How can a career technical education district (CTED) and a member school district structure payments for shared career technical programs without exceeding cost?

Plain-English summary

Career technical education districts (CTEDs, formerly JTEDs) are special-purpose districts that two or more school districts form to deliver vocational programs. Sometimes a CTED uses its own central campus; other times it pays a member school district to host classes on the member district's campus. When that happens, A.R.S. § 15-393(L) requires an intergovernmental agreement, and § 15-393(L)(9) requires the agreement to say payments will not exceed the cost of the services provided.

East Valley Institute of Technology (EVIT) had its counsel review four payment formulas and asked the AG to bless them. The AG agreed with the underlying analysis: methods that track actual cost are compliant; methods that pay regardless of (or in excess of) actual cost are not. Critically, the AG cabined the answer: this is a high-level read of the four methods as described, not a clean bill of health for any particular IGA. Other terms in the actual contract, the Uniform System of Financial Records, and other parts of § 15-393(L) can independently affect compliance.

What this means for you

For CTED finance staff and district business managers

Treat the cost-not-to-exceed rule as a hard constraint that has to be visible in the math. A formula that hands a member district a flat per-pupil rate, or pays based on enrollment without back-checking to actual incurred cost, will fail § 15-393(L)(9), regardless of whether the rate is "reasonable" or "in line with the market." What the AG endorsed are formulas that tie the payment to documented cost categories the member district actually incurs (instructor salary and benefits, supplies, classroom space allocation, etc.). Build your billing template so cost is reconciled at the end of each term and any overpayment is returned or carried forward.

For CTED governing board members reviewing IGAs

Two questions for any IGA on your agenda: does the payment formula tie to actual cost, and does the agreement require reconciliation if estimated costs were too high? If those two answers aren't yes, the AG's analysis says the IGA is at risk under § 15-393(L)(9). The opinion is also clear that no payment formula is bulletproof in isolation; ask counsel to review the whole agreement, not just the payment exhibit.

For Auditor General staff and outside auditors reviewing CTED finances

The AG's posture supports auditing payments against actual cost rather than against the IGA's stated rates. If a member district is being paid on a formula that doesn't anchor to incurred cost (for example, a percentage of state aid or a flat fee per program), that is the kind of arrangement § 15-393(L)(9) targets. Consider a finding that the IGA itself is non-compliant if its payment terms aren't cost-bounded.

For school districts hosting CTED programs

Make sure your accounting can demonstrate the cost the AG opinion expects you to be billing against. That means tracking the FTE share of teachers assigned to CTED courses, the percentage of classroom space used, supply costs allocated to those courses, and overhead allocated using a defensible methodology (the Uniform System of Financial Records sets parameters). If the CTED ever has to defend the IGA, the cost data has to exist on your side.

Common questions

What's a CTED?

A career technical education district. CTEDs are formed by two or more school districts under A.R.S. § 15-391(3) and § 15-392 to provide career and technical education programs to students within those districts. They were formerly called joint technological education districts (JTEDs).

Can a CTED pay a member district more than what the program actually costs the member district?

No. A.R.S. § 15-393(L)(9) requires the IGA to specify that payments shall not exceed the cost of the services provided. The AG's opinion endorsed two of EVIT's four methods because they kept payments tied to actual cost. The other two methods would allow the member district to be paid above cost, which the AG flagged as not compliant.

Does this opinion list which two methods are okay and which two are not?

The opinion gives a high-level read but does not republish the full payment-methodology descriptions from EVIT's underlying counsel opinion. It instead approves the methodology framework: methods that use cost-based formulas comply; methods that don't, don't. If you want to know exactly which methods EVIT proposed, ask EVIT for the underlying opinion attached as Appendix A to the AG's opinion.

What if the IGA has a cost-based payment formula but other terms that effectively let the member district recover more than cost?

The AG explicitly flags this risk. Compliance with § 15-393(L)(9) has to be checked against the complete IGA, not just the payment formula. Other clauses (administrative fees, indirect-cost charges, lump-sum supplements) can push total payment above cost even when the headline formula is cost-based.

The opinion mentions the Uniform System of Financial Records. What's that?

The Uniform System of Financial Records (USFR) is the accounting framework Arizona school districts use under guidance from the Auditor General. The AG's opinion notes that USFR rules can independently affect whether a payment method is compliant, even if the IGA passes § 15-393(L)(9) muster.

Background and statutory framework

CTEDs deliver career and technical education in two principal modes. They can run programs on a central CTED campus the CTED owns or leases, or they can run programs on a member school district's campus pursuant to an IGA. § 15-393(L) sets the rules for IGAs between CTEDs and member districts. Several enumerated terms are required, including the cost-not-to-exceed rule in subsection (L)(9). The opinion's Footnote 1 corrects a citation error in EVIT's underlying counsel opinion (which referenced § 15-539(L)(9) instead of § 15-393(L)(9)). The substantive analysis turns on the language of § 15-393(L)(9) itself: an IGA must "completely and accurately specify... [t]hat the payment for services shall not exceed the cost of the services provided."

The AG's role under § 15-1448(H) is to affirm or revise opinions that have been prepared by an entity's own counsel. Here, EVIT's counsel reached a methodology-by-methodology conclusion; the AG largely agreed but added the standard warning that compliance is contextual.

Citations

• A.R.S. § 15-1448(H) (community college / CTED counsel opinion review)
• A.R.S. § 15-391(3) (CTED definition)
• A.R.S. § 15-392 (CTED formation)
• A.R.S. § 15-393(L) (CTED-member district IGA requirements)
• A.R.S. § 15-393(L)(9) (cost-not-to-exceed rule)

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

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 programsto 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).

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

[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).