Which of EVIT’s four payment methods for member-district career programs meet Arizona’s service-cost limit?

Plain-English summary

Arizona career technical education districts (CTEDs) may offer programs on a member school district's campus under an intergovernmental agreement (IGA). A.R.S. § 15-393(L)(9) requires the IGA to specify that payment for services will not exceed the cost of those services. East Valley Institute of Technology (EVIT) asked its lawyer to assess four proposed payment methods. The lawyer's memorandum, attached to the AG opinion as Appendix A, identifies each method and concludes that methods 1 and 3 satisfy the cost limit while methods 2 and 4 do not.

The Arizona Attorney General generally agreed with those conclusions based on the methods as described. Method 1 starts with a formula of 66% of base support level times average daily membership times 1.339, but reconciles year-end expenses and applies unspent funds to the following year's services. Method 3 calculates payments proportionally from service cost and expressly bars payments above that cost; counsel warned its calculation process needed more detail. Both appeared compliant to counsel, and the AG generally agreed.

Method 2 pays a fixed proportion of average daily membership without regard to service cost and has no reconciliation or overpayment provision. Method 4 uses a board-approved budget and a cap tied to a 100-day student count, but its description does not establish a general cost reconciliation or overpayment recovery mechanism. Counsel found that neither ensures payment stays within actual service cost, and the AG generally agreed.

That is a review of the four descriptions, not approval of any completed agreement. The AG expressed no opinion on other requirements of § 15-393(L) or the Uniform System of Financial Records. Other clauses in a final IGA could change payment calculations or distribution, so a complete agreement must be reviewed before deciding whether it complies.

What this means for you

For CTED finance staff

Keep the statutory ceiling visible when building a payment method: the IGA must specify that payment for services does not exceed their cost. The AG's favorable view of method 1 relied on its year-end accounting for unspent funds, not solely its average-daily-membership formula. Method 3 stated the ceiling but left the proportional calculation vague; counsel advised adding detail. Check what a final IGA actually provides before treating either description as approved.

For member districts and governing boards

A budget approval or student-count cap alone did not persuade counsel that method 4 met the service-cost ceiling. The attached memorandum says it was unclear whether the budget would be reconciled with the student count and found no general means to account for an overpayment. Ask how the proposed agreement deals with the actual cost of the services and whether any other term alters the allocation.

For auditors and counsel

Review the entire IGA and the actual payment method. The AG reserved the questions of other § 15-393(L) provisions and the Uniform System of Financial Records. Appendix A supplies EVIT counsel's method-by-method reasoning, while the AG's concurrence remains general and based on the descriptions provided.

Currency note

This opinion was issued in June 2025 as EVIT was preparing IGAs for the next school year. Confirm the current statute and review the executed agreement before relying on its conclusion about a proposed method.

Common questions

Which methods did the AG generally accept?

Methods 1 and 3. The AG generally agreed with EVIT counsel's conclusion that they appeared to reflect service cost. Method 1 uses a formula with a year-end accounting for unspent funds. Method 3 states that payments will not exceed service cost, although counsel said its proportional-calculation process needed more detail.

Why did methods 2 and 4 fail counsel's analysis?

Method 2 pays a fixed share of average daily membership regardless of service cost, with no stated reconciliation or overpayment mechanism. Method 4 uses a budget and student-count cap but did not show how payments would be reconciled to service cost or generally account for excess payment. The AG generally agreed with counsel's conclusions on those descriptions.

Can an IGA pass if its payment paragraph resembles method 1 or 3?

The AG did not decide that. It said other terms could significantly affect payment calculations and distribution. Compliance with § 15-393(L)(9) requires the complete agreement, and the AG did not decide its compliance with other statutes or the Uniform System of Financial Records.

Why does the appendix cite § 15-539(L)(9)?

The AG's footnote identifies that as a citation error in the submitted opinion. The applicable provision discussed is § 15-393(L)(9).

Background and statutory framework

A.R.S. § 15-1448(H) provided the AG's review procedure. The AG explained that CTEDs can run programs at their own central campus or on a member district's campus under an IGA. A.R.S. § 15-393(L)(9) requires the IGA to "completely and accurately specify" that payment for services will not exceed their cost. Appendix A describes EVIT counsel's four methods and conclusions. The AG generally affirmed those conclusions while limiting its review to the described language in isolation.

