Less than 24 hours after the Joint Legislative Budget Committee published the proposed budget report late Monday, infighting broke out among Arizona’s House and Senate Republicans.
Tuesday marked lengthy budget discussions in the House Appropriations Committee, but in the Senate discussions were cut off abruptly with an indefinite recess of the Senate Appropriations Committee. Effectively, public budget talks ended before they started in half of the State Capitol.
State Senator David Gowan (R-Sierra Vista) said that the House didn’t honor its agreements to pass some bills; one of those significant ones being the Arizona Board of Regents (ABOR) continuation.
“The House has decided that they will not honor the deals we created together and move things forward. I know there’s some media out there, social stuff going on, that they’re trying to pin us and maybe leverage us. But the point is here, they blew the deal,” said Gowan.
Gowan added that he wasn’t willing to call the committee together later on in the day, either. It appears that House legislators reneged on some serious closed-door talks — enough to upset him.
“It would be pretty hard for me to want to come back and help people who wish not to honor deals. In that effort, it’s just not appropriate in what just occurred, so I want that out to the world,” said Gowan.
However, State Representative Travis Grantham (R-Gilbert) contended that he’d never heard of these deals as the House Rules Committee Chairman. He criticized Gowan’s preferences as “special interest” legislation that was “fat, bloated, […] unconstitutional,” and adverse to Republican interests. Gowan didn’t reply.
“I have never discussed a deal, agreed to a deal or been part of some secretive deal to move certain Senator’s special interest bills that are fat, bloated and in some instances likely unconstitutional,” wrote Grantham. “And further, why would we invite and pay an industry, with taxpayer dollars to come into our great state when they will ban, boycott and take away major meetings, corporations and events because of our Republican majorities and sound policies? #BadIdea”
Those weren’t the only serious breaks from presenting a unified Republican front on the budget. Several individual Republican legislators vocalized dissatisfaction with the budget emphatically on social media and during committee votes.
As the majority, the GOP will have to resolve those opposed within its membership if it hopes to secure the budget’s passage before the new fiscal year begins next Friday, July 1.
Among those opposed to the budget are State Senator Michelle Ugenti-Rita (R-Scottsdale). She asserted that the budget wasn’t fiscally responsible in the face of a looming recession. Ugenti-Rita scorned provisions of the bill as “pet projects” for fellow members.
That contradicted how State Representative Regina Cobb (R-Kingman) characterized the budget during the House Appropriations Committee on Tuesday. Cobb said that the proposed budget bills would afford the state with an 8 to 10 percent cushion — enough to “weather the storm” of a pending recession, asserting repeatedly that paying off the pension debt and rollovers would remove troublesome burdens in coming years.
“Are we going to flatline tomorrow or July 1? Absolutely not, but we’ve projected it to be fiscally conservative,” said Cobb. “I think if we’re going into a recession, we’re paying off a lot of debt that could be hanging over our heads during a recession.”
State Representative Jake Hoffman (R-Queen Creek) also opposed the budget. He declared that the budget would only worsen an impending sustained recession and current, serious economic destruction. Hoffman criticized the raises to state employees and judges of up to 15 percent. Although Hoffman was the only Republican committee member to vote against the bill, the legislator said that the budget doesn’t reflect the majority’s platform.
“Everything in [our constituents’] lives are going up, and they’re not getting raises right now. If they are, they’re under the inflation rate,” said Hoffman.
Arizona Free Enterprise Club, a free market policy and advocacy organization, asserted that extraneous funding for agendas contrary to the interests of Arizonans were sprinkled into the budget. In a statement to AZ Free News, President Scot Mussi declared that the budget largely fulfilled Democrats’ wishlist.
“The proposed budget deal includes hundreds of millions in new spending, subsidies for Hollywood liberals to make movies, tax hikes for a Green New Deal transit plan in Maricopa County and special interest pork to buy Democrat votes,” said Mussi. “We should be working toward a budget that has full Republican support, not a Build Back Broke budget supported by Democrats.”
By and large, Democrats focused their comments Tuesday on lamenting the budget’s K-12 spending. Some accused the budget’s design as a “shell game.” Several noted that they didn’t like the idea of funding more border security.
