The Democrats partisan gamesmanship will result in the wasting of thousands of taxpayer dollars. We ask our Democratic members to stop the stall tactics and get into the game.”
Far from achieving the objectives of providing healthcare to all Americans and lowering costs, Arizona citizens can count on these outcomes instead if healthcare “reform” passes as is:
The imposition of $135 billion in new taxes on businesses who cannot afford to finance their workers’ health coverage will increase unemployment.
Even the Congressional Budget Office confirmed that this tax on jobs, called a “pay-or-play” mandate, “could reduce the hiring of low-wage workers,” and that as many as 5.5 million jobs could be lost as a result of the new taxes.
The employer mandate isn’t the only new tax targeting businesses.
The bill includes nearly half a trillion dollars in other taxes – including a surtax on the so-called “wealthy” that actually hit more than half of small businesses right where they live.
This will greatly stifle job creation and hinder expansion at a time when unemployment is at a 26 year high. Together this equals new taxes totaling $729.5 billion just on businesses.
Unfunded mandate on states
Arizona is $2 billion in the red this year and the 2011 budget is looking almost twice as bad - yet Washington’s plan forces states to increase eligibility in their Medicaid programs, costing Arizona as much as $5.9 billion more over five years.
Governor Brewer expressed these concerns in the Arizona Republic, saying, “We can’t afford it. We can’t afford the AHCCCS program we have currently.”
Which is why Congress included a $90 billion Medicaid bailout in the “Stimulus” package and another $23.5 billion bailout in this bill.
Higher insurance costs
Contrary to Congress’ goal to lower healthcare costs, this plan will raise the cost of insurance significantly - for everyone. Here’s why:
First, new Federal rules mandate all plans, whether private, employer or government-run, will have to meet minimum benefits standards and comply with community rating and guaranteed issue mandates. We would basically model the nation’s plan after what the state of New York put in place in the early 1990’s. Their average premiums in the individual market are more than twice the national average and still 14% of the population remains uninsured.
Second, the bill does not allow for lower cost plans, such as high deductible health plans and consumer-directed accounts like HSAs, to exist going forward, removing this option for 5% of Americans under 65.
Third, young and healthy persons, whose insurance premiums now cost about ¼ the average premium paid by individuals aged 60-64, will subsidize the premiums of more disease-prone and older adults under the new plan - and it will cost them. As a result, many will choose or be forced to pay the 2.5% of their income in penalties rather than the high cost of insurance. Mandates don’t work. Hawaii has had an individual insurance mandate since 1973 and a 10% uninsured rate.
Healthcare freedom threatened
Nowhere does the United States Constitution provide Congress the right to force its citizens to purchase health insurance.
This bill usurps fundamental freedoms Arizonans enjoy - to be able to purchase health care privately and whether or not to participate in a health plan.
The Arizona Legislature referred the Arizona Healthcare Freedom Act to the ballot next year so Arizona citizens have the opportunity to preserve these fundamental rights in our state constitution.
Real and substantive health care reforms are critical to Arizona, but only with freedom as a foundation.
Congress’ Healthcare “Reform” bill is a mere handful of votes shy of passage.
Far from achieving the objectives of providing healthcare to all Americans and lowering costs, Arizona citizens can count on these outcomes instead:
Fundamental change in the standard of care. While more people may technically be “covered,” over-utilization of services will lead to longer waits for health care and inevitable rationing of care.
Not to worry, though. The bill plans for this.
A 15-member health commission, much like those in countries with similar nationalized healthcare, will have extraordinary powers to dictate what is covered, for whom and how it will be paid for.
This change will bring a fundamental shift to our system - from doctors providing medical treatment based upon whether it is safe and effective to a cost-effectiveness standard.
Trust between the doctor and patient will be compromised as patients question in whose best interest their doctor may be acting. Reducing medical care to a commodity-driven business model places every patient’s life at the mercy of a panel’s worthiness criteria.
Being denied care or waiting to see your primary care physician, or obtain diagnostic tests results in inferior medical outcomes and higher mortality rates, such as are evidenced in Canada and the U.K. Why these outcomes are not an integral part of the healthcare debate is troubling.
There is a reason medical tourism is booming business in the U.S. We have the best medical care in the world.
Most other nations, especially those with nationalized healthcare, lack what it takes to be the best – a system that rewards the best – the best hospitals, the best surgeons, the best drug therapies available.
Is it a coincidence that the incentives in medicine drive medical innovation? Changing the incentives will also drive physicians out of the profession as they will no longer be caring for patients, but delivering treatment according to formula.
Practicing physicians will be further negatively affected by this bill as it does not address a major cause of rising costs of health care: medical malpractice lawsuits.
An AMA survey reported 93% of physicians report practicing defensive medicine, costing the U.S. $865 billion in indirect costs. Instead, the plan rewards states that ignore this issue and withholds funding from those that cap non-economic damages and pass other tort reforms.
Under the current system people are divorced from health care cost considerations since a third party – either an employer or insurance – is managing them. Fixing this disconnect is key to promoting an economically and physically fit citizenry.
In other words, people taking responsibility for their health, staying well and spending their healthcare dollars wisely. Instead, Congress’ plan emulates failing government programs that do just the opposite. The result is an unsustainable Medicare system with a $38 trillion liability...
Congressional Democrats are now concerned about the 2010 election and as a result will push a “jobs” bill before the end of the year, perhaps to try and convince the public they really are rolling up their sleeves and doing something, anything really, to create jobs.
They hope to get a “jobs” bill out before the House is slated for adjournment on December 18, although this date could change depending on what happens with the job killing “Healthcare reform” bill that’s already passed the House.
Concerning the “jobs” bill, Congressional Democrats have put ideas on the table that merely push the same policies found in the already passed “stimulus” bill. They have communicated a desire to extend unemployment benefits and provide additional funding for highway and other “critical” infrastructure projects.
Sure, government can hire a potentially infinite number of “employees” to dig a hole and then fill the hole, but that doesn’t mean such action is good for the economy, or that it bodes well for long-term growth. It simply means there are now new workers on the public’s dime that may or may not be contributing to long-term growth while saddling taxpayers with massive debt obligations.
According to Andrew Taylor of the Associated Press, all of the ideas Congressional Democrats have proposed don’t directly create new jobs.
Rather, stimulus packages merely fund one-off bouts of consumption spending. By contrast, job creation and economic growth require capital accumulation via savings; firms cannot invest in new production and employees without marshalling the requisite capital. Capital accumulation and the resultant creation of jobs, rising incomes, and economic growth accumulates to the extent government refrains from engaging in activities that impair capital accumulation and increases the cost of doing business (taxes, regulations, price controls, unionization). Siphoning of capital accumulated via savings to fund consumption by government and recipients of its spending hamper job creation and economic growth.
For more info, kindly click on this link.
So why is a proposal to continue a failed policy not raising more questions? Why would we want to continue the same failed policies that have done nothing to prevent the shedding of 3 million jobs? When we are digging a hole deeper and deeper, shouldn’t we stop digging and reevaluate? And aren’t we obligated to actually help businesses, you know, those who actually create jobs?
Although the nearly $1 Trillion price tag for the “stimulus” bill hasn’t stemmed unemployment or created jobs, someone who has certainly kept his job is the guy who makes the signs. You know, the signs that pop up on freeways that spend taxpayer money to tell us…they’re spending taxpayer money?
So we can safely say at the very least, the stimulus has “created or saved” one job…the sign maker’s job!
Not to mention the Recovery.gov website that says the federal government spent $6.4 billion to create 30,000 jobs (or $225,000 per job) in Congressional districts that don’t exist…
In reality, the converse is true. Within Arizona’s tax structure, the Sales tax is one of the most stable components. When looking at collections for the last 20 years, the state sales tax as currently constituted is the least volatile of the state’s taxes.
Of Arizona’s three major tax sources (corporate, personal, sales), the corporate income tax (CIT) remains by far the most highly volatile revenue source for the state.
See this chart, which is a graph of tax collections from FY89 to FY09 and the average growth rate (return) on tax revenues.
Over the years, the CIT has gone from lower lows to higher highs, whereas the personal income tax (PIT) and Sales Tax remain relatively stable. Although in the last few years all three tax revenues are dangerously low, the Sales tax remains remarkably stable with the PIT a close second in stability.
As you can see from the chart, when the state economy lags, corporate income tax revenues lag with it. Thus, by lowering the state’s dependence upon the CIT, we will also take away the temptation by policymakers to depend on expanded tax revenues to boost ongoing spending in the good years, only to have to reverse those decisions when economic activity slows significantly.
Arizona can depend upon CIT for year-to-year spending or “pay as you go,” however, when the state increases new permanent spending and depends upon extraordinary CIT revenues to pay for the permanent increases, legislators have nowhere to turn in the down years except to increase taxes on an already exacerbated economy or cut services - neither option being desirable.
Volatility will occur regardless of tax structure. Down economies will generate lower tax revenues and vice versa. Yet there is much we can do to mitigate the cyclical nature of tax revenue - remove as many economic distortions in Arizona’s economy as possible, or the conditions that create economic inefficiencies. More to follow…
The study specifically found that for every dollar reduction in state-local corporate income taxes resulted in a $2.50 rise in employee wages.
Unfortunately they found the converse to be true as well - for every one-dollar rise in corporate income taxes resulted in a $2.50 loss in employee wages.
Further, the study even found that states with low corporate tax rates have seen an increase in worker productivity.
Lately however, we seem to hear the rhetoric of “let’s tax the rich fat cats since they can afford to give a little more” drowning out any other voice of reason.
Unfortunately if the goal is to boost revenues, then this approach fails miserably. Instead of helping those they argue who need it the most, they end up hurting them by driving down employee wages.
And most states are paying attention…at least in 2009.
