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Legislative budget will cost Arizona nearly $1 billion in Federal Education Stimulus money

June 05, 2009

Statement from Arizona State University

The Arizona Legislature this week passed a budget that seizes or “sweeps” funds from the Arizona State University System.

 Although this budget is intended to remain in compliance with the qualifications for federal stimulus funds under the American Recovery and Reinvestment Act of 2009 (ARRA), the result of such fund seizures – along with a rollover of $100 million in university funding from the fiscal year 2009 to fiscal year 2011 budget – would be to disqualify the state from education stimulus money.  The disqualification would be triggered by the ARRA’s “maintenance of effort” requirement.

The funds in question are not state-appropriated funds, but rather were generated by the universities from non-state sources, such as student payments for textbooks and campus housing. Consequently, ASU officials do not believe that it is legal for the state to sweep accounts of non-state money.

Among the ARRA requirements for federal stimulus money is that there be “maintenance of effort” in the levels of state financial support for public institutions of higher education. Funding is not to drop below the level of such support in fiscal year 2006. Rather than reduce outright the amount of state appropriations below the fiscal year 2006 level, the legislative budget makes an additional $50 million cut to the state universities through sweeping non-appropriated funds, in addition to a $40 million reduction in state funding.

But such a tactic still reduces university funding by an additional $90 million and violates the federal government's requirement that the aggregate level of Arizona's support for higher education not be reduced below specified levels.

While ASU officials very much appreciate the financial difficulties faced by Arizona in balancing the fiscal year 2010 budget, it would not appear to be either legally permissible or operationally prudent for the state to engage in sleight-of-hand efforts to seize one source of university funding to subsidize the level of “state support” which the state has represented as having been made in higher education in Arizona. These sweeps – along with the funding rollover – do not comply with the maintenance of effort requirements and will result in the loss of nearly $1 billion in federal education stimulus money to the detriment of the state budget, the state universities and the citizens of Arizona.