Tucked here and there among the $12.8 billion budget package signed into law last week by Gov. Doug Ducey are numerous water-related funding opportunities for rural counties across Arizona.
Among the budget items in SB1823, the general appropriations bill, are allocations of $3 million for water project assistance grants to cities and towns that provide water in Navajo and Apache counties. Another $2 million of water project assistance grants are available to irrigation districts in Cochise and Graham counties.
Those funds are in addition to $160 million moved from the state’s general fund on June 30 to the Drought Mitigation Revolving Fund. Of that, up to $10 million may be used for grants which facilitate the forbearance of water deliveries by June 30, 2025, while another $10 million may be used for Arizona State Land Department grants related to water use.
Ducey also signed into law changes to Arizona’s tax code which allow water utilities regulated by the Arizona Corporation Commission (ACC) to deduct contributions toward construction from their Arizona gross annual income. This can be particularly beneficial for companies which serve smaller communities where it can be difficult to spread out the cost of construction projects.
In addition, the Legislature passed a bill sponsored by Rep. Gail Griffin (R-LD14) to provide $40 million for the Water Supply Development Fund for assistance to water providers for improvements to water infrastructure and projects located in rural communities.
The ACC is encouraging owners and operators of small water utility companies which are regulated by the Commission to take advantage of the funding, which can go as high as $1 million per project, to improve their water systems and benefit customers. There is also an option of a $100,000 grant which does not require repayment.
Eligible water utility companies must serve at least 15 customers or at least 25 people for at least 60 days of the year, be located outside of an active management area, and be within a county with a population of less than 1.5 million people. The funding can be used for myriad purposes, including acquiring water or water rights; purchasing or refinancing debt related to water supply development projects; conveying, storing, or recovering water; reclaiming or reusing water; capturing or controlling stormwater; and replenishing groundwater.
Utilities can apply for the WSD Fund loans or grants to the Arizona Water Finance Authority.
“I encourage every regulated water utility that qualifies for these funds to take advantage of them as expediently as possible for the benefit of their customers,” ACC chair Lea Marquez Peterson said last week.
House Speaker Rusty Bowers (R-LD25) acknowledged the importance of the water funding allocations in a post-budget signing statement, calling the funding for infrastructure projects a “key to securing Arizona’s future, and one of our highest priorities.”
When the State House voted Friday to pass HB2898, the K-12 Education budget bill, it marked the end of a grueling process that resulted in passage of a $12.8 billion budget package for Fiscal Year 2022.
A key provision of HB2898 is the establishment of new academic standards for K-12 students in the area of civics. There was also funding for a number of special programs for students and a variety of new rules for school board and school districts.
But much of the debate about the bill centered on whether more money should have been allocated.
Rep. Aaron Lieberman (D-LD28) acknowledged HB2898 includes “a lot of money,” but he argued it was not enough. Lieberman noted 2,000 classrooms across the state do not have assigned, permanent teachers, something he said could be remedied by spending one-fourth of the state’s $2 billion surplus.
“It’s clear now more than ever we need every dollar,” Lieberman said in voting against the bill.
However, Rep. Bret Roberts (R-LD11) questioned why more focus is not on the decisions of school boards who spend the billions of dollars provided each year through federal funding and from the legislature.
“Why are we not asking the school boards why they’re not giving the money that the legislature sends to the school boards to the teachers?” he asked on the floor. “Why are we not holding the school boards responsible for the money that we send them to give to the teachers? When are the teachers going to hold the school boards responsible?”
Rep. Walt Blackman (R-LD6) expressed similar frustration, noting that many of the chamber’s 24 Democrats who were present Friday complained the funding in HB2898 was too low. So they simply voted against the bill.
Blackman acknowledged K-12 funding in the bill “may not be enough” but said those representatives who vote green -yes- are demonstrating they “support education by action.” Which is why he was disturbed to see so many red -no- votes.
Democrats may give myriad reasons for what is wrong in HB2898 or what could be done differently, he said, “but if we are really dedicated to teaching our children K-12, and that is a non-partisan issue, then why do we have red votes?”
“This can’t be an issue where we are upset and we take our marbles and we go home because we don’t have enough marbles to play,” Blackman said, adding that all of the votes should be green because “nothing is perfect.”
The House K-12 Education bill will now be transmitted to the Senate, which last week passed its own education bill. There is now one significant difference between the bills which will need to be reconciled.
