MODERATOR RICH DUBEK: Next up, we'll ask, once again, Secretary Bennett to describe Proposition 118.

SECRETARY OF STATE KEN BENNETT: Thank you, Rich.

A "yes" vote on Proposition 118 will have the effect of changing the distribution formula for the State Land Trust Permanent Endowment Fund, which funds various public institutions, including schools. This new formula will be 2.5 percent of the average monthly market values of the Fund for the immediate preceding five years. That change would affect fiscal years 2013 through 2021.

A "no" vote shall have the effect of keeping our current constitutional law related to the distribution formula for the State Land Trust Permanent Endowment Fund.

MODERATOR RICH DUBEK: Thank you, Mr. Secretary.

MODERATOR RICH DUBEK: And our first speaker is on the pro side of 118, and he is Harry Papp, member of Arizona Board of Investment and the managing partner and portfolio manager of L. Roy Papp & Associates. You have two minutes.

MR. HARRY PAPP: Thank you. And thank you folks for having me here this evening.

I'm Harry Papp, and I'm a member of the Arizona Board of Investment and managing partner of L. Roy Papp & Associates.

When Arizona became a state, the federal government granted about 10 million acres of land to the State. 8.4 million acres of that land was dedicated to Arizona's public education. Today 8.1 million acres remain, and K-12 schools are the primary beneficiary of about 87 percent of those assets.

As the State sells land, proceeds are deposited at the State Treasurer's office and managed into perpetuity. The market value today is over $3.5 billion. The Treasurer's office recently completed the first ever allocation study. The most glaring takeaway from the study was that the current constitutional formula that determines how the funds are distributed to public education and the 12 other beneficiaries is flawed.

It is overly complex and resulted in uneven and unpredictable and even zero dollar distributions in 2010. The current formula likely will result in several additional years in the next decade of zero dollar distributions. With an endowment this large, there was no reason that for years with zero dollars, from a $3.5 billion fund going to benefit Arizona's children and teachers.

Proposition 118 simplifies the formula and ensures consistent, reliable earnings distributions that will protect the principal of the fund. There's widespread bipartisan support.

Proposition 118 includes -- supporters include Arizona Department of Education and all leading education groups and the business community. This is a common-sense solution to an inconsistent funding formula. Proposition 118 stabilizes the distributions and would provide approximately $10 million more to K-12 education in 2013, compared to the current formula, without raising taxes. Please join me in supporting Proposition 118. Thank you.

MODERATOR RICH DUBEK: And right on time. Thank you very much.

MODERATOR RICH DUBEK: Now, we do want to make one clarification. In this program we have mentioned ballot arguments being submitted to your office. What we really mean to say is those ballot arguments have been submitted to the Secretary of State's office. So, we do want to clarify that.

Now, there was no organized opposition to this legislative referenda.