Of the 17 States in the U.S. that raised taxes in 2009, none of them raised their corporate income taxes. Interestingly, nine of the 17 tax raising states raised the individual income tax before going after the corporate income tax. Perhaps they know something the rhetoricians don’t?
The real question we must ask is not how can we burden corporations with more taxes, but how best can the corporate tax burden be divvied up amongst those who are in reality impacted by higher corporate taxes - workers, consumers and investors?
Without answering those questions we’re merely harming those we claim we’re helping - employees.
The Governor’s recent reversal of necessary spending cuts defies logic and I simply don’t understand it. I’ve known Governor Brewer for a long time and I’ve always liked her. That is why it is so difficult for me to understand this recent action that simply makes no economic sense. Meanwhile, Democratic legislators are putting politics over helping the state.
Our state is over $3 billion short and is spending more than it has coming in every single day. Simply put, we are paying for things we can’t afford. So the fiscally responsible Republican legislators made the difficult, but necessary, decision to make modest spending cuts and passed a balanced budget, without a tax increase, three times. Unfortunately, the Governor has vetoed it or threatened to veto it all three times. If she didn’t, the budget could have been balanced on June 4th.
The Governor’s most recent vetoes have increased spending by $714 million and increased property taxes by $250 million a year. Unless changed, a vast majority of this $714 million increase in spending and the entire $250 million increase in property taxes will continue into future years. This action adds to the already huge gap between spending and revenues instead of decreasing it, meanwhile increasing the tax burden on the public at a time when individuals and businesses are struggling to stay afloat. This is obviously the wrong direction we should be moving in.
What’s next? I don’t know. The Democratic legislators don’t want to help. They would rather see the Republicans crash and burn instead of helping the state balance its budget.
Why would they take on the responsibility of having to make cuts when they can just let the Republicans take all the blame? Not one of them voted for the three balanced budget packages. The Republicans can try once again to re-negotiate with the Governor, but she has the final and ultimate vote.
Rep. Debbie Lesko represents Legislative District 9, which includes Sun City, Youngtown, and parts of Glendale and Peoria. For more information, visit: www.DebbieLesko.org. Debbie can be reached at 602-926-5413 or DLesko@azleg.gov.
Arizona’s unemployment rate is the highest it has been since 1983, with the private sector sustaining the second-highest job loss in the nation, second to only Michigan. Arizona families and businesses continue to struggle to make ends meet, while government leaders toil to find a solution to get the state moving in the right direction again.
Arizona Republican lawmakers understand we cannot cut the state budget or raise taxes enough to revive the economy. The only solution is to develop a pro-business, job creating, economic growth package that allows the state to emerge successfully from this economic downturn.
Legislators from both sides of the aisle agree on one thing: Arizona’s economy needs to turn around and start working for the citizens in this state once again. However, we are somewhat less agreeable on how to deliver that recovery.
The state’s Democrats want to expand the tax base, increase government spending and consistently vote against a responsible balanced budget package. Whereas, Republican lawmakers think the answer to fixing our economy is found in a comprehensive tax reform plan designed to stimulate job creation and attract businesses to the state.
Our plan begins with the passage of a responsible, balanced budget that works to bring government state spending in-line with actual revenues. Arizona’s spending exponentially expanded during the Napolitano years and is now unsustainable.
The budget plan sent to the Governor has been criticized for inclusion of a tax reduction package even though it benefits individuals and businesses. Opponents of our tax plan would like voters to believe it’s a $650 million give-away in tax cuts to corporations and special interests. Not true.
In order to have a robust economy, solid pro-growth policies must be implemented. No other state in the nation is focused on growing out of the recession. Taking more from taxpayers in a recession is a recipe for disaster and does not create an environment for recovery or job growth.
If passed, Arizona’s tax package would be a major pro-growth package to support Arizona jobs, businesses, and economic activity. Specifically, our plan will:
Repeal the State Equalization Property Tax providing $250M in property tax relief to residential and business property taxpayers in FY10 and beyond;
Reduce the assessment ratio for secondary property tax on commercial property from 20% to 16% beginning Tax Year 2012;
Permanently reduce the Corporate rate from 6.968% to 4.86% ($200 million total), moving Arizona from the 23rd most competitive state to 7th best in the nation, bypassing states such as Utah, Florida, and Virginia, starting Tax Year 2011; and
Permanently cut Arizona’s Individual Income Tax rates across the board by 7% ($200 million total); every taxpayer will receive a 7% income tax reduction starting Tax Year 2011.
Our tax package incorporates pro-job tax reductions designed to encourage Arizona businesses to expand operations, create jobs and restart economic growth; as well as, create a pro-business environment to entice people and businesses from neighboring states and across the nation to come to Arizona to set up businesses.
Rep. Steve Montenegro from District 12 represents the cities of Litchfield Park, Goodyear, Surprise, Glendale, Buckeye, El Mirage, Avondale, West Phoenix and Waddel. Contact Rep. Montenegro at 602-926-5955 or via email at email@example.com.
Please click on this link or click on the picture below to go to the Horizon website to view the video in it’s entirety.
Each bill has a link with more information on the legislation and includes:
- Redefinition of partial birth abortion and increased the penalty from a class 6 to a class 5 felony
- Repeal of the sunset of the corporate income tax credit to student tuition organizations
- Enactment of a policy for public/private partnerships to build transportation infrastructure
- Expansion of the individual income tax credit for contributions to qualifying charitable organizations to include nonprofit organizations that provide services to chronically ill or physically disabled children, which was fixed in Special Session
- Suspension of any rule making that would impose increased monetary or regulatory costs for one year (vetoed by Governor)
- Re-establishment of the Administrative Rules Oversight Committee
- Permanent repeal of the state property tax, which would have prevented the largest property tax in Arizona’s history (vetoed by Governor)
- Establishment of a study committee on Arizona’s position and participation in the Western Climate Initiative
All legislation that was not vetoed goes into effect on September 30 unless otherwise noted.
With bipartisan support, we introduced and passed legislation today to ensure school districts and charter schools can proceed with adopting their budgets and put the state back in compliance with requirements to receive federal stimulus funds. The bills passed unanimously out of both chambers and are on their way to the Governor.
The four bills to address the issues above are described below:
- Appropriates basic state aid to school districts and charter schools at the FY09 level of funding following the spending adjustments passed during first special session in January 2009, plus the full 2 percent inflator.
- Allows school districts to budget for career ladders and desegregation at fiscal year 2009 levels until October 1, 2009, prohibits excess utilities budgeting, and reduces spending for soft capital by $175 million. Additionally, funding is eliminated for a second year of kindergarten for children with birthdates after September 1, 2009, grandfathering current kindergarten pupils.
- Ensures county contributions to AHCCCS and distributions of Medicaid stimulus monies are consistent with the requirements of the federal stimulus legislation. This language, which was part of one of the BRBs vetoed by the executive, ensures that Arizona receives more than $1.7 billion in federal stimulus monies for Medicaid.
- Limits legislator pay during the special session to those days when the legislature convenes and attendance is recorded.
Appalled by the recklessness of the Executive, a bipartisan legislative effort has developed to immediately address two of the most egregious aspects of the Executive’s vetoes.
First, the Executive zeroed out formula funding (more than $3.2 billion) for the state’s K-12 System, denying any funding to Arizona’s school districts and charter schools for FY 2010, which began July 1, 2009.
The ostensible purpose is to compel the Legislature to give the Executive her 18 percent sales tax increase referral to the ballot, which failed to garner sufficient Republican or Democratic votes during the regular legislative session.
By casting enormous uncertainty over the level of funding to the K-12 system, the Governor has effectively orchestrated a shutdown of Arizona’s schools and compromised the state’s Constitutional mandate to maintain public schools.
Second, the Executive jeopardized more than $2.7 billion in stimulus funds coming to Arizona, including over $1 billion in Fiscal Stabilization Fund monies for K-12 and Higher Education and $1.7 billion in Medicaid monies.
The Governor’s decision to zero-out formula funding to the K-12 public schools violates the Maintenance of Effort (MOE) requirements under the federal stimulus package, which requires the Legislature at least maintain a fiscal year 2006 level of funding.
More than $1.7 billion in Medicaid assistance is at risk as the Governor’s veto eliminated a technical BRB provision regarding county cost share and distribution of stimulus monies without which the Medicaid MOE is also violated.
Of all the states with an individual income tax, if passed, Arizona would have the lowest individual income tax rate in the country.
The benefits of a flat tax are numerous. The first $10,000 for single filers are tax exempt ($20,000 for married couples) and every dollar thereafter of taxable income is lowered from 4.54 percent at the highest rate to a flat rate of 2.8 percent which is less than the current marginal rate that every taxpayer pays regardless of earnings.
As Governor Brewer has said, we need a tax structure that promotes job growth, investment in Arizona and revenue stability for the future.
The Flat Tax does exactly that.
Since Arizona must compete with neighboring states for business, lowering the tax rate will incentivize economic growth as it has in Arizona’s neighboring states. Arizona already competes with Utah and Colorado - neighboring states that already have a flat tax.
Arizona also competes with Texas, which has no personal or corporate income tax (or capital gains tax) and has created more jobs in 2008 than the other 49 states combined. Their stellar economic growth can be chalked up primarily to a low tax burden.
While the flat tax necessitates the removal of deductions, it also lowers the rate for everybody. So while certain taxpayers will not continue to receive specific deductions, the first $10,000 for singles, $20,000 for married couples will be tax free, and the rest that is taxable will be at a much lower rate than the current marginal tax rate.
Additionally, the Legislative proposal will still retain credits for public school extracurricular activities, incomes taxes paid in other states, charitable contributions to help the working poor, clean elections, student tuition organizations and increased sales tax for Proposition 301.
Lowering taxes on Arizona’s workers will attract investment capital and will help create sustainable, high-wage jobs as we have seen in Utah, Texas and Pennsylvania.
