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SB1696 - 572R - I Ver
REFERENCE TITLE:
school districts; aggregate expenditure limitation
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SB 1696
Introduced by
Senators
Diaz: Bravo, Fernandez, Gonzales, Hatathlie, Kuby, Miranda, Ortiz, Sears
AN
ACT
amending
section 41-563, Arizona Revised Statutes; relating to expenditure
limitations.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 41-563, Arizona Revised
Statutes, is amended to read:
START_STATUTE
41-563.
Expenditure limitations; determination by the commission;
definitions
A. For political subdivisions
,
the commission shall:
1. Determine the base limit level of political
subdivisions for each political subdivision subject to an expenditure
limitation pursuant to article IX, section 20, Constitution of Arizona.� For
the purposes of this subsection and subsection D of this section,
the
"base limit" of each political subdivision means
the amount of actual payments of local revenues by such political subdivision
in fiscal year 1979-1980 as used to determine the expenditure limitation
pursuant to paragraph 4 of this subsection.
2. Determine and report to the governing board of
each political subdivision subject to an expenditure limitation pursuant to
article IX, section 20, Constitution of Arizona,
prior to
before
February 1 of each year, the following:
(a) The total of the estimated population of each
such political subdivision as of July 1 of the prior year and the estimated
population of any areas annexed by such political subdivisions thereafter,
based on the population estimates developed by the
department of
economic security
office of economic opportunity
. The
population of any areas annexed thereafter must be estimated as of July 1 of
the prior year.
(b) The estimated change in the GDP price deflator
used to determine the expenditure limitation for the following fiscal year over
the GDP price deflator used to determine the expenditure limitation for the
current fiscal year.
(c) The estimated expenditure limitation for each
such political subdivision for the following fiscal year.
3. Determine and report to the governing board of
each political subdivision subject to an expenditure limitation pursuant to
article IX, section 20, Constitution of Arizona,
prior to
before
April 1 of each year, the following:
(a) The total of the population of each such
political subdivision as of July 1 of the prior year and the population of any
areas annexed by such political subdivisions thereafter. The
population of any areas annexed thereafter must be estimated as of July 1 of
the prior year.
(b) The estimated change in the GDP price deflator
used to determine the expenditure limitation for the following fiscal year over
the GDP price deflator used to determine the expenditure limitation for the
current fiscal year.
(c) The expenditure
limitation for each such political subdivision for the following fiscal year.
4. Determine the
expenditure limitation for each political subdivision subject to an expenditure
limitation pursuant to article IX, section 20, Constitution of Arizona, as
follows:
(a) Determine the population of the political
subdivision as of July 1, 1978.
(b) Determine the total population of the political
subdivision as required by paragraph 3, subdivision (a) of this subsection.
(c) Divide the population determined in subdivision
(b) of this paragraph by the population determined in subdivision (a) of this
paragraph.
(d) Determine the estimated or actual GDP price
deflator for the 1978 calendar year.
(e) Determine the estimated GDP price deflator for
the calendar year immediately preceding the fiscal year for which the
expenditure limitation is being determined.
(f) Divide the GDP price deflator determined in
subdivision (e) of this paragraph by the GDP price deflator determined in
subdivision (d) of this paragraph.
(g) Multiply the amount determined in paragraph 1 of
this subsection for the political subdivision by the quotient determined in
subdivision (c) of this paragraph and multiply the resulting product by the
quotient determined in subdivision (f) of this paragraph.
5. If any annexation, consolidation or change in the
boundaries of a political subdivision occurs after the determination and report
required by paragraph 3 of this subsection but before July 1 of the current
year, the commission, as promptly as feasible, shall redetermine the total
population, calculated in paragraph 4, subdivision (b) of this subsection, of
the political subdivisions affected by the annexation, consolidation or change
in boundaries. The commission shall determine respective amended
expenditure limitations based on the amended population, which shall be
promptly reported to the governing board of each of the affected political
subdivisions. The political subdivisions affected shall use the
revised expenditure limitation if it is received before the annual financial
statement and estimate of expenses is prepared as required by section 42-17101.
