Arizona Cities Are Sitting on a Mountain of Cash—So Why Are They Opposing Tax Cuts?

Arizona Cities Are Sitting on a Mountain of Cash—So Why Are They Opposing Tax Cuts?

By the Free Enterprise Club |

The Arizona state coffers are running over with cash. The state is set to receive $12B in federal recovery funds, more than the entire annual state budget. On top of that, forecasting by the Joint Legislative Budget Committee projects by 2024 the state will have a $6.4B cash balance with $1.5B in ongoing revenues. Republicans in the Legislature and Governor Ducey are looking to return the record high, multi-billion-dollar state surplus to taxpayers by passing major tax cuts.

On the front lines to defeat these efforts—the cities—that are claiming major income tax reductions will significantly impact their bottom line. But it isn’t just the state sitting comfortably on a mountain of cash, the cities are too.

tax scorecard

In opposing the proposed tax cuts, cities are arguing that the package will result in a $225 million decrease in their shared revenue from income tax collections. Despite this estimate being seriously flawed, their projections are in reality insignificant.

Based on research from the Arizona Tax Research Association, we’ll look at 4 cities—urban, rural, small, and large—comparing their estimated “cut” from the tax package to their cash balances and scored against additional revenues generated from the 2019 Wayfair legislation, which permanently expanded the cities’ tax base.

Chandler

The city of Chandler has a budget of just under $317 million in general fund expenditures for FY2021, leaving nearly $135 million in the general fund.

So far in FY2021, the city has collected close to $3.6 million in new, local TPT revenue and $1.2 million in state shared TPT collections by remote sellers. Taking the average from the 8 months of collections so far in FY2021, this would result in just over $7 million annually.

The estimate of Chandler’s decrease in shared revenue? Just over $10 million.

With a cash balance of $135 million, $7 million in new revenue from Wayfair, Prop 207 revenue, and nearly $36 million in Covid cash from the latest package, residents of Chandler need not worry about their city providing a high level of service.

Their estimated “cut” represents a 0.67% decrease in Chandler’s general fund when scored against new ongoing tax revenues.

Flagstaff

The city of Flagstaff budgeted $81.7 million in general fund expenditures for FY2021, leaving the city with a cash balance of over $33 million.

From Wayfair, Flagstaff has already collected $1.3 million from remote sellers and their estimated state share is $340,000. Averaged out this is just under $2.5 million in new annual revenue. Flagstaff has also received $15.2 million in new Covid cash.

The estimated “cut” from income tax reductions? $2.9 million. This represents a mere 0.36% decrease in the general fund when scored against new ongoing tax revenues…

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Rally Draws Support For Police, Minority Unification Amid Push For Student Scholarship Expansion

Rally Draws Support For Police, Minority Unification Amid Push For Student Scholarship Expansion

By Terri Jo Neff |

Many attendees at Monday’s “Unification Rally” outside the Arizona State Capitol held signs which read “Unity – Protect and Educate Our Children” while speakers talked about bringing together law enforcement officials and religious leaders to build better relationships between peace officers and minorities.

The event also served as a show of support for Sen. Paul Boyer’s pending Empowerment Scholarship Accounts (ESA) legislation which supporters say will bring an end to the school to prison pipeline by expanding Arizona’s student funding program to an additional 470,000 children between preschool and grade 12.

An ESA allows an eligible child to receive credit for a large amount of the government education funding that would have been paid to the student’s public or charter school. Those funds can then be used toward private school expenses, including tuition, counseling, tuition, and other necessary costs.

SB1452 cleared the state Senate back in mid-February on a 16 to 14 party line vote, but has been stalled in the House after being amended in March by the Ways & Means Committee. Monday’s rally about the importance of educational options for parents who want additional educational options for their children highlighted Boyer’s ESA legislation.

Less than 10,000 students currently utilize ESAs, but speakers at the rally believe expanding eligibility criteria will allow nearly 726,000 children to have the option to receive an ESA. Among SB1452’s supporters are the Barry Goldwater Institute for Public Policy Research, AZ Families for Home Education, and the American Federations of Children.

Currently there are 256,000 students eligible for the ESA program based on one of eight criteria, such as children with disabilities, children with a parent on active duty in the Armed Forces or whose parent was killed in the line of duty, children who are wards of the court with a permanent guardian, and children attending schools or school districts with a “D” or “F” rating.

According to the Joint Legislative Budget Committee (JLBC), Boyer’s bill as amended by the House would expand eligibility to children who qualify for a free or reduced-priced lunch program, as well as about 63,000 students who are the children of veterans. That would make approx. 726,000 preschool to grade 12 students eligible for ESAs under at least one of the criteria.

The JLBC estimates the participation rate of the newly eligible students at around four percent, which would boost ESA enrollment by 1,926 students in Fiscal Year 2022, 3,877 in FY 2023, and 5,982 in FY 2024. Based on that increased participation, the Arizona Department of Education expenses would increase by $1.7 million, $3.6 million, and $6.4 million in those years, respectively.

However, JLBC noted the overall effect on the General Fund would be annual savings of $7.1 million to $9.4 million during the same three-year period. Those savings do not include estimated increases in annual administrative expenses of $2.2 million to $4 million.

Boyer’s bill has not been placed on a House agenda for a Third Reading as of press time.

Hoffman Bill To Prevent Mailing Of Unrequested Ballots Proceeds

Hoffman Bill To Prevent Mailing Of Unrequested Ballots Proceeds

A bill introduced by Rep. Jake Hoffman, HB 2792, which will prevent county recorders from going rogue and sending out ballots to registered voters who did not request them, is one step closer to becoming law.