That difference involves a major expansion of the state’s Empowerment Scholarship Accounts (ESAs) which is currently available to about 250,000 students. The Senate’s budget bill added two eligibility criteria which would make ESAs an option to 700,000 students, including children from Title 1 schools where at least 40 percent of the families are considered low-income.
However, three Republicans in the House voted against an amendment which would have included the ESA expansion in HB2898. The amendment died without those votes and the three Republicans also voted against a later attempt to insert the failed amendment into the main bill just prior to final voting.
Sen. Paul Boyer (R-LD20) is a teacher and a major supporter of ESA legislation. He took to Twitter after the House vote to express his disappointment with the ESA decision.
“Meanwhile, minority students are 6 to 12 months behind their white counterparts. This defeat of ESAs for Title I students makes sure those same students never leave the school that’s failing them,” Boyer tweeted.
In its longest workday of the session, some legislators debated various budget bills late into the evening after 11 bills cleared the Appropriation Committee in each chamber earlier in the day.
At stake is how to divvy up Arizona’s forecasted budget surplus of $1.5 to $2 billion while transitioning the state to a flat rate income tax and fine-tuning a $12.8 billion budget spending plan released Monday without tweaking it too much.
Many House Representatives believe the budget will be voted on no later than Friday afternoon, allowing lawmakers to leave for the long Memorial Day weekend. But as of Tuesday night, the 16 Republican Senators appeared nowhere near being on the same page, which is critical as all their votes are needed to pass the budget unless a few Democrats can be enticed to cross the aisle.
Masks in public schools turned out to be a divisive issue for many legislators after it was revealed that wording in the Education budget bill would allow schools to have the final say on wearing of masks. That led to a pushback from Sen. Michelle Ugenti-Rita as well as a sharply worded rebuke from Rep. Joseph Chaplik on Twitter.
“This is completely unacceptable and will not get my vote. In fact, I will not agree to any budget that doesn’t strip the power for mask mandates from school districts. Enough is enough,” Chaplik tweeted.
After much debate it appears as of press time that the mask language will be dropped.
Another highly debated issue involved what role the legislature should have in regulating vaccine passports, which some lawmakers refer to as “show me your medical records.” There has been a split among legislators on where, when, and why the vaccine passports could be allowed.
Currently Gov. Doug Ducey has an executive order in place which prohibits proof of COVID-19 vaccinations as a condition to enter state and local government buildings or to receive public benefits. His order also bans private businesses which conduct services on behalf of state and local governments from implementing a vaccine passport policy.
However, the question of whether universities, retail businesses, transportation companies, and large social venues can set some threshold of vaccination documentation remains unsettled. As is whether the legislature should weigh in on private employers demanding employees to be vaccinated to keep their jobs.
Other debated spending in the budget bill includes unemployment tax payments, low-income housing credits, and an increase in impounded vehicle fees, all of which would impact lower- and middle-income Arizonans the most.
Meanwhile, other legislators are concerned about the state’s long-term fiscal health and want to see Arizona’s debt addressed with some of the existing budget surplus, along with increasing the Rainy Day Fund and upping funding for the state’s universities. And rural lawmakers continue to push for increases in legislative per diems, which have not been adjusted in years.
One large ticket item already in the bill is $50 million toward the cost of widening a dangerous section of Interstate 10 between Casa Grande and Chandler. That funding was necessary to ensure an “aye” vote from Sen. TJ Shope.
Rep. Jake Hoffman said Tuesday he supports the budget’s flat tax proposal, but was still a no vote until much “unnecessary” spending was dumped. And while the idea of a flat tax is popular with Republicans, there still is not much consensus on the details.
There were also talk of Sen. Kelly Townsend seeing her long-sought election bills accounted for in some manner within the budget, in order to guarantee her vote. Instead, a multi-item amendment has been introduced to Townsend’s SB1241, meaning the bill will be address separate of the budget.
Republicans have only a two-vote majority in each chamber, giving each of the caucus’s 16 Senators and 31 Representatives an above average amount of leverage in budget negotiations. It is unclear whether sufficient Democrat-friendly priorities have been included in the budget bills to attract a few votes from the blue side in the event Republicans like Hoffman and Chaplik don’t come onboard.
After months of meetings, crunching numbers, and compromises, the group of legislators and state staff tasked with hammering out Arizona’s $12 billion budget could be ready to roll it out this week.