Citations

• A.R.S. § 15-1448(H)
• A.R.S. § 15-391(3)
• A.R.S. § 15-392
• A.R.S. § 15-393(L)
• A.R.S. § 15-393(L)(9)

Source

• Landing page: https://www.azag.gov/opinions/i25-004-r25-006
• Original PDF: https://www.azag.gov/sites/default/files/2025-06/I25-004.pdf

Original opinion text

STATE OF ARIZONA

OFFICE OF THE ATTORNEY GENERAL

ATTORNEY GENERAL OPINION
No. I25-004
(R25-006)
By
Re: Permissible payment methodologies
KRIS MAYES
under A.R.S. § 15-393(L)(9)
ATTORNEY GENERAL

June 12, 2025

To: Kevin Koebel, Director of Legal Services, East Valley Institute of Technology

Pursuant to A.R.S. § 15-1448(H), we generally affirm the conclusions reached by the

opinion you prepared for the East Valley Institute of Technology (“EVIT”), a career technical

education district (“CTED”), regarding whether various payment methodologies comply with

A.R.S. § 15-393(L)(9). 1 That opinion is attached hereto as Appendix A.

CTEDs (formerly known as “joint technological education districts”) are education

districts formed by two or more school districts to provide career technical education (“CTE”)

courses and programs to students within those districts. See generally A.R.S. §§ 15-391(3), 15-

392. CTEDs may provide CTE courses and programs at a central campus owned or operated by

the CTED or on a member district’s campus pursuant to an intergovernmental agreement (“IGA”)

with the member district. A.R.S. § 15-393(L).

1
The submitted opinion cites A.R.S. § 15-539(L)(9). However, it is clear based on the issues addressed in the Opinion that the Opinion is referring to A.R.S. § 15-393(L)(9).

A.R.S. § 15-393(L) sets forth specific requirements for an IGA between a CTED and a

member district. One is that the IGA must “completely and accurately specify . . . [t]hat the

payment for services shall not exceed the cost of the services provided.” A.R.S. § 15-393(L)(9).

The submitted opinion outlines, at a high level, four methods for calculating payments

owed to member districts for services provided by them in connection with CTE courses and

programs on their campuses pursuant to A.R.S. § 15-393(L)(9). It concludes that two of the

methods appear to accurately reflect the actual cost of services, as required by § 15-393(L)(9),

while two do not.

We generally agree with the conclusions reached, based on the provided descriptions of

the four payment methods. But we express no opinion on whether these methods, as presented

here, comply with other statutory requirements, including those in other subsections of A.R.S.

§ 15-393(L), nor do we express an opinion on whether the methods discussed herein comply with

the Uniform System of Financial Records. Further, there could be language in other provisions of

the final IGA that could significantly affect the manner in which payments are calculated that may

affect the distribution of the payments between the parties. Thus, while we can make general

conclusions and provide general guidance with respect to the specific language presented in

isolation here, whether an IGA containing this language is compliant with A.R.S. § 15-393(L)(9)

will necessarily require review of the complete agreement, rather than just certain or select portions

thereof.

                                      *       *       *

Kris Mayes
Attorney General

2

APPENDIX A

R25-006

Kevin Koelbel
Director of Legal Services
East Valley Institute of Technology
1601 West Main Street
Mesa, Arizona 85201

April 14, 2025

Chris Mayes
Attorney General
Office of the Attorney General
2005 N. Central Ave.
Phoenix, AZ 85004-2926
Re: Request for Opinion Regarding Payments for CTED Member District Services Dear General Mayes:

Pursuant to A.R.S. § 15-253(B), I am submitting for your review the enclosed legal opinion that I provided to the Governing Board of the East Valley Institute of Technology (”EVIT Board”), an Arizona Career and Technical Education District.

The EVIT Board is currently preparing its Intergovernmental Agreements (“IGAs”) with its member districts. These IGAs will start on July 1, 2025. The EVIT Board was hoping your office could complete a review by April in order to avoid any delay in executing the new IGAs. To that end, I submitted a request for an opinion to you in January. Unfortunately, it appears that I did not submit it properly.

