which are most dependent on their local schools as the basis of their local economy would be particularly vulnerable. As the state currently has an estimated 142,000 people unemployed, an additional 65,000 equivalent short-term job losses represent nearly a 50% growth.

GCI has provided an estimated impact by school district in the appendix of this report.

FACT 4: Closing schools has a devastating impact on student learning.

It is particularly galling to see policymakers who complained about the shutdown of schools during the pandemic willing to risk shutting schools down for their own political agendas. A 20% cut in school spending is associated with a loss of about 16% of a standard deviation in NAEP scores (a 10% cut is the equivalent of moving from a middle quintile teacher to a lowest quintile teacher), with the most serious impacts in math. Likewise, it lowers the high school graduation rate. However, implementing the cuts in the dramatic manner that the AEL requires would likely lead to impacts magnitudes greater than that as well as create such serious disruptions in the educational infrastructure that it would take years to recover.

FACT 5: The AEL undermines the attractiveness of the state to corporate investment.

A state that annually plays politics with their children’s education is not going to improve educational outcomes and certainly will not induce corporations to locate there, since the state is signaling a blatant disregard for its future workforce.

FACT 6: The AEL accomplishes nothing.

The AEL was adopted during the early 1980s, a time of economic uncertainty compounded by a recent experience of high inflation. At the time, Arizona was ranked in the middle of states in its per pupil school funding. In that context, voters were presumably concerned about the balance between taxes and expenditures. 

A number of policy changes have occurred that make the AEL not only unnecessary but harmful. Since that time, the state has been forced to adopt an equalization formula to ensure a more uniform school system as mandated by the Arizona Constitution. Unfortunately, that also meant the legislature gained greater control over K-12 spending and the state’s ranking in per pupil funding has plummeted to among the lowest in the nation. In 1980-81, when the AEL was enacted 19 other states spent less per pupil on K-12 education than Arizona. Today we rank 47th in per pupil funding.  Voters narrowly approved Prop. 208 in 2020 to improve investments in their public schools and the Arizona Supreme Court nullified it exceeded the AEL in the Constitution, even though Prop. 208’s drafters tried to include language to avoid the AEL.

Two other policy changes make the AEL completely unnecessary.  When the AEL was passed, the legislature could increase taxes with a majority vote and districts had much autonomy on setting local property tax rates. Today it requires a ⅔ vote in each chamber to increase taxes–something that is virtually impossible to attain. Consequently, tax increases are referred to voters instead. Local jurisdictions have strict parameters for overriding state spending limits under equalization for budget overrides.

Going forward any attempt to increase taxes to fund education through citizen’s initiatives such as Prop. 208 InvestinEd will now require a 60% vote in support due to Prop. 132 narrowly being passed by voters. 


The Grand Canyon Institute (GCI) is dedicated to informing and improving public policy in Arizona through evidence-based, independent, objective, nonpartisan research.  GCI makes a good faith effort to ensure that findings are reliable, accurate, and based on reputable sources.  While publications reflect the view of the Institute, they may not reflect the view of individual members of the Board.


Contact: Dave Wells

Dave Wells holds a doctorate in political economy and public policy and is the Research Director for the Grand Canyon Institute.  He can be reached at or by contacting the Grand Canyon Institute at (602) 595-1025 ex. 2. 

The Grand Canyon Institute, a 501(c) 3 nonprofit organization, is a centrist think tank led by a bipartisan group of former state lawmakers, economists, community leaders, and academicians. The Grand Canyon Institute serves as an independent voice reflecting a pragmatic approach to addressing economic, fiscal, budgetary and taxation issues confronting Arizona.