Taxpayers in Arizona spend $125 million each school year funding more than 13,000 students who don’t exist at public schools.

That’s because the state school system uses an antique budget approach that causes taxpayers to overpay, says a new report, “Ghost Busters: How to Save $125 Million a Year in Arizona’s Education Budget,” by Goldwater Institute education director Jonathan Butcher.

The system pays for some students twice, Butcher says.

Here’s how it happens.

Arizona schools are funded based on the number of students who attend each school in the prior school year, Butcher’s report says. However, when a student transfers out of one school and into another, the school getting the new student can apply for funding for that student in the middle of the year, he says.

But the schools don’t talk to each other, nor share funds, nor computer systems, it seems. So that results in the two schools double filing for -- and getting double the taxpayer money for -- the same student. This budget snafu costs taxpayers $125 million each school year, according to Butcher’s estimates.

Arizona taxpayers “are literally throwing $125 million school funding dollars into a black hole,” says Butcher in a statement. “More money would be available for all schools if we weren’t paying for ‘ghosts.’”

The phantom students are doubly painful, because “two years ago, Arizona voters passed a temporary sales tax increase to protect schools from budget cuts during the recession,” his report notes.

Taxpayers would not have been hit with higher sales taxes if the state officials would do their jobs and get on the stick.

“Do we really need to raise taxes on families when we are paying for thousands of empty desks?” asks Butcher. “We should re-direct the money that is double-paying and fill whatever gap schools may have.”

But Arizona taxpayers may get a crack at this issue again in the coming November ballots, since this tax is scheduled to expire in 2013, he notes.

Butcher also says there’s an easy fix to the problem.

Instead of being lazy and funding schools based on the prior year’s enrollment figures, Butcher suggests that “school funding should be based on current enrollment, he says, given that Arizona’s 524 charter schools are already funded this way. 

“We already have a model for how this funding structure would work. We do it like this for charter schools,” Butcher says in his statement. “They are funded on current student counts and adjust according to the increases and decreases in their student populations. All we’re asking is that all schools be funded like charter schools.”

This simple fix, Butcher adds, would save taxpayers millions each year.

Elizabeth MacDonald joined FOX Business Network (FBN) as stocks editor in September 2007.
Follow Elizabeth MacDonald on Twitter @LizMacDonaldFOX.