6. In the event of the creation of a new city or
town, the base limit of the new city or town shall be determined by multiplying
the average amount of actual fiscal year 1979-1980 per capita payments of
local revenues for all cities and towns within the county in which the new city
or town is located by the population of the new city or town.
7. In the event of the division of a county into two
or more new counties, determine the expenditure limitation for each of the new
counties or the consolidation of counties, pursuant to article IX, section 20,
Constitution of Arizona, using one of the following two methods. The
board of supervisors of each new county
upon
on
the affirmative vote of two-thirds of the members of
the board of supervisors, on or before February 1 following the county's
establishment, shall adopt one of the expenditure limitations determined:
(a) Method one:
(i) Determine the existing county
which
that
has a population closest to the population of the
new county as of July 1 for the fiscal year preceding the fiscal year for which
the expenditure limit is being determined.
(ii) Determine the per capita expenditure limit for
the existing county determined in item (i) of this subdivision based on the
amount determined in paragraph 3, subdivision (c) of this subsection for the
first full fiscal year following the establishment of the new county
government.
(iii) Multiply the per capita amount determined in
item (ii) of this subdivision by the population of the new county as of July 1
in the fiscal year in which the new county government is
established. The amount
thus
determined is the
expenditure limit for the new county for the first full fiscal year following
its establishment.
(iv) Determine a base limit for the new county
which
that
will yield the new expenditure
limit determined in item (iii) of this subdivision for the first full fiscal
year following the establishment of the new county government.
(b) Method two:
(i) Determine the per capita expenditure limit of
the old county or counties for the last full fiscal year
prior to
before
the establishment of the new county government
based
upon
on
the amount determined
in paragraph 3, subdivision (c) of this subsection.
(ii) Multiply the per capita amount determined in
item (i) of this subdivision by the population of the new county as of July 1
in the fiscal year in which the new county government is
established. The amount
thus
determined is the
expenditure limit for the new county for the first full fiscal year following
its establishment.
(iii) Determine a base limit for the new county
which
that
will yield the new expenditure
limit determined in item (ii) of this subdivision for the first full fiscal
year following the establishment of the new county government.
8. If the governing board of a political subdivision
authorizes expenditures in excess of the expenditure limitation determined
pursuant to paragraph 4 of this subsection as provided in article IX, section
20, subsection (2), paragraph (b), subdivision (i), Constitution of Arizona,
the expenditure limitation for such political subdivision for the following
fiscal year shall be reduced by the amount of expenditures in excess of the
limitation, unless the governing board has held an election as provided in article
IX, section 20, subsection (2), paragraph (b), subdivision (ii), Constitution
of Arizona, and the excess expenditure has been approved by a majority of the
qualified electors voting in such election.
9. If the citizens of a political subdivision
approve an increase or decrease in the expenditure limitation as provided in
article IX, section 20, subsection (6), Constitution of Arizona, the base limit
of a political subdivision shall be adjusted by the commission such that the
expenditure limitation of the political subdivision for the fiscal year
following approval reflects the approved increase or decrease.
B. For community college districts
,
the commission shall:
1. Determine the base limit of each community
college district subject to an expenditure limitation pursuant to article IX,
section 21, Constitution of Arizona. For the purposes of this
subsection and subsection D of this section,
the
"base limit" of each community college district means the amount of
expenditures of local revenues in fiscal year 1979-1980 as used to
determine the expenditure limitation pursuant to paragraph 4 of this
subsection.
2. Determine and report to the governing board of
each community college district
prior to
before
February 1 of each year the following:
(a) The estimated student population,
utilizing
using
the procedure prescribed in section 15-1466.01, of
each community college district for the following fiscal year.
(b) The estimated change in the GDP price deflator
as prescribed in subsection A, paragraph 2, subdivision (b) of this section.