We cannot cut our way out of a structural deficit, nor can we tax our way into prosperity. Part of the puzzle includes significant tax reform. The flat tax, coupled with the State Property Tax repeal and reforms to the assessment ratio on business property tax will help give Arizona the tools it needs to weather this storm and grow our way into prosperity once again.
Arizona must jumpstart capital accumulation and job creation through tax reform that fosters economic activity. A flat tax rate will help the state do just that.
UPDATE: The Legislature is running an amendment that will make the starting point for the flat tax the federally adjusted gross income (FAGI). What this means is Arizona’s flat tax will correspond to that of Utah, Colorado, Indiana, Illinois, Michigan and Massachusetts which all start with FAGI as the income tax base. Deductions for items such as educator expenses, tuition and fees, health savings accounts, alimony payments, pension contributions, self-employment deductions, IRA and more will all be deducted from taxpayer’s income.
The Legislature wants to ensure small businesses, students, teachers and those that are investing for their future are not unduly burdened.
Please click on this link for the agenda.
Referring to the Court’s decision Robb says “I think that the court is wrong that the bills were unconstitutionally not being transmitted, and grossly so. In fact, I think the court is so wrong that it might actually regret its hasty conclusion when it gets around to explaining itself in a full decision.”
Click on this link for the full article.
Governor Brewer accuses the Republican led legislature of “decimating” education in their budget proposal, meanwhile the Democrats accuse Governor Brewer of “decimating” education in her budget plan.
He went on to explain in his article, “The GOP plan, which has the largest of the K-12 cuts, reduces state aid to K-12 by 5.2 percent out of the more than $4 billion the state provides to K-12. When other funds that K-12 receives are factored in, it amounts to a 2.2 percent cut.”
As Scarpinato pointed out, the total reduction to K-12 in the Legislative budget is about two percent, or conversely, education is funded at 98 percent of what it was funded in fiscal year 2009...either way, one can hardly say the reductions decimate education.
This Legislature contends the budget process was difficult, with only bad and worse options, yet this body has done everything within its power to keep education cuts to a minimum. Given the size of the $3 billion plus state deficit, a 2.2 percent reduction to education is not a “decimation.”
Please click on the following link to see the brief (large PDF file, 90 pages) - Speaker and President's Response Brief
Oral arguments will be held in the case Tuesday morning at 10am. You can find the live stream at this link.
Representative David Gowan (R) District 30
This morning, the Arizona Chapter of Americans for Prosperity (AFP) held a press conference at the State Capitol urging legislators to prohibit a $1 billion dollar tax increase on Arizonans.
AFP utilized a gigantic ATM machine titled “Already Taxed to the Max” to make their point.
Representatives David Gowan, David Stevens, Frank Antenori and Senators Pamela Gorman and Russell Pearce all spoke at the event.
The Legislature and Governor are currently negotiating how best to deal with the worst fiscal crisis in Arizona’s history.
The news release says:
“Steve Voeller, president of the Arizona Free Enterprise Club, a pro-growth advocacy group, today expressed support for the legislative leadership’s decision to hold the budget bills passed two weeks ago while continuing to negotiate the details with Gov. Brewer.
This morning, the governor filed a special-action lawsuit in an attempt to force the legislature to transmit the bills, which she intimated she would likely veto.
“The timing of when budget bills get transmitted to the governor is inside baseball for most people,” Voeller said. “But as a co-equal branch of government, the legislature’s decision to assert their role in this process is a positive development for taxpayers and the direction of the state.”
The legislature intends to pass a budget that does not raise taxes. The governor called for a budget that includes an increase in sales and property taxes.
Senate President Bob Burns (R-Peoria) and House Speaker Kirk Adams (R-Mesa) pledged to transmit the bills before June 30, the end of this legislative session.
The Arizona Constitution does not mandate when legislation that passes the legislature be transmitted to the governor. The budget bills passed the House and Senate on June 4.”
Here’s the House’s response:
Letter to Governor Brewer 6_15_9 (PDF)
Yesterday news broke that federal officials approved Arizona’s plans for $1 billion in education stimulus funding. The Majority budget did not place stimulus money at-risk when the Legislature passed a balanced FY2010 budget last week.
In fact, Majority members intended all along to utilize federal stimulus funding to backfill education reductions as they worked to ensure education be held as harmless as possible throughout the budget process.
Unfortunately, many legislators received emails and phone calls from concerned teachers, parents and students due to Governor Brewer’s, the Democrats and the universities’ very public concerns about the GOP budget proposal that in the end wasn’t even accurate.
The Majority budget did not endanger the state of losing federal stimulus dollars. The accusations and attacks were unwarranted, unsubstantiated and more importantly, unnecessary.
The teacher’s union (Arizona Education Association) actively opposed a bill (HB2630) that sought to give school districts more time before notifying teachers about renewal of their contracts for the upcoming school year. The plan was to change the teacher notification period from April 15th to June 15th to allow districts to gain a better understanding of their budgets for the coming school year.
However, the AEA and Democrats severely exaggerated the size of the GOP education cuts, saying Republicans sought to pass the bill to hide huge budget reductions to education. The GOP has been vindicated as the teachers who received reduction-in-force notices in April are now being rehired by their respective school districts.
A recent article in The Arizona Republic, “Valley district recall teachers laid off in April” details the school districts rehiring teachers.
Examples of teachers being rehired include:
- Gilbert Public Schools has rehired 130 of 267 teachers who received pink slip notifications in April.
- Peoria Unified School District is recalling 188 of the more than 300 teachers previously laid off.
- Dysart Unified School District has recalled 104 of 209 laid-off teachers.
- Scottsdale Unified School District said last month that it could fill 129.5 of the 221 positions cut in April.
- Deer Valley Unified School District has recalled 71 of 105 teachers.
John Wright from the Arizona Education Association in particular needs to apologize to teachers for instilling fear and spreading inaccurate information. Wright claimed cuts to education would be over $990 million to K-12 alone.
The recent Majority budget passed by the Legislature consisted of $220 million in cuts to education, or approximately 2 percent of their overall budget. And as the Majority assumed, the federal government has approved $832 million of stimulus funds to be applied towards education in Arizona.
Instead of working with the school districts and this body, the AEA and the Democrats opted to work against school teachers and the students of Arizona.
Click on this link or click on the picture below to go to the Horizon website to view the video in it’s entirety.
It’s simply untrue.
The recent budget proposal passed by the State Legislature does not raise taxes either openly or secretly.
The budget merely introduces a single assessment ratio for both businesses and homeowners. So instead of businesses being taxed on their property at 22 percent and homeowners at 10 percent, both businesses and homeowners will pay the same assessment ratio (if approved by voters). This is not a tax but merely shifts the burden away from businesses to an equitable level with homeowners.
Additionally, the single assessment ratio leaves it up to the voters to decide. This is not imposed upon Arizona citizens by the Legislature, but leaves it up to voter discretion to vote ‘yea’ or ‘nay’ in an override or bond election. Knowing their decisions will no longer be subsidized by businesses, homeowners are empowered to consider whether they would support any future overrides or bond elections, knowing they will be paying on an equitable level with businesses.
The single assessment change is prospective, meaning it will only affect future taxes and as already mentioned, at the voter’s discretion. Moving forward, voters will have a chance to vote on overrides and bond elections giving homeowners more responsibility and accountability for their actions knowing an increase will no longer allow them to be subsidized by a 2 to 1 ratio through local businesses.
Furthermore, the budget proposal also removes the single most punitive tax that disincentivizes businesses from moving to Arizona - the state’s business property tax. The state property tax is a severe handicap on existing Arizona businesses and a sizeable deterrent to business relocation. While Arizona tries to lure businesses into the state, the state property tax makes businesses think twice about moving here.
By prospectively shifting the tax to an equal amount to both businesses and homeowners, the Legislature still keeps in place local control, but includes more responsibility and accountability to the homeowner in voting for a future override or bond election, while also expanding the scope for job creation and capital investment by businesses in the state.
The following is the JLBC’s response…
“We understand that the universities are contending that the Legislative budget proposal would place the state out of compliance with the requirements to receive Federal Stabilization Funds from the American Recovery and Reinvestment Act. The Universities’ concerns seemed to be centered on the auxiliary fund transfers and the payment deferrals.
The intent of the Legislative proposal is to draw down all available Federal Stabilization Fund dollars. We are unaware of any provision of the legislation being out of compliance with federal statutory requirements or with subsequent United States Department of Education (USDOE) guidance...”
To read more, please click on this link: ABOR Letter 6-8-09 (PDF)
Senate President Bob Burns and House Speaker Kirk Adams
June 8, 2009
Arizona's economy has been severely impacted by the worldwide recession. The recent decline in commercial activity is reflected in the state's record-setting budget shortfall as demands for government spending continue to outpace the economy's ability to generate tax revenues.
The original budget signed by former Gov. Janet Napolitano for fiscal 2009 has had to be repaired several times and has left the new governor and state Legislature with severely limited options.
But to govern is to choose. Your elected leaders have chosen carefully and wisely to manage the state's finances in a manner that prepares government agencies for the near-term realities of the state's tax collections, while doing no harm to an ailing and fragile economy upon which state government relies.
The budget the legislative majority passed takes necessary action to reduce the size of government. Like employers and households across Arizona, state government has to tighten its belt and prepare for what may very well be a long recession and slow recovery.
Opponents of the majority budget say it will decimate state services and education. This is simply not true. Our budget tackles the structural deficit without raising taxes, while continuing to fund essential state services and education out of the general fund. Our budget also directs additional funding toward those services and education with federal stimulus dollars.
The legislative-majority budget allows the state to operate at nearly 95 percent of its funding levels from fiscal 2009. Arizona households and employers have already adjusted their spending levels to deal with the poor economy more significantly than 5 percent. Families and businesses have had to do more with less. Government must, too.
We have taken measured steps toward significant tax reform and improved our potential for recovery by prospectively addressing excessive commercial and agricultural property taxes.
