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Judge makes order that Arizona Legislature, schools mediate school funding suit optional

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PHOENIX — A judge on Wednesday ordered lawyers for Arizona public schools, the Legislature and the governor and state to enter settlement talks over a school funding lawsuit, then changed the order to make it voluntary during a second, unscheduled hearing.

Attorney General Mark Brnovich, whose chief of staff was involved in both hearings, said the second hearing was by telephone.

Maricopa County Superior Court Judge Katherine Cooper issued the initial order during a hearing despite statements by the Legislature's lawyer that he wasn't authorized to engage in talks.

The attorney for Senate President Andy Biggs and House Speaker David Gowan, Bill Richards, told Cooper he wasn't sure he had his clients' approval to negotiate. He also said he wasn't sure she could order the parties to negotiate.

"I'm not here authorized to tell you that there has been a voluntary agreement to proceed," Richards said.

Cooper ordered the parties to begin meeting with three appeals court judges who have agreed to mediate the case behind closed doors.

"Can you think of a reason not to?" Cooper asked Richards.

"There are constitutional reasons, there are all kinds of other reasons, why it may not be appropriate or it may not be a viable process," Richards said.

Gowan and Biggs didn't respond to requests for comment.

After the afternoon hearing ended, Cooper amended her order during a telephone hearing, Brnovich said.

It wasn't clear which party asked for the second hearing, but lawyers for the schools didn't object to the mandatory nature earlier and Richards did.

Cooper has ordered that schools be paid $331 million this year to make up for inflation boosts lawmakers failed to provide during the Great Recession. The increases would continue each year and total more than $1.6 billion over the next five years.

She also is considering ordering up to $1.3 billion in back payments, which schools are suggesting to also be paid over five years.

The root of the dispute is a voter-approved 2000 law that raised the state sales tax by 0.6 percent and required the money be spent on annual inflation increases for schools. Lawmakers quit providing the annual boosts in 2009 as state revenues were decimated by the recession.

The Arizona Supreme Court ruled last year the increases were constitutionally required, and Cooper's July order is implementing and interpreting that high court decision.

The Legislature began paying the increases again in the budget year that began July 1, 2013. But Cooper's July ruling ordered the Legislature to reset base level school funding to where it would have been if the inflation increases had been given in each year — a boost of $331 million this budget year and a larger amount in subsequent years.

Gov. Doug Ducey challenged the schools and lawmakers to settle the case during his State of the State address Monday. But he also raised questions about the court decisions that found the Legislature violated the constitution by not paying annual inflation adjustments, saying they had misinterpreted the law.

"Here's the short of it, elected leaders acted in good faith during the Great Recession to keep statutory commitments to education, while also keeping this state afloat," Ducey said. "And now the courts have given us a choice — between a fiscal crisis or a constitutional crisis."

Don Peters, who represents the school districts, said before the hearing that while his clients were willing to negotiate, they could not wait long because schools had been without the money for years already.

"And we are hoping that within three to four weeks we've either got an agreement, at least in broad outline, or we don't have one and we go on with the case," Peters said. "We're the ones trying to get the money into the classroom, and we've got to keep on litigating to make that happen."

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