(c) The expenditure limitation for each community college
district for the following fiscal year.
(d) The modified expenditure limitation as
prescribed in section 15-1471, if applicable.
3. Determine and report to the governing board of
each community college district
prior to
before
April 1 of each year the following:
(a) The student population, utilizing the procedure
prescribed in section 15-1466.01, of each community college district for
the following fiscal year.
(b) The estimated change in the GDP price deflator
as prescribed in subsection A, paragraph 2, subdivision (b) of this section.
(c) The expenditure limitation for each community
college district for the following fiscal year.
(d) The modified expenditure limitation as
prescribed in section 15-1471, if applicable.
4. Determine the expenditure limitation for each
community college district, as follows:
(a) Determine the student population of each
community college district for fiscal year 1979-1980 using the definition
of full-time equivalent student in section 15-1401 in 1979-1980,
except that if a redefinition of full-time equivalent student changes the
number of semester credit units per semester from fifteen units, the student
population for the 1979-1980 base year shall be recalculated using the
new number of units.
(b) Determine the estimated student population of
each community college district for the fiscal year for which the expenditure
limitation is being determined using the definition of full-time
equivalent student in section 15-1401.
(c) Divide the student population determined in
subdivision (b) of this paragraph by the student population determined in
subdivision (a) of this paragraph.
(d) Determine the estimated or actual GDP price
deflator for the 1978 calendar year.
(e) Determine the estimated GDP price deflator for
the calendar year immediately preceding the fiscal year for which the
expenditure limitation is being determined.
(f) Divide the GDP price deflator determined in
subdivision (e) of this paragraph by the GDP price deflator determined in
subdivision (d) of this paragraph.
(g) Multiply the amount determined in paragraph 1 of
this subsection for the community college district by the quotient determined
in subdivision (c) of this paragraph and multiply the resulting product by the
quotient determined in subdivision (f) of this paragraph.
5. In the event of an annexation, creation of a new
community college district or a consolidation or change in the boundaries of a
community college district, the base limit of a community college district
shall be adjusted by the commission according to the following guidelines:
(a) In the event of the creation of a new community
college district, the base limit of the community college district shall be
determined by multiplying the average amount of 1979-1980 per capita
expenditures of local revenues for all community college districts within
the
this
state by the student population
of the new community college district. The expenditure limit of the
county in which the new community college district is located shall be reduced
by the amount paid to other community college districts for tuition in the
fiscal year preceding the fiscal year in which the new community college
district is created.
(b) In the case of an annexation, consolidation or
change in the boundaries of a community college district, the base limit of a
community college district shall be adjusted by the commission to reflect the
change by increasing the base limit of the community college district gaining
the newly included territory and decreasing the base limit of the community
college district losing the territory.
(c) If an existing community college district
consolidates with a contiguous county
that is
not part of
a community college district
,
the commission shall:
(i) Increase the base limit of the existing
community college district by an amount equal to the amount of revenue
which
that
would have been generated by
applying the primary property tax rate of the existing community college
district in the immediately prior year to the limited assessed valuation of the
contiguous county in the immediately prior year.
(ii) Decrease the base limit of the contiguous
county by the amount of reimbursement prescribed by section 15-1469,
subsection B, paragraph 1, paid by such county in the 1979-1980 base
year, except that
no
a
decrease
shall
not
be made to the base limit of such county if the
reimbursement prescribed by section 15-1469, subsection B, paragraph 1 in
the immediately prior year was paid by
the
this
state pursuant to section 15-1469.01.
(d) In the case of a decrease in service boundaries
of a community college district, the base limit of the community college
district shall be reduced by the commission to reflect the amount attributable
to the service area in fiscal year 1979-1980 and the base student
population of the community college district shall be reduced by the commission
to reflect fiscal year 1979-1980 student population attributable to the
service area. The adjusted base limit and the adjusted fiscal year
1979-1980 student population shall be used in determining the expenditure
limitation for the community college district in the first year in which the
service boundaries are diminished and in each subsequent year.