We avoided a property-tax increase that was intentionally programmed to reappear on taxpayers' property-tax statements this fall. Raising taxes now will only exacerbate the situation, and we find it unconscionable to ask the people of this state to endure a tax increase on top of these already crippling economic times.
Clearly, the state's deficit has hit historic lows, with only bad and worse solutions to balance the state budget. With so few options, we can learn from California, where voters refused a tax increase to help balance their budget, opting instead for further cuts to government programs.
Or look to Washington state, where they balanced their budget by cutting $4 billion in government spending over two years. In both states - and with a Democratic majority - voters and lawmakers alike recognized new taxes do not solve their budget problems.
We have long contended there have been no easy choices as we balanced this budget, but our solution is the best for Arizona.
The following is a sampling of emails in response to the fiscal year 2010 budget:
William C. - “Hold fast! No new taxes. Cut what you must.”
John J. - “No new TAXES! Tell Brewer and the Libs to Stick it!”
Nancy Y. - “I support your legislative plan. We cannot raise taxes. Some agencies must be cut back. We must operate like a business. We must have checks on departments. You can't just say "I ran out of money, I need more". Get it under control. We all have had to tighten our belts. All the states must do it as well. There must be ways to consolidate purchase and use of supplies. Salaries must just hold for a while. Raises must wait. Benefits cannot increase. We must make businesses welcome in our state, if they provide jobs and spending in our city.”
Ronald R. - “I agree with your 2010 budget. Please do not support the Governor's plan for sales tax increases. The problem is SPENDING. I know it takes courage to cut expenses but that is what you must do. Every special interest wants to keep their 'goodies'. It is time to take the hatchet to this state's wasteful spending and unnecessary spending. I repeat that the problem is entirely SPENDING. There isn't an area of government that can't be cut...”
Additionally, a tax that raises $1 billion dollars in tax revenue will cost 14,400 private sector jobs, real economic output will decline by $1.2 billion, and Arizonans total after-tax income will fall by $760 million, or nearly $300 per household on average per year.
Please click on the below link that illustrates how a one-cent tax will put a large majority of Arizona localities at or above a 10 percent combined tax. Kindly note the “Total Rate.”
State and Local Retail Sales Tax (PDF)
Please click on the below link for the joint House and Senate Budget Plan:
House and Senate Budget Plan 6_3_9 (PDF)
The plan would cost at least $225,000 to pressure legislators to support the Governor’s proposal through letters to the editor, telephone calls, interviews, mass emails, talk radio and contacting their local legislators.
If Arizona were to go to a 6.6 percent state sales tax, this would give us the seventh highest rate in the nation. And it would result in the combined state and local tax rates in 30 Arizona cities surpassing 10 percent, putting us at the same infamous rank with California and New York.
Yet an even higher tax would deter people from making major purchases - the kind of purchases on which Arizona’s economy depends to help pay for necessary programs and services.
With the second highest budget deficit in the country, now is not the time to put out the “Not Welcome For Business” signs in Arizona by raising taxes even further.
Do we really want to make it any worse?
Democrats claim their new budget proposal avoids “high tax increases,” but in fact, they increase the qualifying tax rate to the maximum allowable by law and add a new tax on services. All of this, at a time when any tax increase will further damage Arizona’s economy and make life harder for already struggling families.
Increasing business property taxes is by far the biggest obstacle to attracting and retaining employers in the state. Rather than redressing and learning from past errors by not taking steps to reduce unsustainable government spending, Democrats are asking Arizonans to pay for their fiscal mismanagement.
Instead of proposing reasonable cuts and addressing how spending got over $3 billion dollars out of alignment, Democrats propose to take billions more from Arizonans.
Republicans continue to work on a solution to our fiscal deficit which addresses our structural deficit without raising taxes and further damaging Arizona’s already struggling economy.
The most recent Democratic press release criticizes Republicans for budget cuts in the FY09 budget fix, yet without these cuts, Arizona would face an even higher deficit than the current one.
Democrats act irresponsibly in their pseudo budget proposal and their criticism of Republican proposals, yet like the Obama budget plan, would only indebt current and future Arizonans to more permanent spending and debt.
Democratic leadership has given us growth in state government at an unprecedented level. We’ve seen an increase in spending of $3.7 billion dollars in the last five years alone!
In another act of irresponsibility, Democrats attack contributions to School Tuition Organizations saying it costs the state more money when in reality it actually saves the state money. Arizona could definitely use any savings wherever we can find it in the midst of a historic budget deficit.
The Institute for Justice reports the corporate tax credit scholarships will save the State of Arizona an estimated $57.2 million over the life of the program, or an average of $11.4 million annually. This means the state could educate many more students at a private school than what the state would have spent had they remained in the public school system.
Additionally, the bill gives current students the ability to stay in the schools they currently attend, and parents with limited options will now have enhanced options in sending their child to a school that best fits their child’s educational needs.
Democrats have instead decided to take a vulnerable population and use them as political pawns to attack Republicans for a budget crisis due largely to the last several Democratic budgets that obligated the state to permanent spending the state could never afford.
Not only should we be finding ways to save the state money as in the case of HB 2001, but we should also look to find ways to enact good policy, another benefit of HB 2001.
Unfortunately this program is capped at $5 million when there are approximately 120,000 students who could potentially qualify for and benefit from this program.
Click on this link or click on the picture below to go to the Horizon website to view the video in it’s entirety.
California voters rejected five out of six of these budget proposals yesterday by an overwhelming margin in spite of substantial union support and supporters outspending the ballot opposition ten to one.
The powerful California Teachers Association and the National Education Association collectively spent $12.2 million in support of the propositions alone, not to mention the other 146 unions who supported the propositions.
The ballot propositions would have increased taxes $15 billion dollars, borrowed and diverted voter protected funds into the General Fund.
Californians voted no as the propositions merely maintained the status quo in terms of spending yet did nothing to decrease the size of state government.
"No more budget gimmicks, no more legislative shenanigans. Balance this budget by making the type of structural cuts you need to make," the Santa Barbara County Taxpayers' Association said.
California voters were unimpressed with an expensive marketing campaign that did nothing to address the state’s structural deficit but instead insulates the public sector from the same strains and stresses felt by families and businesses.
They realized for every threatened teacher or state employee that would be laid off there are businesses that will close and employees that will lose their jobs to pay for unsustainable levels of state spending.
Meanwhile, 75 percent of voters disapprove of the job performance of the California State Legislature.
Here’s a list of the propositions and how they fared:
- Proposition 1A would have extended tax increases on income, sales, vehicles, and gasoline to as much as 5 years. Outcome - Failed by 2:1 margin
- Proposition 1B would have agreed to pay back schools for any cuts that were made to education; a measure added to appease the California Teachers’ Union and get their support for the fixes. Outcome - Failed by 2:1 margin
- Proposition 1C would have allowed the state to bond for more than $5 billion through an enhanced Lottery. Outcome - Failed 2:1 margin
- Propositions 1D & E would have diverted dedicated money from certain state programs to pay for general government operations. Outcome – Failed 2:1 margin
The problem - it’s simply untrue.
Arizona faces an enormous budget deficit. Even if the Democratic budget proposal were passed and signed into law, it’d be at least $1,000,000,000 short of being balanced.
Their proposal of a ‘better’ way includes raising taxes in “fair and practical ways” that is somehow supposed to keep us competitive with other states.
Their tax increases include:
- $360 million in property taxes on homeowners and businesses
- $80 million in additional income taxes
$100 million from the elimination of tax credits for contributions to public and private schools
- $233 million in utilities taxes
- $45 million on consumer and business warranty and service contracts
Since Arizona sits geographically in a seven-state region, we must compete with surrounding states for business.
Arizona is higher in corporate income taxes than the region with the exception of California and New Mexico.
Arizona business property taxes are not only the highest in the region, but the fifth highest in the nation!
Sales tax collections in Arizona are already the fourth highest per $1,000 of income in the nation!
So while we’re competing with these six other states for retaining and inviting businesses into our state, there are those who would seek to make our uncompetitive playing field even less uncompetitive – something bad for all of Arizona.
A sales tax as one example would deter people from making major purchases - the kind of purchases on which Arizona’s economy depends to help pay for necessary programs and services.
The ‘better’ budget solution is certainly not the Democratic proposal, nor their surrogates.
Without the state’s voucher program, 473 disabled and foster children will be pulled from the private schools they currently attend and be placed in public schools. It’s never a good idea to rip a student out of a school they’re already attending.
This is why the Legislature and the Governor are working together to develop a solution in a possible Special Session.
The voucher program saves the state money since the tax credit covers up to 90 percent of the tuition, while the parent covers the difference in cost. Without this tax credit, the state would have to pay 100 percent of the per pupil spending at a public school.
The savings from the voucher program can go to help offset other education spending. Critics of school vouchers have said the Legislature is kowtowing to “corporate interests.”
Those critics need to explain how allowing disabled and foster children to go to the school of their choice is a bad thing. They also need to explain how lowering state expenditures in this historic deficit is a bad thing too.
The voucher discussion is about kids, parents and educational choices. Critics will find something to condemn with the voucher program for the sake of political mileage. This time the causalities are disabled and foster kids.
- Tax increases – taxes would increase by $15 billion including sales, income, vehicles and gasoline taxes.
- Securitizing the lottery – this would authorize California officials to borrow $5 billion that would be repaid by profits from the California state lottery.
- Ballot reform – Similar to Arizona’s First Things First Initiative, this would allow the state to divert a portion of voter protected funds for childhood development and mental health into the General Fund to help fund other basic programs and operations.
California already passed a nearly $15 billion annual tax last February. If passed, today’s ballot proposals would allow these taxes to last as long as five years.
Arizona voters should pay particularly close attention to how one of the most (arguably) liberal states in the country and the world’s ninth largest economy votes on these propositions. Would they like to see the tax and spending continue to increase permanent spending?
