Impact of alternate tax models and compensatory educational weights on the equity of school finance in Arizona

The purpose of this study was to determine if the application of alternate tax models and commensurate educational weights have an effect on the equity of per pupil expenditures in school districts in Arizona. Per pupil expenditures within Arizona are not equal due to differences in taxable wealth, specifically the total primary assessed valuations of the property within the boundaries of each school district. This seems to be at odds with the mandate for school and state officials to administer a uniform and general educational system. Additionally, schools and states are under enormous pressure to demonstrate academic improvements for all students, including those whose educational needs are greater. Arizona, as do many states, utilizes a foundation formula to compute the amount of state aid distributed to the school districts. This study examined the use of three alternate tax bases as potential sources of additional revenue. These alternate tax bases are the Representative Tax System (RTS), state sales tax on selected services and a statewide property tax. Revenue projections from the tax bases were computed based on nationally averaged tax rates. The projected revenues were applied to a compensatory educational weight, and added to the Average Daily Membership (ADM) to produce new base revenue levels and subsequent new total expenditures. A comparison of the equity of per pupil expenditures was made prior to and following the application of five different levels of compensatory weights based on the revenue projections from the RTS, sales tax on selected service taxes and a statewide property tax. Analysis of the results revealed that the addition of compensatory educational weights impacts the equity of per pupil expenditures in Arizona.