C. For school districts
,
the
commission shall:
1. Determine the base limit of school districts
subject to the expenditure limitation prescribed by article IX, section 21,
subsection (2), Constitution of Arizona.� For the purposes of this subsection
and subsection D of this section, "base limit" means the total amount
of expenditures of local revenues of all school districts in fiscal year
1979-1980
2026-2027
as used to
determine the expenditure limitation pursuant to paragraph 4 of this
subsection.
2. Determine and report to the legislature
prior to
before
March 1 of each year the
following:
(a) The estimated total student population of all
school districts for the current year.
(b) The estimated change in the GDP price deflator
as prescribed in subsection A, paragraph 2, subdivision (b) of this section.
(c) The estimated aggregate expenditure limitation
for all school districts for the following fiscal year.
3. Determine and report to the legislature,
prior to
before
May 1 of each year, the
following:
(a) The total student population of all school
districts for the current year.
(b) The estimated
change in the GDP price deflator as prescribed in subsection A, paragraph 2,
subdivision (b) of this section.
(c) The aggregate
expenditure limitation for all school districts for the following fiscal year.
4. Determine the aggregate expenditure limitation
for all school districts as follows:
(a) Determine the aggregate student population of
all school districts for the school year
1978-1979
2025-2026
.
(b) Determine the total student population of all
school districts for the current year.
(c) Divide the aggregate student population
determined in subdivision (b) of this paragraph by the aggregate student
population in subdivision (a) of this paragraph.
(d) Determine the estimated or actual GDP price
deflator for the
1978
2023
calendar
year.
(e) Determine the estimated GDP price deflator for
the calendar year immediately preceding the fiscal year for which the aggregate
expenditure limitation is being determined.
(f) Divide the GDP price deflator determined in
subdivision (e) of this paragraph by the GDP price deflator determined in
subdivision (d) of this paragraph.
(g) Multiply the amount determined in paragraph 1 of
this subsection by the quotient determined in subdivision (c) of this paragraph
and multiply the resulting product by the quotient determined in subdivision
(f) of this paragraph.
D. In the case of a transfer of all or any part of
the cost of providing a governmental function, pursuant to article IX, section
20, subsection (4), Constitution of Arizona, or article IX, section 21,
subsection (5)
or subsection (6), paragraph (
a
)
, Constitution of Arizona, the base limit of political
subdivisions, community college districts or school districts, whichever is
applicable, shall be adjusted by the commission to reflect the transfer by
increasing the base limit of the political subdivision, community college
district or school district to which the cost is transferred and decreasing the
base limit of the political subdivision, community college district or school
district from which the cost is transferred by the amount of the cost of the transferred
governmental function.
E. For the purposes of this section:
1. "Commission" means the economic
estimates commission.
2. "GDP price deflator" means the average
of the four implicit price deflators for the gross domestic product reported by
the United States department of commerce for the four quarters of the calendar
year.
3. "Political subdivision" means any
county, city, including any charter city, or town.
4. "Population" shall be defined pursuant
to article IX, section 20, subsection (3), paragraph (f), Constitution of
Arizona.
5. "Student population" shall be defined
pursuant to article IX, section 21, subsection (4), paragraph (e), Constitution
of Arizona.
END_STATUTE
Sec. 2.
Economic estimates commission
The
economic estimates commission shall adjust any necessary calculations to
determine the aggregate expenditure limitation for fiscal year 2027-2028
pursuant to section 41-563, Arizona Revised Statutes, as amended by this
act.
Sec. 3.
Conditional enactment; applicability
This act
does not become effective unless the Constitution of Arizona is amended by vote
of the people at the next general election by passage of Senate Concurrent
Resolution ____, fifty-seventh legislature, second regular session,
relating to expenditure limitations, and applies to fiscal years beginning from
and after June 30, 2027.