Legislators have offered one-time sales of state assets including the L.A. Coliseum and San Quentin as potential solutions for California’s cash deficit, but, like Arizona, this would do nothing to fix the state’s overall permanent obligations in spending.
House Speaker Kirk Adams and Senate President Bob Burns explain this issue with Horizon Host Ted Simons. They also discuss the overall state budget.
Click on this link or click on the picture below to go to the Horizon website to view the video in it’s entirety.
Click on this link or click on the picture below to go to the Horizon website to view the video in it’s entirety.
With this legislation, school districts will be allowed to spend dollars they are otherwise not legally allowed to spend on school operations during one of the most severe deficits in the state’s history.
HB2028 and HB2029 avoid sweeping these excess cash balances into the General Fund to be used for state general operating purposes.
These bills also avoid additional cuts to K-12 spending in FY09.
So instead of harming education, it helps education by allowing districts to use their funds the districts currently have no legal authority to utilize.
Not only does it protect school funding but it also helps the State solve our deficit in 2010 so budget cuts will not have to be any deeper towards Education.
In an effort to score political points, Democrats have chosen to continue their false narrative of Republicans balancing the state budget on the backs of children and teachers.
This is simply untrue.
These bills attempt to address the larger than anticipated FY09 deficit that has grown to $650M since February 2009.
“Every month, revenues decline further. It’s just in the last few days we’ve discovered a decline in revenue from April of $200 million dollars. It is irresponsible if we do not act quickly and decisively to fix this problem. There has been much talk about the budget process. I’ve received bills from the minority leadership that still does not solve the $650 million dollar deficit problem,” Speaker Kirk Adams said.
While legislators argue over whether this is the right approach to fixing the state’s Constitutional obligation to balance its budget every year, we have yet to address the real issue – the State’s structural deficit. The State’s spending is not in line with its revenue.
“You’re literally out of cash and living paycheck to paycheck,” State Treasurer Dean Martin said.
Martin testified to the House Appropriations committee that before the fiscal year 2009 budget fix, the state was spending $28 million a day and bringing in $22 million a day. This is what led to the $2.2 billion budget deficit.
Since the fiscal year 2009 budget fix, the state has lowered the spending from $28 million a day to $26 million a day but the state must still reduce its spending to make its expenditures line up with its revenues.
Clearly the State is spending more money than it brings in.
The Legislature can fix its cash deficit in any given year through one-time payments.
However, structural deficits are a permanent, year-to-year deficit that needs permanent revenue streams to cover these expenses. Chronic year after year cash deficits are a consequence of a structural deficit.
There are only two options to balance a structural deficit – permanent cuts or permanent revenue increases. Unless the structural deficit is balanced by either or both of these options, recurring cash deficits will follow.
There is no third option.
The budget bills passed out of the House Appropriations Committee on May 5 use more stimulus money so the State would not have to borrow as much to close the FY09 budget gap. These bills allow the Legislature to reduce the State’s structural deficit in FY10.
Instead, the current agreement solves the statutory problem of tomorrow’s deadline but does nothing to address the State’s structural deficit.
“There are some scenarios where even a consortium of banks could not provide us [State of Arizona] enough cash. That’s why it’s so important to get your expenses and revenue in line,” Martin said.
The JLBC 2010 baseline summary report says if current policies are continued, the projected structural shortfall is $3.33 billion in FY 2011 and $3.14 billion in FY 2012.
The Land Conservation Fund was approved by voters in 1998 to help prevent urban sprawl. Since the economic downturn has essentially frozen construction, the $70 million in the Land Conservation Fund currently has no use.
A three-quarters vote was needed to pass the measure and keep parks open, however only two rural Democrats joined the Republicans to support the measure. Unfortunately, this kind of partisan approach to common-sense measures has been the norm for House Democrats all session.
So this summer, leave the sleeping bags in storage and thank your nearest Democrat for voting to cancel your family’s summer camping trip.
The brief argues the proposition has an inadequate revenue source and a negative impact upon the State’s General Fund.
You can view the brief here - EARLY CHILDHOOD BRIEF (PDF)
In 2004, Arizona voters amended the State Constitution to respond to problems with initiatives that created ongoing funding obligations where the State is obligated to spend money for initiatives without an adequate funding stream.
Because of these problems, the voters enacted Article 9 Section 23, the constitutional Revenue Source Rule, which creates special protection for the State’s General Fund.
As a result, initiatives are now required by the State Constitution to identify a revenue source for current and future costs and it cannot have an impact on the General Fund.
So far, the First Things First initiative has had an approximately $50 million negative impact upon the State General Fund.
In November 2006 Arizona voters approved Proposition 203 that established the First Things First Initiative. The Fund consists of revenues generated by an 88 cents tax on every pack of cigarettes. A pack of cigarettes went from $1.18 per pack to $1.98 per pack.
The brief says “The Revenue Source rule requires that programs prescribed through the ballot measures must be funded from a new revenue source that meets the entire needs of the programs, both at inception and in the future. And, the funding source cannot cause a reduction in State general fund revenues. Proposition 203 failed to meet both of these requirements, because the tobacco tax it imposed caused an immediate reduction in State general fund revenues. Also the funding source cannot meet the future needs of the Board’s programs.”
They want a budget that “works for Arizona” and say “massive” cuts to education, health and human services take Arizona in the wrong direction.
The problem is that Arizona government is simply too large to pay for itself, even if we were to increase taxes.
For Arizona to emerge from this financial crisis, we must work to solve the state’s cash and structural deficits.
By using federal stimulus dollars, we chip away at the “cash” deficit, but until we bring government spending in line with revenues, we cannot correct the structural deficit.
ABC said they oppose cuts and provide an alternative. The only problem with their alternative is it’s impossible, and irresponsible.
The problem with the ABC alternative is we’ve already tried it with the last three state budgets. It’s a large part of why we’re where we are today – an obligation to spending that we cannot afford.
O’Neil Associates conducted a poll in late 2008 asking citizens what they thought about the state’s budget shortfall and if Legislators should increase taxes or cut government spending.
Interestingly, 93 percent of respondents said the state should cut government spending to fix the budget shortfall.
Here’s where the poll gets interesting…
Since 93 percent of respondents said the state should cut spending, respondents were asked EXACTLY what they would cut.
When given actual agencies with actual budgets to cut, respondents time and again answered they did not want to cut K-12, Mass Transit, Freeways, Police services, Universities or Fire services.
Instead they actually wanted to see those budgets increased.
The point is this – it’s very easy to say “cut government spending,” but when presented with what comprises that spending, they wanted more money to go to those services, not less.
This is the challenge this Legislature faces every day as they work to balance a huge state budget with a deficit of $3.3 billion.
It’s easy to criticize a process…what’s far less common are actual solutions to the problems.
Lawmakers are working very diligently to produce a responsible budget that maintains our quality of life, which the poll clearly demonstrates.
Several issues impacting the state’s educational system have nothing to do with legislative action like declining enrollment, declining Proposition 301 revenues and a loss of gaming funds.
- Declining enrollment is having a huge impact to school districts because fewer students means fewer dollars for districts; and with funding at $9,700 per pupil, depending on how badly enrollment numbers are off, the district may be losing out on significant funding. Not the Legislature’s fault.
- Declining Proposition 301 revenues has hurt districts too because this funding is tied to the state’s tax revenue. Unfortunately, Arizona’s state tax revenues are down 21.5 percent from where they were last year – making fewer dollars available for education.
- Declining gaming revenues are off because people just aren’t gambling as much in this poor economy. Districts receive a portion of gaming revenues for dropout prevention programs, school readiness and reading programs.
Setting the record straight is important; and although it is true the Legislature made reductions to the state’s K-12 education budget, the fiscal year 2009 Special Session DID NOT decimate public education as critics would have you believe.
In fact, the K-12 budget was reduced by $133 million, but even after that reduction, the funding levels for education in ’09 were still $61 million more than they were in FY08.
Lawmakers have tough budget decisions ahead, but they will do everything within their power to keep education cuts as low a possible as they work to balance the budget.
Today the House Appropriations voted 10 budget bills out of Committee, moving one step closer to finalizing and delivering a balanced budget to the Governor that does not include a tax increase.
The fiscal year 2010 budget had to solve a $3.3 billion shortfall, which lawmakers were successfully able to balance by utilizing a combination of $989 million in stimulus funding, $670 million in spending reductions, $394 million in fund transfers, $51 million in additional revenue and $615 million in non-tax revenue enhancements.
According to Speaker Kirk Adams he is pleased the appropriations process has been allowed to work. “The FY10 budget that passed out of the Appropriations Committee today effectively tackles the state’s structural deficit and makes thoughtful reductions to agencies in an effort to limit impact to government services and the citizens in the state,” Rep. Adams said.
Arizona’s economy is in bad shape, but with few options and a Constitutional mandate, Lawmakers have no choice but to reduce agency budgets to solve the state’s deficit and balance the budget.“ Regardless of what critics say about the FY10 budget, the cumulative budget reductions DO NOT decimate state services. The fact of the matter is that state government is simply too large to pay for itself,” Majority Leader John McComish said.
“General Fund spending has increased by $3.7 billion since 2004, a third of the General Fund is voter protected and tax revenues in the state are down by 25 percent from this time last year. Lawmakers have no choice but to reduce state agency budgets to help solve the budget shortfall,” Rep. McComish explained.
“The Legislature was asked to keep permanent reductions to state agencies reasonable." Majority Whip Andy Tobin said and added, “Lawmakers have tried very hard to deliver on that request.”
“We have been looking at all options, everything is on the table. It is clear that a crisis of this magnitude will require us to think out side of the box and we must work hard to limit mistakes. Clearly, we could simply make an assumption that the economy will grow at 8 percent, like last year, and balance the budget. We know that number is irresponsible, just as it was last year. Trying to fool the public to push off our crisis to someone else is Napolitanoesque,” Tobin explained.