One of the most vocal opponents of the budget, State Representative Kelli Butler (D-Paradise Valley), called the ongoing revenue calculations “irresponsible” during committee. Butler also said that she and a majority of Arizona voters wanted $1 billion for K-12 education. Butler accused the budget of shell games related to taxation that made education funding more vulnerable.
Despite the ongoing economic turmoil and near-universal expectation of a recession, Butler asserted that the economy was “thriving.” Butler also took issue with the fact that she was still getting briefings by midnight and memos from staff at one am early Tuesday, arguing that no legislators had time to figure out what’s all in the budget.
Present at the State Capitol were educator activists with the Arizona Education Association (AEA) rallying for more teacher pay using the $5.3 billion surplus.
Those for the budget praised it for getting more things right to address the state’s current needs. One Democrat, State Representative Cesár Chávez (D-Maryvale) signaled support for the budget, pointing out during committee that the legislature had a little over a week before its deadline for the budget hits. He concurred with his Democratic peers that K-12 education needed a “true, historic investment,” but that he had a responsibility to make the budget work ahead of the deadline.
State Representative Michelle Udall (R-Mesa) offered a list of positives within the budget solving statewide problems: over $1 billion to solve water supply problems; over $1.6 billion overall increase in K12 spending, which meted out to $750 per pupil or a $23,000 increase per classroom; over $1 billion in debt payoff in unfunded liabilities and pensions; over $1 billion increase in public safety (police, fires, courts); and over $500 million to increase health care like in diabetes management training and postpartum care.
On Wednesday, Governor Doug Ducey signed HB2492, which requires individuals to provide proof of citizenship when registering to vote. The law most heavily impacts federal-only voters: federal law doesn’t require proof of citizenship when voting in federal elections. In the 2020 election, there were over 11,600 Arizonans who didn’t provide proof of citizenship, and state legislators reported that the current numbers were even higher: around 36,000, according to State Senator Warren Petersen (R-Gilbert). In 2018, there were 1,700 registered voters without proof of citizenship.
In a statement to AZ Free News, former Arizona Supreme Court Justice Andrew Gould commended Ducey for signing the legislation. He predicted that the law would improve voter turnout: the opposite of what the bill’s opponents claimed it would do.
“I want to thank Governor Ducey for signing HB2492. This new law, which requires proof of citizenship for state and federal elections, provides a critical protection for election integrity in Arizona,” said Gould. “This important piece of legislation, like all common-sense elections laws, will boost voter confidence and increase voter participation in Arizona.”
The Democratic Party’s Russiagate hoax lawyer, Marc Elias, pledged to sue Arizona over the law. Elias specializes in election litigation; he’s intervened in nearly 330 elections-related cases following the 2020 election, 150 of which he’s won. This week, the Washington Examiner reported that the Federal Election Commission (FEC) fined the DNC $105,000 and Hillary Clinton $8,000 for failing to accurately report how they funded the sole instigator of the Russiagate hoax, the Steele dossier. Clinton and the DNC together paid over $1 million to Elias’ law firm, Perkins Coie, for the opposition research firm that compiled the dossier, Fusion GPS. The DNC and Clinton claimed their combined funds were for legal services, not opposition research.
Based on Elias’ latest remarks, it looks like he will make good on the promise to sue.
In a letter to Secretary of State Katie Hobbs on Wednesday, Ducey offered a history of Arizonans’ support for proof of citizenship in order to vote. He recounted Proposition 200, a proof of citizenship requirement passed by voters in 2004 but later struck down by the Supreme Court (SCOTUS). Ducey also dispelled rumors that those who registered to vote without proof of citizenship prior to this bill’s enactment would have to re-register to vote.
“Election integrity means counting every lawful vote and prohibiting any attempt to illegally cast a vote,” wrote Ducey. “[This bill] is a balanced approach that honors Arizona’s history of making voting accessible without sacrificing security in our elections.”
In response, Hobbs claimed the legislation was “illegal.” She noted that the law would cause “costly litigation,” potentially alluding to Elias’ threats. Hobbs criticized Ducey’s latest efforts as a failure, a day after her signature-gathering system crashed while Maricopa County Attorney candidates attempted to submit signatures before their deadline in just a few days’ time. Those candidates need over 4,000 signatures to qualify for the ballot.
