State’s $11.8 billion budget clears hurdles, faces GOP opposition

PHOENIX – The $11.8 billion state budget cleared its first hurdles Wednesday as the package of spending and tax cuts was approved by a pair of legislative panels.

The 7-4 party-line vote by the House Appropriations Committee came after the Republican-dominated panel rejected a series of proposals by Democrats to add some spending to the mix.

Across the courtyard, the Senate Appropriations Committee gave its blessing on a 6-4 margin.

In that case, however, Sen. Heather Carter, R-Cave Creek, sided with the Democrats in concluding that the spending plan left too many priorities unfunded.

But the plan did pick up the support of Sen. Michelle Ugenti-Rita, R-Scottsdale, after Gov. Doug Ducey agreed to her demand to eliminate by June 30, 2021 the controversial $32-a-vehicle registration fee instituted last year by the Department of Transportation to fund the Highway Patrol. Ugenti-Rita had made her vote on the entire budget contingent on that fee going away – and sooner than 2024 as proposed by Ducey.

The biggest defeat for the Democrats in the House came on a bid by Rep. Randy Friese, D-Tucson, to immediately and fully restore the dollars that were cut from the "district additional assistance” fund, money earmarked for schools to pay for items like books, computers and buses.

That account was zeroed out, most recently by Gov. Doug Ducey on his first year in office.

Since then, lawmakers have restored about $100 million. And the budget calls for putting another $130 million back this coming year, with a $203 million balance schools are owed having to wait until future years.

Friese said there's no reason for the delay, pointing to not just the surplus of cash, some of which is being put into the rainy-day fund, but also a proposal to cut taxes, reduce fees and pay off some debt. That totals about $386 million.

"These are choices that we are making,” he said.

"Our choices reflect our values,” Friese said. "And our values should reflect funding our classrooms, investing in our students' futures, and giving our pupils the tools they need so they can prepare for the future.”

But he said that's not what's happening.

"We are choosing tax give-aways and tax cuts over our students' future and our teachers' tools to help our students maximize their future,” Friese said.

The characterization of that $386 million as a tax cut drew a sharp retort from Rep. Ben Toma, R-Peoria, calling it "a suspension of logic.”

"It is, in fact, an offset,” he said.

What's happened, Toma explained, is that Arizona will be collecting an extra $217 million in state income taxes next year because of changes in federal tax law. On top of that, the state expects to get $85 million in new revenues by imposing its sales taxes on online purchases made by Arizonans.

In exchange, the state is altering its income tax scheme to increase the standard deduction, creating a new child tax credit, altering the tax rates and providing a new deduction for charitable donations to people who do not itemize.

The net result, said Toma, is a wash.

"No matter how many times we call it a tax cut, it won't make it so,” he said.

And other Republicans defended putting $271 million in cash available this coming year into the state's rainy day fund, with an identical deposit planned for the following year. That would bring the fund to $1 billion.

Whatever the label, Democrats remained unconvinced that the changes in the tax code and squirreling all that money aside makes sense, particularly given what they say are the pressing needs.

Democrats had no better luck with a proposal to add $100 million to the budget in additional dollars for road construction and repair.

The proposal by Rep. Charlene Fernandez, D-Yuma, comes after lawmakers in the past two decades, looking for ways to balance the budget, have taken about $1 billion out of the Highway User Revenue Fund. That is made up of gasoline taxes and vehicle registration fees.

She called it an "investment” in the state, saying that better roads will reduce other costs in delays and repairs.

But Rep. Anthony Kern, R-Glendale, pointed out that the budget already includes funding for special projects. That includes $28 million to widen a stretch of State Route 95 in Yuma, $20 million for construction of a new interchange along I-40 in Kingman, $10 million to start design on widening I-10 between Phoenix and Casa Grande, and $6.5 million for a second interchange bridge for State Route 24 near the Gateway-Mesa airport.

Republicans also rejected a proposal to give $84.4 million to the Department of Economic Security to help the working poor pay for child care, and adding an extra $20 million for the Housing Trust Fund, above the $10 million in the plan.

The committee action, however, still leaves the future of the spending plan in doubt.

At least five Republican state senators have told Capitol Media Services they have reservations about the budget and cannot support it, at least not without changes or approval of unrelated legislation. With no Democrat support, that leaves the package short of the 16 Republican votes necessary for approval.

Lieberman told his GOP colleagues they could have Democrat support – and Democrat votes – had they agreed to craft a bipartisan spending plan rather than an all-Republican effort.