“Tough choices are being made and compromises will be made by everyone. I welcome the opportunity to look into any idea that does not harm the working community by driving more people to the unemployment line,” Tobin added.
Lawmakers understand citizen’s concerns about education, health services and other state service reductions and struggle with how to maintain quality of life for Arizonans. Reducing state agency appropriations to balance the budget is an extremely difficult process and in many cases, just plain agonizing for Legislators.
Speaker Pro Tem Steve Yarbrough said, “I applaud the work of the Appropriations Committee. The budget that passed today is distinctly different in size and scope from the reduction options released in the Chairmen’s Options in January. The FY10 budget will provide more flexibility for state agencies by allowing directors to make decisions about where and how to implement reductions within their own organizations.”
The House is moving toward delivering a final budget and is looking forward to working with the Governor on finalizing the FY10 budget.
For more information about the House budget bills, please review the fact sheets at: HB2633;HB2634;HB2635;HB2636;HB2637;HB2638;HB2639;HB264;HB2641; and HB2642. Or view the entire list of bills at www.azleg.gov
Some think government is too big, whereas others think the money should be spent more in areas they think are important.
Put yourself in the legislator’s shoes…
What would you cut and why?
Facing the largest fiscal crisis in Arizona’s history would you cut K-12? AHCCCS? Department of Economic Security? Do you cut the Department of Health Services? Universities? Corrections?
These agencies help provide for the developmentally disabled, the blind, vaccinations, health care for the poor, public safety and the future of Arizona amongst many, many others. Of these, which one do you cut and why?
Arizona’s budget shortfall is the largest in state history at $3.3 billion dollars.
There are no good options.
Only horrible and worse options.
A third of the budget is off limits as Arizona statute prevents legislators from managing it. Another third of the budget is protected by the will of Arizona voters. This leaves you only a third of the state budget to actually manage and balance.
Of this, K-12 already comprises 42 percent of the budget, with another six state agencies making up 92 percent of the entire state budget, leaving just eight percent left over for all other state services.
Unlike the federal government, Arizona cannot print money and the State Constitution mandates a balanced budget every year.
In spite of the enormous budget shortfall, more emails and phone calls come in telling you “not to cut,” and to increase spending in certain areas. If you increase spending in one area you must cut more spending in another. This is already on top of the cuts that must be made to balance the current $3.3 billion shortfall.
So the million dollar question once again becomes “what do you cut and why?”
In theory it’s easy to say government should cut from a specific agency, but in practice there are no easy solutions.
The goal of education should never consist of how much money we spend on education, but what comes out - student achievement. Yes, funding is extremely critical but so is parental involvement and teacher discipline.
Critics have held an obsessive, tunnel-vision focus on per pupil spending to the detriment of student achievement.
Yet higher student achievement does not necessarily correspond with more money.
Let’s take Utah and Washington D.C. as a practical example.
Utah spends roughly $7,215 per pupil in overall expenditures whereas Washington D.C. spends roughly $17,600 per pupil. Yet Utah continuously scores well above Washington D.C. in student achievement. So money, although necessary, is not sufficient.
Arizona spends roughly 42 percent of the ENTIRE state budget on education. In fact, six state agencies comprise over 91 percent of our state budget.
And despite the $133 Million in Fiscal Year 2009 budget correction reductions in K – 12, education still received $61 Million more than their Fiscal Year 2008 budget.
Most people value quality education and most people believe that a highly qualified workforce is critical for the emerging economy. This is not disputed.
These same critics who say Arizona is near the bottom in per pupil spending assume that student achievement in Arizona is extremely poor and thus the ONLY way to increase student achievement is to increase per pupil spending.
The literature suggests that parental involvement remains the number one indicator of student achievement.
Higher student achievement directly corresponds to higher parental involvement.
Although we cannot legislate parental involvement perhaps we can reduce taxes and allow parents to keep more of their own money thus giving them the opportunity to spend more time with their children.
Last week, the State of Washington balanced their state budget by cutting almost $800 million from K–12, $255 million from healthcare and $250 million in government spending by instituting furloughs.
Washington did not raise taxes to balance their budget. They instead opted to utilize federal stimulus, one time sweeps of construction accounts and skipped pension payments to balance their budget.
The Seattle Times Editorial Board praised their work and said, “In the end, lawmakers knew constituents had no stomach for higher taxes. Nixing a planned sales-tax hike for a range of health services was the wise course considering the state’s sputtering economy.”
Washington Democrats in the Legislature felt a tax increase was not the right approach to solve the state’s fiscal crisis and solved their problem without new taxes.
Arizona Republican lawmakers are of the same mindset. Washington is proof a balanced budget can be done without a tax increase, but Arizona Democrats believe only taxing will solve our state’s budget deficit.
In Washington, Democrats balanced a budget without raising taxes and the press praised them.
There also isn’t any discussion on what a $1 Billion dollar tax increase would have on an already flailing Arizona economy. Arizona unemployment has gone from 7.4 percent to 7.8 percent and Democrats would like to raise taxes by a Billion dollars? What kind of impact would this have on the private sector?
Although the Legislature has helped to extend unemployment benefits utilizing federal stimulus funding, we still have much to do in solving and preventing future unemployment. Stemming an increase in taxes is the first step.
Democrats $1 Billion dollar tax increase includes an increase of $360 Million on property taxes for businesses and homeowners, $80 Million in additional income taxes, an additional tax of $233 million in utilities, a new tax of $45 million on consumer and business warranty and service contacts and an elimination of $100 million of tax credits for contributions to public and private schools which will mean higher costs to the state.
Democrats cannot consistently talk about job creation and taxes in the same breath, as these are mutually contradictory concepts. While they blame Republicans for cutting government, Democrats hurt those who provide the economic tax base in Arizona – the private sector. Ultimately, Democrats end up harming those they claim to represent.
As Robert Robb said, research has been conducted and found that states that are decreasing taxes have a higher growth rate than states that are increasing taxes – the lower the taxes the higher the growth.
Rep. Russ Jones (R-Yuma) sponsored the bill that will utilize 100 percent of federal stimulus funding to extend unemployment benefits by 13 weeks for the state’s out-of-work citizens for this year. A sunset clause for the measure has been included and pursuant to the federal stimulus legislation the federal funding will begin to be phased out January 1 and will cease by June 30, 2010.
“Arizona’s unemployment rate jumped from 7.4 percent in February to 7.8 percent by March, which is the state’s highest unemployment rate since 1983,” Rep. Jones said. “Rural Arizona has been hit particularly hard by the poor economy, posting double digit unemployment rates. In Yuma, the unemployment rate is at 22 percent. I believe this legislation will bring immediate aide for many families struggling to make ends meet as they look for work,” he added.
According to Rep. Frank Pratt (R-Casa Grande), the primary sponsor on the bill that changes the eligibility re-application requirement for AHCCCS from every six-months to a year, this bill makes a technical change and clears the way for Arizona to receive $1.6 billion in federal stimulus.
“The bipartisan actions of lawmakers today demonstrates our willingness to work together to implement solutions that immediately help the citizens in this state,” Rep. Pratt said. “We have been criticized for not getting these funds out sooner, but people need to remember the federal stimulus package wasn’t even voted on by Congress until mid-February. I believe the state and this Legislature did an excellent and responsible job of accepting these funds as quickly as possible,” he explained.
Key quotes include:
Representative John Kavanagh - “Year after year she [Governor Napolitano] oversaw double digit increases in state spending in years of single revenue growth. And when it became apparent that the economy was tanking last year, rather than cut back then, she created overly optimistic projections of future revenue and she continued to go into fund sweeps…”
Senator Russell Pearce - “We voted in mass against the Democratic budget.”
Representative John Kavanagh - “A tax increase will give us revenue but at the cost of massive job losses.”
HB2631 (eligibility determination; AHCCCS) fixes a problem with last year’s Democratic budget that changed the AHCCCS requirement of re-applying every six months instead of the annual application requirement.
Federal stimulus dollars are contingent upon compliance with a prohibition of reducing the maintenance of effort. The “stimulus” legislation required all modifications to have been made by July 1, 2008. Since the modification did not take affect until September 26, 2008 the Legislature is now required to fix it.
HB2632 (unemployment insurance; benefits) extends the length of unemployment benefits with no programmatic changes. When the federal money is no longer available, the state will not have to continue the extension.
If the bills pass out of Commerce Committee, they will go to Caucus tomorrow and more than likely onto the Committee of the Whole (COW) and Third Read on Thursday. This means both bills could go up to Governor Brewer’s desk as early as Thursday.
Both bills have an emergency clause meaning they have to pass with a two-thirds majority so the bills need 41 votes in the House and 21 votes in the Senate.
Please click on the following link to hear the call.
Constituent call 4_15_9
The purpose of the event was to better educate the community regarding Arizona’s multi-year budget shortfall and provide potential solutions.
The presentation is broken up into three segments.
Majority lawmakers are being criticized for not being transparent as they continue to work on the budget. Critics are claiming the budget process is being “cloaked in secrecy” and that most GOP Members are not involved in the process.
Majority Members are in fact working hard with their Caucus to find a solution for this budget and providing more information than in years past. There was a time when Members used to meet behind closed doors and Democrats never got to see the budget until it was presented in a bill format.
This session, multiple public budget meetings have taken place, including business and municipal leader’s public roundtable discussions. There has also been a public release of DRAFT budget documents that list proposed solutions and cut options. Neither of these took place last year and releasing a draft of the budget before memorializing it in a bill is unprecedented.
A Caucus website has been established in order to open up transparency to the public. The web site includes budget updates and documents. The public also had the opportunity to attend discussions in multiple cities around the state where Leadership traveled to discuss the budget and explain the legislative process. The Education Committee also traveled the state discussing the Education Budget with the public.