I realize that my error does not place any burden on your office. But if there is anyway to expedite a review of the attached legal opinion, the EVIT Board and I will greatly appreciate it. IF you have any question, please do not hesitate to contact me. Sincerely,

Kevin Koelbel

To: EVIT Governing Board
From: Kevin Koelbel
Date: March 28, 2025
Re: CTE Satellite Funding Mechanisms

ATTORNEY-CLIENT PRIVILEGE

Board Members:

In preparation for preparing new Intergovernmental Agreements (“IGAs”) with CTED’s member districts, you asked that I determine what funding mechanisms Arizona Career and Technical Education Districts (“CTEDS”) use to fund CTE Satellite Programs and to request an opinion from the Arizona Attorney General about whether they comply with A.R.S. § 15-539(L)(9), which requires that payments for services to member districts no exceed the cost of delivering services.

On January 28, 2025, I sent a letter to the Arizona Attorney General outlining four funding methods that represent the funding methods used by Arizona CTEDs and requesting an opinion about whether each complies with A.R.S.
§ 15-539(L(9) (copy attached). I expected a response within sixty days, but received none. I have since learned that the form in which I requested the opinion was incorrect. I apologize for that delay.

The four funding methods commonly used by Arizona CTEDs are:

1. The services provided for the satellite program are proportionally calculated between the CTED and
   member district based on the cost of delivering services. The payment to the member district not to exceed
   the cost of the services provided. The CTED pays the member district based on the following formula: 66%
   of (Base Support Level x Average Daily Membership x 1.339). Member district’s unexpended funds at the
   end of the school year are used to decrease reimbursements for the following year

2. The CTED pays the member district a fixed proportion of the Average Daily Membership generated by the
   member district for the CTE courses provided by the member district without regard to the cost of the
   services. Payments are made quarterly with no provision for payments exceeding the cost of services or
   unexpended funds.

3. The services provided for the satellite program are proportionately calculated between the CTED and
   member district based on the cost of delivering the service. The payment to the member district is not to
   exceed the cost of the services provided.

4. Member districts provide a budget plan to the CTED for the CTED’s governing board’s approval prior to
   providing the services. The CTED reimburses the member district for costs included in the approved
   budget. The CTED distributes fund twice annually. The amount distributed will not exceed the amount to
   which the member district is entitled based on the current year’s 100-day student count. If the member
   district uses CTE funds to supplant non-CTE programs, the amount supplanted is deducted from the
   following year’s funding. No other provision is included for overpayments of unexpended funds.

Method 1 appears to comply with this statutory requirement because, although it passes through a fixed percentage, the expenses are reconciled at the end of each fiscal year and funds provided to the member district in excess of expenses are applied to services provided in the following fiscal year.

Method 2 would not comply with the statutory requirement because a fixed percentage of funds generated by Average Daily Membership does not account for the actual cost of providing services. This method does not reconcile the actual costs with the payment amounts, has no method of determining if the fixed percentage exceeds the costs of providing services, and therefore, no means to recover overpayments.

Method 3 is similar to Method 1, but a vague on the process of how the proportional service calculation is made. But the requirement that payments to the member district not exceed the cost of the services provided should insure compliance with the statutory requirement.

Method 4 requires member districts to submit budgets for CTE Board approval prior to providing services. The CTED reimburses based on the budget. The amount distributed cannot excess the current year’s 100-day student count. If the member district uses any funds to supplant non-CTE programs, the amount supplanted is deducted

from the following year’s funding. Whether the budget is ever reconciled with the 100-day student count to determine if an overpayment was made is unclear. And, there does not appear to be a method to recover an overpayment aside from a supplanting issue.

Methods 1 and 3 satisfy the statutory requirement that payments for services shall not exceed the cost of services provided. Methods 2 and 4 do not have a mechanism to determine if payments made to a member district exceed the cost of services provided nor a means to recover or account for an overpayment.

My opinion, therefore, is that Methods 1 and 3 comply with A.R.S. § 15-393(L)(9) and you may use either method. I would caution you, however, to provide additional details if you choose Method 3. Methods 2 and 4 do not satisfy A.R.S. § 15-439(L)(9) and I advise you not to include either method of funding EVIT satellite programs in the new IGAs.