Rep. Regina Cobb (R-LD5) told AZ Free News that after numerous meetings this session the fine-tuning of the budget package “is down to the last few items.” As a result, legislators could be presented with the package in a few days.
The two most anticipated features involve whether Arizona’s current multi-rate income tax structure will transition to a flat tax rate, and what types of immediate tax cuts will be divvied out of the state’s budget surplus of between $1 billion and $2 billion.
Cobb, who chairs the House Appropriations Committee, said tax relief via tax cuts was on top of the House’s budget wish list heading into budget negotiations, and now that all sides have come to “a general agreement on how much there is to spend” that income tax cuts for all Arizonans are part of the budget.
The other priority was a proposed flat tax which could drop Arizona’s four income tax brackets (which range from 2.59 percent to 8 percent) into one flat tax. According to Cobb, that plan is would get all Arizonans to a 2.5 percent income tax by 2024. A flat income tax has been supported by Gov. Doug Ducey although he had not proposed a rate plan.
Cobb has been involved in the budget or appropriation side of the legislature for five of the seven years she has been in office. Normally the House and Senate hammer out their differences and then bring the plan to the Governor’s Office. This year, however, the budget process differed in that the executive side became involved earlier.
“It was clear our philosophies between the House and the Senate were different, so we made it a three-way negotiation sooner than expected,” Cobb said, adding that the “majority of the negotiating and give-and-take is complete.”
Among those working with Cobb on this year’s budget is House Majority Leader Rep. Ben Toma, as well Sen. David Gowan, the chair of the Senate Appropriations Committee, and Sen. J.D. Mesnard, chair of the Senate’s Commerce Committee. A few issues remain, which is not unusual at this stage.
“The last items are always the most controversial items,” Cobb said.
Ducey introduced a budget for consideration by the legislature when the session started in January. The governor’s budget included discretionary spending and revenue changes necessary to enact a balanced budget, with a forecasted $350 million surplus.
That surplus prediction continued to exponentially grow every few weeks. In mid-April, the Joint Legislative Budget Committee and its Finance Advisory Committee of public and private sector economists pegged the surplus at $1 billion, while some economists put it closer to $1.5 billion or even $2 billion.
The budget discussions are also addressing the impact of Proposition 208, which mandates a 3.5 percent income tax surcharge for thousands of Arizonans, many of whom are small business owners. Those subject to the surcharge are being “walloped” by the tax and need relief, according to Scot Mussi, president of the Arizona Free Enterprise Club.
“We currently have an uncompetitive tax rate structure, which needs to be a priority for the legislature,” Mussi told AZ Free News. “We need a simpler tax code, we need to correct the damage from Prop 208, and we need to push for a $1 billion tax cut to return that money to the taxpayers.”
Another priority, particularly for business owners, is for Arizona’s income tax code to better conform or match up with the federal tax code. This limits the potential for double taxation of income, Mussi explained.
Mussi also noted none of the tax cuts or additional spending due to the surplus will impact Arizona’s rainy day fund, which was established in 1990 as a reserve of funds the state could turn to during economic downturns.
Once the budget bills pass the House and the Senate, Ducey will have the option to sign them, veto them, or let them take effect without his signature. He also has authority to do a line‐item veto of appropriations, although any veto can be overridden by a two-thirds vote in each chamber before adjournment.
But how long it will take for the budget to get approved is not very clear. Traditionally, the legislature will sine die after the budget is approved. Sine die marks the adjournment and end of the session without setting a date for reconvening. It also terminates any unfinished legislative business.
However, Sen. Kelly Townsend has suggested there should be no sine die in case the Senate’s election audit of Maricopa County requires some type of legislative action. She has also been critical of the fact several of her 18 election reform bills never made it out of a Senate committee this year.
It is possible Rep. John Kavanagh, as chair of the House Government & Elections Committee, will introduce strike-everything amendments to others bills in an effort to force the Senate to support Townsend’s legislation, thus potentially ensuring her vote on the budget.
None of the budget surplus being considered by the legislature involves COVID-19 funds, as Arizona is one of a handful of states in which the executive branch controls federal funds issued to the state. That means Ducey has control of his own multi-billion purse derived from federal monies.
Making matters even trickier is that approving the budget will require the support of all 16 Republican senators and 31 Republican representatives unless a Democrat or two cross the aisle. Such uncertainty means it is unclear how much time will be needed by the leadership in both chambers to be ready for a vote.