Members of the Caucus are kept informed through a newsletter developed by the Majority Whip and are asked for their input. It is a top priority of the Majority Staff to involve all members of the Caucus in the budget process. In creating this budget, Leadership has been working with all of the Caucus Members by meeting with them in small groups.
It may seem that Majority Leadership is leading the budget from the outside with little input, but the House Appropriations Committee, made up of both Republicans and Democrats, has played a primary role in developing the budget and the committee reflects the actual body of the House.
In a push for transparency, Leadership has also established a Speaker’s Bureau and they are holding weekly Chairmen’s meetings.
Majority Leaders are not hiding the budget behind closed doors, and are instead introducing new steps in making the process more transparent than it ever was in the past.
Click here for entire story
The purpose of the event was to better educate the community regarding Arizona’s multi-year budget shortfall and provide potential solutions.
Click on the following link to view the presentation.
GPEC Presentation 4_9_9
When the Appropriations Chairmen develop a full budget proposal with input from members, we will release it as an official proposal.
Working Document 3_26_9
House Majority Whip
Instead of doing what’s right for teachers and students, the teachers union (Arizona Education Association) has decided politics are more important. This same teacher’s union colluded with the House Democrats to make sure school districts do not have the ability to have more time to notify teachers about whether or not they will be retained for the following school year.
The Democrats voted party line against HB2630 with the exception of one Democrat. This bill would have given school districts the time they needed to make teachers aware of their employment status and not frighten or lose good teachers because of unnecessary contract termination letters.
In March the Legislature attempted to pass HB2630, which would have extended the statutory teacher notification deadline for all Arizona school districts. The Republicans attempted, at the request of the Arizona School Boards Association, to give an emergency extension so school districts could finalize their budgets without frightening or losing good teachers with contract termination letters that were based on worst-case scenarios.
Unfortunately, the Arizona Education Association went against the school districts and convinced all but one of the House Democrats to vote ‘no’ on HB2630. Rep. Rae Waters voted with the Republicans on this issue. In addition to the 35 Republicans, five Democrats needed to vote ‘yes’ to pass the emergency measure. Instead, the Arizona Education Association and the Democrats decided to play political games with teachers’ livelihoods and killed the emergency measure.
- Click here to see Highlights of the HB2630 Debate
If you are truly concerned about the situation Arizona teachers are in, I suggest you contact your Democratic legislators and ask them why they voted to send layoff notices to teachers that may still have jobs.
You can find their contact information at this link.
The Legislature has received countless letters and emails from businesses that talk of the stifling effect government – both state and federal, has had on their companies, their innovation and their desire to grow.
Instead of forcing businesses to base their saving and investment decisions on taxes, we should provide the grounds that foster economic growth meanwhile encourage innovation and investment.
Not every economist (or politician) will agree that lowering taxes on capital income fosters greater investment, greater economic growth and higher standards of living. Yet every business takes capital income taxes into consideration when deciding whether to move into a state or even move out...as in the case of California.
The question we must ask – is Arizona as business friendly as we could be?
In comparison to our neighboring states (with the exception of California), we lag far behind in terms of having a business friendly environment.
Raising taxes on an already flailing economy will only harm businesses and in turn harm families – the very families that help sustain our great state.
Even if Democrats were able to squeeze $1 billion more from businesses and families that are already struggling, they would still be unable to close the $1 billion budget deficit that they’ve admitted they are short in their budget proposal.
As Speaker Pro Tem Steve Yarbrough said, “Instead of reducing unaffordable expenditures to bring them into alignment with revenues like every other household, business, and local government is doing, the House Minority wants to take more from Arizonans.”
The question we must answer is how can we make Arizona a more business friendly state and what can we do to foster long term growth?
This will take real leadership who can provide for a qualified workforce and a business friendly environment.
Meanwhile, Arizona faces an unprecedented fiscal crisis never seen before in the history of our great state. Our ongoing expenses greatly outweigh our incoming revenue – to the tune of $3 Billion dollars.
We must cut non-essential services and grow our way out of this topsy-turvy imbalance and provide pro-growth tax policy that accomplishes this.
We are trying to align our structural deficit, which has come about due to a doubling and sometimes tripling of state services in the last several years.
Last January, the Legislature passed a fix to the Fiscal Year 2009 budget that became the largest reduction in government in Arizona’s history. While House Republicans are trying to stem the growth of government and fix our structural deficit, Democrats are seeking to bring it back and even increase the size and scope of government with their most recent budget proposal.
Conversely, the ongoing discussions of the House and Senate FY10 Republican budget proposal includes not raising taxes nor growing government.
The minority proposal includes an increase in taxes by $1 billion in FY10. These taxes include increases of $360 million in property taxes on homeowners and businesses, $80 million in additional income taxes, $100 million from the elimination of tax credits for contributions to public and private schools, a new assessment of $233 million on the generation of electricity, and a new levy of $45 million on consumer and business warranty and service contracts.
We can and we must continue to attract and retain businesses as a major piece to fixing our fiscal crisis.
Additionally, spending reductions, non-tax revenue enhancements, and federal stimulus funding will help us to correct the state's budget shortfall.
Arizona has the dubious distinction of being ranked fifth in the nation for having the highest business property tax burden. Regionally, Arizona is the worst (with the exception of California).
This means when a business is considering moving to a state, they factor in the additional costs state government will impose, along with regulations. In comparison to Nevada, Colorado, New Mexico and Utah, Arizona has a much lower business friendly environment than our neighbouring states.
Allowing the State Property Tax to return this fall without a complete repeal is a tax increase - the worst possible thing we could allow in a troubled economy. Our businesses and homeowners cannot afford an added financial burden during a time when many are struggling to hold onto what they have.
It is an extremely dangerous proposition to raise taxes during an economic crisis. As lawmakers we must make wise tax decisions to grow our economy, expand our economic base and create jobs. We do that by attracting business and innovation to Arizona.
Tax cuts didn’t lead to the state’s recent budget crisis. We must correct the $3B deficit in Arizona now because the two previous budgets under Governor Napolitano ignored the economic warning signs and relied heavily on borrowing and accounting schemes.
If the State Property Tax is not permanently repealed, it will be incorporated into property tax bills in the fall of 2009 and we will fail to attract and encourage greater diversity and investment in our state among businesses that could bring jobs to Arizona.
We must do all we can to retain and invite business into Arizona. We can continue this process by passing HB2073, the State Property Tax Repeal.
The biggest beneficiary of my company…GOVERNMENT. The taxes we paid or generated during 2008 were $654,602.
While I earned $72,000 to sustain and grow my business, government received $654,602 from my effort. Small business is being taxed to death. The small business engine of the U.S. economy is being suffocated with taxes. Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Remove or lessen some of these taxes so I can invest more to develop jobs, grow my company and stimulate economic growth.
Unfortunately one of the consequences of high taxation is to discourage individuals from going into business. New ideas are left dormant because the obstacles to success seem too great or the reward too little. Our tax system should support individuals with new and creative ideas to develop their potential, provide jobs and create wealth. I ask you to support such a system and to oppose programs that restrict entrepreneurial spirit.
Keith Stephens, President
Although I do not own any real estate at this time, the State Property Tax Relief provision should remain as it is and not be allowed to expire. In light of all the new developments out of Washington, D.C., and the new taxes that are going to be levied, businesses do not need any further taxes. To do so would force businesses to increase its prices, possibly lay off employees, and/or reduce employees’ hours to that of part time, thereby saving on benefits i.e. vacations, health, sick days, workman’s compensation. We could not keep our businesses open longer or add hours, as this would only increase our overhead costs.
Frank de Rosa , PhD, President. Advance Paper & Maintenance Supply, Inc.
In spite of the Temporary Property tax relief provisions passed in 2006, I have seen my property tax payment increase over 25 percent in the last two years while the full cash value of my property has declined 43 percent. In other words, the state revenues collected for 2008 and 2009 will be based on the higher cash values from the housing bubble since it takes two years for declines in value to equate to tax liability.
By my estimate I will not see relief from taxes caused by declines in my property values until tax payments are due in 2010. We need this relief provision to be extended for this reason alone.
We are a small service business, employing and paying healthcare for five employees. We are experiencing a significant reduction in revenues and are struggling to keep our workers employed. Our business credit line has been closed by our bank. Our house which we have owned since 2005 is upside down according to our lender. We have cut back on all unnecessary expenses. The next step will be to cut salaries, hours or benefits.
Linda M. Day
Day Enterprises, Inc.
In 2006 the Arizona Legislature passed the Omnibus Tax Relief Act suspending the State Equalization Property Tax Rate for three years. According to research from the Joint Legislative Budget Committee, this legislation saved property owners a projected $250 million a year.
Bills currently in the state legislature would make this temporary suspension permanent. Repealing the statewide property tax will prevent further job loss and will make Arizona more competitive by lowering taxes for homeowners and businesses in this struggling economy. If the Legislature does not act, businesses will face a dramatic tax increase when the tax returns following fiscal year 2009. Businesses both large and small will undertake the difficult decision of whom to layoff when the new property tax bill comes due. Taxing our citizens and businesses in a time of economic crisis will result in a longer recession and less capital to retain employees and create jobs.
The State Equalization Property Tax Rate was enacted in 1981 to support local communities’ public school financing. The state legislature sets the rate for this property tax.
Prior to 1981, Arizona’s public schools, like in most states, received their funding from local property taxes. If real estate in a particular area had high valuations, the town or city could impose a relatively low tax rate and still meet its school system's financial needs. In areas where valuations were low, property owners were forced to bear a greater burden to pay for schools.
In an effort to comply with the state constitution's call for "a general and uniform public school system,”the legislature established a formula to determine an "equalization base" of guaranteed funding. If local property taxes fail to meet this minimum, money raised from the State Equalization Property Tax Rate is used to top those districts’ coffers until they reach the set equalization base level.