HB 2792, specifically prohibits a county recorder, city or town clerk or other election officer from delivering or mailing an early ballot to a person who has not requested an early ballot for that election, with certain exceptions. The bill classifies an election officer knowingly providing an early ballot to a person that did not request an early ballot for the election, with exceptions, as a class 5 felony.

“Arizona is one step closer to sending a clear message to activist county recorders that the people of this state don’t want you illegally interfering in our elections by unlawfully mailing early ballots to voters who don’t request one,” said Rep. Hoffman. “The security of our elections, for all voters regardless of Party, is too important to allow one or two rogue recorders to jeopardize it for everyone.”

HB2792 passed the Committee of the Whole in the Senate on Monday. It now only needs one more vote in the Senate to reach the governor’s desk.

In March 2020, a Maricopa County Superior Court judge granted the Arizona Attorney General’s Office’s request for a restraining order to stop Maricopa County Recorder Adrian Fontes from illegally mailing out ballots for the Democratic Presidential Preference Election to voters who had not requested them. Fontes claimed that he was sending out last-minute ballots due to concerns about coronavirus.

RELATED ARTICLE: Court Grants Brnovich Restraining Order To Stop Fontes From Illegally Mailing Ballots

Secretary of State Katie Hobbs, a Democrat, agreed with the Attorney General’s Office that there’s nothing in the law that allows Fontes, a Democrat, to do what he planned to do. Hoffman’s bill makes it clear that a Fontes-style mass mailing would be a violation of Arizona law.

Independent Businesses Join Arizona AG In Challenge Of American Rescue Plan

Independent Businesses Join Arizona AG In Challenge Of American Rescue Plan

Last week, the Small Business Legal Center for the nation’s largest and leading small business association filed an amicus brief supporting the Arizona Attorney General’s lawsuit against the federal government over a provision in the American Rescue Plan Act of 2021 that would prevent states from lowering their own taxes.

The American Rescue Plan Act of 2021 made funds available to states if and only if states agree to not pass any laws or take any administrative actions that decrease their net revenue, whether that decrease comes through tax credits, rebates, reductions in tax credits, or new or expanded deductions.

“Congress passed the American Rescue Plan to relieve some of the financial pressure caused by the pandemic, but a provision that blocks Arizona and other states from cutting taxes is eroding state sovereignty and hurts local businesses,” said Karen Harned, executive director of the NFIB Small Business Legal Center, which filed the brief today in the U.S. District Court of Arizona.

In a March 25 news release announcing the filing of his lawsuit, the Arizona Attorney General said, “It’s unacceptable for the federal government to commandeer states’ tax policies and micromanage their budgets. We will always fight on behalf of hardworking taxpayers and push back against federal overreach.”

“Every state should be insulted by the last-minute amendment the US Senate adopted into the American Rescue Plan,” said Chad Heinrich, Arizona state director for NFIB. “If a state can no longer be a master of its own destiny on tax and spending matters, then we may as well resort to a central planning model run out of DC. What needs to be made clear and repeated often is that the State of Arizona’s financial health is a product of prudent fiscal management with sound policies that attract businesses and residents to live, work and enjoy life in Arizona.”

 

Newest Census Report Of Arizona’s Population Comes In Far Below Estimates

Newest Census Report Of Arizona’s Population Comes In Far Below Estimates

By Terri Jo Neff |

The 2020 U.S. Census state population results were announced Monday, and while Arizona added nearly 760,000 residents over the last 10 years, the growth was not as high as some state officials estimated. As a consequence, Arizona will not earn a 10th congressional district as many had expected.

The official increase in Arizona’s population is listed at 746,223 from April 1, 2010 to April 1, 2020.  That puts the number of residents at almost 7.16 million. What won’t be available for a few more months is the population breakdown by counties and communities.

Gov. Doug Ducey and his census taskforce pushed hard during the 2020 Census process, committing nearly $2 million to the effort which was hit hard by COVID-19. State officials previously said 99.9 percent of all households were counted.

“In 2020, countless volunteers embarked on a statewide campaign to reach underrepresented communities, resulting in AZ’s highest self-response rate in decades,” the state’s census team tweeted Monday.  “The state’s 64.1% self-response rate exceeded that from 2010 (61.3%) and 2000 (63%). 19 of the 20 land-based tribal communities in AZ had final enumeration rates of 100%.”

Many estimates by government agencies had pegged Arizona’s overall population at nearly 7.4 million going into 2020. It is unclear whether those estimates were based on overly optimistic formulas or if well-publicized concerns with how answers to census questions would be used kept some residents from being forthright.

The most immediate impact of the Census state population announcement is that those interested in representing Arizona in the U.S. House of Representatives now know the state’s allotment of congressional districts will remain at nine, each serving roughly 795,500 residents.

Each state is initially assigned one of the 435 seats in the U.S. House of Representative. The rest are then allotted based on data from the U.S. Census Bureau. Arizona came in about 80,000 residents short for being considered for another congressional seat, while Colorado, Florida, Montana, North Carolina, and Oregon added a seat. Texas added two congressional seats to its current 36.

How the boundaries of Arizona’s nine districts will look won’t be known for more than one year, as the Arizona Independent Restricting Commission must wait for the more detailed, localized census data to finalize their maps.

Long term, the biggest impact of the lesser than expected population numbers could be on Arizona’s budget, of which about 40 percent comes from federal funds. If Arizona was truly undercounted during the census process, there are some estimates it could cost the state roughly $62 million annually for every one percent undercount.