Another shadow hanging over the budget negotiations is whether Arizona will be punished by the U.S. Treasury Department if it approves tax cuts which the Biden Administration later considers were “directly or indirectly” offset by federal COVID-19 funds.
Attorney General Mark Brnovich has filed for a court order declaring part of the recent COVID-19 relief package unenforceable. That provision prohibits states from using COVID-19 federal monies to essentially underwrite tax cuts, but the language needs to be clarified, according to nearly two dozen attorneys general.
“The fact that those politically allied to enact the Act cannot even agree with each other as to what the Tax Mandate means provides powerful evidence that it is subject to multiple potential interpretations,” Brnovich argues in a lawsuit filed in March in U.S. District Court. “Indeed, the language of the Tax Mandate is patently ambiguous, and even borderline incoherent.”
The Arizona legislature failed this year to pass a bill that would have required third grade students to be held back if they failed to learn to read adequately. The unsuccessful bill uncovered some unhappy truths about the state of education.
Third grade is recognized as a critical progression point for reading proficiency. Students through third grade are taught to read, after which they are expected to read to learn. Those unable to do so suffer a lifelong handicap in today’s knowledge economy with enormous economic and social consequences.
In 2019, 60 percent of Arizona’s third graders failed to meet our own reading standards. Unfortunately, nothing really new here.
Yet this ongoing failure is largely ignored by educators. There is little sense of urgency. Almost all of the failing third graders are routinely promoted to fourth grade, as if nothing of consequence had happened.
Here’s the worst of it. These dismal scores were recorded in the year before Covid, during which teachers’ unions refused in-person instruction. There was never the least evidence that school children suffered from Covid nor spread it.
Nevertheless, teachers received full pay and benefits. Ignoring “the science”, the unions insisted their work was far too dangerous.
No matter how much their students and families suffered, they stubbornly persisted. We’ll be years assessing the educational damage caused by their intransigence. Third graders mostly losing a year of reading instruction will be especially hard hit.
Yet even under these circumstances, government educators fiercely resisted the notion of a do-over, as they had before. They claimed that holding students back would cause more to drop out and result in worse outcomes. (Harvard research suggests the opposite).
Admittedly, holding back all non-reading third graders would be logistically difficult, although the long-term benefits to students and heightened accountability for educators would be well worth it. But educators’ real objection is that thousands of students in remediation would shine a bright light on their failure to perform what is arguably their most important duty: teaching basic literary skills to students who need them the most.
American education, with achievement levels lagging behind most other industrialized nations, has badly needed an overhaul for some time. The irony is that we know how to teach children effectively.
The Success Academies in New York, KIPP schools nationwide, Arizona charter schools and others have shown that it is a lie to pretend that disadvantaged students are “ineducable.“
Thomas Sowell found that New York City charter schools achieved proficiency levels several times that of district schools housed in the same building. Tuition scholarship programs in Arizona, DC and elsewhere have provided life-changing opportunity for thousands of children who otherwise would not have been so fortunate.
But in spite of their successes, school choice programs have been met with implacable hostility from an educational status quo that sees only threats, not opportunities to better serve. Some teachers’ unions even demanded further charter school restrictions as a condition for returning from their Covid vacation.
The result has been that critical reforms have been stymied. Tuition scholarship programs and charter schools, though growing, still have waiting lists. The default option for too many students is still the failing school closest to their home.
But the Covid debacle could be the springboard to wide sweeping reforms. Parents noticed the callous disregard for their children’s welfare from those they trusted. Some parents were shocked by the pervasive ideological indoctrination in the zoom lessons they observed.
They became comfortable with homeschooling and other options that put them more in charge of their children’s education. Not coincidently, Education Savings Accounts, funds made available to parents for any educational expenses in lieu of public school attendance, have been introduced in over twenty legislatures this year.
The fallout from our failing schools is enormous. We have produced a generation too many of whom are uneducated, entitled and angry. They are enamored with socialism and disdainful of American culture, including free speech. Moreover, income inequality has been widened by the very education activists so vexed by it.
Covid is our best chance to finally open up and modernize the structure of American education. Viva la Revolución!
Dr. Thomas Patterson, former Chairman of the Goldwater Institute, is a retired emergency physician. He served as an Arizona State senator for 10 years in the 1990s, and as Majority Leader from 93-96. He is the author of Arizona’s original charter schools bill.
