LOS ANGELES -- Elementary schools in Arizona failed in last week's election to expand their bonding capacity, and a tougher restriction on state tax increases could hamper overall education finance reform, according to school officials.

Elementary school districts, especially those experiencing fast growth, had hoped to gain added bond capacity through Proposition 106, which was placed on the ballot by the state Legislature.

The Arizona Constitution currently prohibits elementary school districts from incurring debt in an amount more than 15% of the value of each district's taxable property. Proposition 106 proposed increasing that debt limit to 20% of taxable property, while still requiring local voter approval of school bonds.

But that change failed in last week's election. About 64% of those voting opposed Proposition 106, even though there was no organized opposition to the measure prior to the election, according to Martha Dorsey, an education committee analyst for the state Senate.

The state's legislative council, which summarizes arguments both for and against such propositions, said in a written analysis that opponents believed Proposition 106 "would permit additional public debt a time when taxpayers cannot afford it."

According to the opposition argument, "School districts must make do with the money they have [and] not ask they taxpayers to let them go deeper into debt."

By contrast, the argument in favor said Proposition 106 "simply gives the residents of elementary school districts the power to provide

for better schools if they are willing to pay for them."

School officials, especially those in fast-growing areas, contend that many elementary school districts are unable to provide adequate educational equipment and facilities because of their existing debt limit. They believed that Proposition 106 would let voters in each school district decide whether to meet this need with more debt.

Dorsey said it is difficult to tell why voters rejected the proposal. It is possible some voters "didn't understand it," she said. "Sometimes, people read it as though this was like the bond vote itself."

Other arguments arose against the proposal. In an editorial, for example, the Mesa Tribune said "this would be a reasonable proposition" if it limited bond votes to general elections in which turnout was high. But the local daily newspaper opposed the proposition because school districts could schedule such elections at other times, when turnout which be much lower.

Officials at some of the fast-growing local school districts that would benefit most from Proposition 106 could not be reached for comment yesterday because of the Veterans Day holiday.

Arizona-based investment bankers said the debt limit is a common problem for many districts with pressing facility needs. Those districts that lack additional bond capacity devise various solutions to concerns such as overcrowding, including year-round schedules, according to the bankers.

Gaye Smoker, a spokeswoman for the Arizona School Boards Association, said her group supported Proposition 106, but she was uncertain if more attempts would be made to expand the local bonding capacity.

She said the school board association expended much of its election efforts opposing Proposition 108, which amends the constitution to require a two-thirds vote of both the House and Senate to increase taxes or fees or impose new ones.

But voters overwhelmingly approved the measure, with almost 72% favoring it.

The school association fears that Proposition 108 will make it more difficult for Arizona legislators to provide resources needed for public education. They also fear it will make additional funding for new or expanded programs almost impossible to obtain.

School officials also question whether broader education finance reform will be possible under the tougher legislative voting threshold for taxes. In particular, they wonder whether it will be possible to fashion a funding formula to correct the property wealth differences that lead to spending disparities among various school districts.

Some opponents of Proposition 108 argued that it would crimp the state's flexibility at a time when the population growth rate remains at about twice the national average. This growth is driving up expenses for items such as education, health care, and corrections.

In a recent review, Standard & Poor's Corp. said its ratings outlook is negative for Arizona's $200 million in certificates of participation, largely because slower revenue growth and growing program requirements "have eroded financial flexibility."

A Standard & Poor's official did not return a phone call yesterday to comment on the proposition.

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