Because a fixed statewide property tax rate combined with rising real estate values meant owners’ tax bills were constantly increasing, the legislature passed Truth in Taxation (TNT) laws in 1998. TNT was intended to lower tax rates to offset the rise in property valuations, thereby stabilizing owners’ tax liability.
From 2001 to 2006, TNT lowered the State Equalization Property Tax Rate from 51 to 44 cents per $100 valuation –a 16 percent drop. However, statewide primary valuations jumped 55 percent over the same period resulting in property tax increases for many residents. In Maricopa County the increase was nearly 60 percent.
Although most property taxes are collected at the local level, state lawmakers wanted to provide some form of relief from this tax surge. They negotiated a three-year suspension of the State Equalization Property Tax Rate (one of the two property taxes the state controls) saving owners over $250 million a year.
The degree to which education and statewide property taxes are truly separate issues was made clear in the Joint Legislative Budget Committee's December 2007 fiscal note. The Committee reported that the Department of Education had a $61.1 million budget surplus. Additionally, the legislature appropriated $145 million in additional funding last year. In the FY 2009 budget adjustments signed into law on January 31, 2009, the legislature cut $133 million from education, which translates to only 3.2% of its General Fund budget.
It is important to remember that the State’s General Fund counterbalanced the loss of this revenue stream, ensuring no school district fell below the base funding level. The business community supports a strong educational system. High property taxes, however, detract from the ability to create wealth and employment for Arizona.
Property Tax Differences for Business and Homeowners
In Arizona, property is divided up into nine classes. A property’s valuation will vary depending on its classification,.
Owner-occupied homes are listed in Class 3 and assessed at 10 percent of full cash value (market value). Business property, however, is placed in Class 1 and subject to 22 percent of full cash value.That means if a home and business have the same market value, say $200,000, the business will pay primary tax on $44,000 while the home will pay tax on only $20,000 worth of value.
A further distortion comes in the form of the Homeowner’s Rebate. In 2006, the State covered 36 percent of homeowners’ primary school district tax rate. In Phoenix Union School District the primary property tax rate for a business was 9.76 cents per $100 valuation. The primary tax rate for a home, on the other hand, was 7.29 cents per $100 valuation. By applying those rates to the above valuations, we find a tax bill of $4,294 for the business and $1,458 for the home —a difference of $2,836.
The State Equalization Property Tax portion of these two tax bills is similarly affected. Applying the State Equalization rate of $0.33 cents per $100 valuation to this example results in a $145 tax for business owner and a $66 tax for the homeowner —120 percent less.
Many businesses, however, own property worth more than $200,000. Perhaps a more realistic example is that of a commercial development valued at $3.9 million in Tempe. The State Equalization Tax part of the owner’s property tax bill would come to over $15,000.
High property taxes are particularly damaging. A growing body of research has found property taxes, because they must be paid regardless of a company's profitability, negatively impact business start-ups.According to the Minnesota Taxpayers Association and the Arizona Tax Research Association, Arizona ranked 5thhighest in the nation for industrial property taxes payable in 2007.Furthermore, business property in Arizona suffers much higher taxes than neighboring states.
To remain a competitive and attractive location for business, to preserve and create more jobs, and to increase individual incomes, Arizona needs to eliminate the state equalization property tax.
To Critics of the Repeal
Some worry repealing the statewide property tax would unfairly benefit big business. What it would actually do is benefit everyone. According to the Arizona Department of Commerce, property-intensive industries employ over 20 percent of the civilian labor force.Lower property taxes would provide companies with additional financial resources to stave off job loss in the short term and support higher wages and expansion in the long term. The ongoing result would be the creation of more jobs to keep Arizona’s economy healthy. Lowering the cost of business in Arizona by cutting property taxes will benefit the future of all residents.
Another criticism of the repeal focuses on the state’s looming budget deficit, projected to reach $3 billion for fiscal year 2010. Opponents question how the legislature can contemplate eliminating the State Equalization Property Tax when revenue is coming in below expectations?
There are a few problems with this argument. First, if the State Equalization tax had been collected in fiscal year 2009, it would have added approximately $250 million in revenue, leaving a deficit of at least $1.35 billion.This suggests the Arizona budget problem lies with too much spending and an antiquated tax system that does not promote investment, capital formation, and job creation.
Second, while sales and income tax collections are down approximately 11 percent from last year, the corporate income tax is down 24.6 percent.Simple economic rationale affirms that increasing taxes on homeowners and business by $250 million is not the way to grow an economy that is in crisis. When business suffers during an economic downturn workers suffer. Now is the time to aid in the sustainability and development of the private sector.
In a globalized economy, Arizona can no longer set fiscal policy as if it were in a vacuum. Companies and individual entrepreneurs are watching to see what Arizona does in comparison to other states and countries. Then, they will react accordingly.
To make sure they react in a positive way, the Arizona Chamber of Commerce and Industry supports the permanent elimination of the State Equalization Property Tax Rate. Now is the time for Arizona to position itself for economic growth and job creation. The repeal is a critical and important step as Arizona looks to improve its competitiveness.
 Joint Legislative Budget Committee, “Fiscal Impact of Statutory Tax Changes,” September 20, 2007,http://www.azleg.gov/jlbc/taxchanges07.pdf
 Arizona State Constitution, Article XI Section 1,http://www.azleg.gov/FormatDocument.asp?inDoc=/const/11/1.htm
 In addition to the State Equalization Property Tax, which is actually collected by the counties, revenue from the Qualifying Tax Rate and Basic State Aid from the General Fund is used to guarantee funding levels. If a district collects enough money on its own to meet the equalization base level, then the State does not provide any funds.
 Joint Legislative Budget Committee, “State of Arizona 2006 Tax Handbook,” September 12, 2006, p 82,http://www.azleg.gov/jlbc/06taxbook/06taxbk.pdf
Maricopa County Department of Finance, “Tax Rate 2001-2006,”http://www.maricopa.gov/Finance/tax_pub.aspx
 Joint Legislative Budget Committee, “FY2009 Appropriations Report,” August 2008,http://www.azleg.gov/jlbc/09app/apprpttoc.pdf.
 For Tax Year 2007; the percent will drop .5 percent each year until it is reduced to 20 percent for business in 2015
 The Arizona State University Real Estate Center records the median sale price for a single family home in Greater Phoenix between 2004 and 2007 at $255,000. For more information seehttp://www.poly.asu.edu/realty/marketupdate/sales/Annual%20Sales.xls.
 For a full explanation see the Arizona Tax Research Association’s “An Explanation of Property Tax,” 2007,http://www.maricopa.gov/Finance/tax_pub.aspx
 EJM Developers, Co., “Good Cents Presentation,” January 16, 2008
 For more seeTimothy J. Bartik (1989). “Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States,”Southern Economic Journal, pp. 1004-1018; Stephen T. Mark, Therese J. McGuire and Leslie E. Papke (2000). “The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area,”National Tax Journal,Volume 53, pp. 105-123; Sanjay Gupta and Mary Ann Hofmann (2003). “The Effect of State Income Tax Apportionment and Tax Incentives on New Capital Expenditures,”The Journal of the American Taxation Association,Supplement 2003, pp. 1-25.
Minnesota Taxpayers Association, Arizona Tax Research Association, “Residential Property Tax Rankings vs. Industrial Property Tax Rankings,” March 3, 2009
 Arizona Department of Commerce – Research Administration, “State of Arizona Labor Force and Non-Farm Employment,” 2007,http://www.workforce.az.gov/admin/uploadedPublications/1970_aznaics01-06.pdf
 Joint Legislative Budget Committee “Joint Caucus Budget Update: FY 2009 and FY 2010 Revenues and Budget Shortfall Estimates,” January 14, 2009,http://www.azleg.gov/jlbc/JointCaucusBudgetUpdate 011409.pdf.
 Joint Legislative Budget Committee, “2009 Revenue Update,” February 12, 2009http://www.azleg.gov/ jlbc/09janrevupdate.pdf.
In 2006, the Arizona Legislature and Governor were faced with extraordinary uncertainty in the property tax system. Property valuations in many counties skyrocketed, forcing county assessors to increase values on some homeowners up to 60 percent. Angry citizens began circulating initiatives to roll back the valuation increases and cap overall property taxes.
The Legislature and Governor responded by reducing its property tax rate while also prohibiting local governments from increasing primary property taxes. In addition, the Legislature referred Proposition 101 to the 2006 general election ballot to ensure that the constitutional levy limits of counties, cities and community colleges would limit future primary property taxes to 2 percent plus growth.
Regrettably, the state property tax relief was made temporary in last minute negotiations with Governor Napolitano. Unless the Legislature takes further action, the state equalization tax rate will return to tax bills this year, resulting in a $247 million tax increase.
Arizona Tax Research Association’s (ATRA’s) Recommendation:
Clearly, the environment that led to the reduction in property taxes in 2006 has changed. Residential property valuations are decreasing substantially and home foreclosures are at record levels. Moreover, theArizonaeconomy continues to contract and businesses shed workers to try to stay afloat. Arizona’s unemployment rate is up to 7 percent and more than 155,000 Arizonans have lost their jobs over the last year.
ATRA recognizes that the depth of Arizona’s budget crisis leaves very few good options to balance the FY 2010 budget. The federal stimulus money provides some short term relief and a potential bridge to better economic times. However, a statewide property tax increase this year will only serve to dampen and delay any potential economic recovery.
Study after study has demonstrated that Arizona’s tax system discourages business location and expansion in the state. In particular, Arizona’s high business property taxes (ranked 5th highest nationally) are a major impediment to economic growth. As the attached table reflects, whileArizonabusinesses account for only 16 percent of the property tax base, they will pay 33 percent of the $247 million tax increase.
Simply put, ATRA believes that a major tax increase in the area of our tax system that is already a major impediment to economic growth is the worst possible option for balancing the FY 2010 budget.