State Representative Jake Hoffman’s (R-Queen Creek) controversial proof of citizenship for voting bill passed the Senate on Wednesday along party lines. HB2492 now heads to the governor for final approval. The legislation requires that individuals provide proof of citizenship when registering to vote in the state, and further requires election officials to confirm with all available government databases that the applicant is an American citizen.
The bill advanced steadily through both the House and the Senate, moving out of Senate committee less than two weeks ago, shortly after it was passed by the entire House a few weeks before that. The legislation didn’t advance without pushback, however. Community activists attempted to stall the bill during its consideration by the Senate Judiciary Committee, forcing a recess with their antics such as shouting down the legislators and shouting, “Shame!” repeatedly after the bill passed.
In a statement to AZ Free News, Arizona Free Enterprise Club President Scot Mussi was hopeful that Governor Doug Ducey would sign the bill. Mussi applauded the legislature for passing a bill that aligned with the state and federal constitution, forecasting that the bill would prevent bad actors from interfering with elections.
Senate Democrats had a different perspective of the bill: they claimed that the legislation would force numerous Arizonans to register to vote again. They also claimed that the bill violated federal election law.
In regard to the constitutionality claim, Arizona Free Enterprise Club Deputy Director Greg Blackie explained during the Senate Judiciary Committee hearing that the 2013 Supreme Court ruling determined that the National Voter Registration Act didn’t stop states from denying an applicant’s registration based on information that proved the applicant’s ineligibility. Under this bill, that would mean proof that an applicant isn’t a citizen.
On Thursday, the Arizona Supreme Court ruled that Proposition 208 (Prop 208), the voter-approved increase on income taxes to fund public education, was unconstitutional and remanded to lower court. If that trial court determines that Prop 208 exceeds the constitutional spending limit, then Prop 208 would be killed. Chief Justice Brutinel authored the opinion.
The case, Fann, et al. v. State of Arizona, et al., challenged one major provision of Prop 208 and the circumstances of its approval.
First, the case questioned how Prop 208 exempted itself from the Arizona Constitution’s provisions on tax revenue spending caps, or the Education Expenditure Clause.
Brutinel ruled this aspect of Prop 208 unconstitutional. The chief justice made sure to note that this ruling rendered the other aspects of Prop 208 unworkable and unseverable. Meaning, no part of Prop 208 is enforceable if the trial court concurs with the Arizona Supreme Court’s opinion.
“We hold that the direct funding provision does not fall within the constitutional definition of grants in article 9, section 21 of the Arizona Constitution, and Prop. 208 is therefore unconstitutional to the extent it mandates expending tax revenues in violation of the Education Expenditure Clause,” wrote Brutinel. “Likewise, the remaining non-revenue related provisions of Prop. 208 are not separately workable and thus not severable.”
Second, the case challenged tax impositions made by voter initiative. The plaintiffs cited the Arizona Constitution’s Tax Enactment Clause, which stipulates that tax changes must be approved through a two-thirds vote by the state legislature.
The court disagreed with this assessment.
“Additionally, we hold that Prop. 208 does not violate article 9, section 22 of the Arizona Constitution (‘Tax Enactment Clause’), because that clause does not apply to voter initiatives,” wrote Brutinel. “Therefore, the bicameralism, presentment, and supermajority requirements found therein are inapplicable to Prop. 208.”
The Goldwater Institute, Snell & Wilmer, and Greenberg Traurig filed the lawsuit on behalf of the 11 plaintiffs: State Senate President Karen Fann (R-Prescott); State Senators David Gowan (R-Sierra Vista) and Vince Leach (R-Tucson); Arizona House Speaker Russell Bowers (R-Mesa); State Representatives Regina Cobb (R-Kingman), John Kavanaugh (R-Fountain Hills), Steve Pierce (R-Prescott); Montie Lee of Lee Farms; Dr. Francis Surdakowski; NO on 208; and Arizona Free Enterprise Club.
In a statement, Goldwater Institute Vice President for Litigation Timothy Sandefur classified the ruling as a win.
“Today represents a major victory for the hardworking taxpayers of Arizona,” said Sandefur. “The justices made clear that the state constitution’s limits on spending—which were added to the Constitution by the voters themselves—cannot be simply ignored, as Prop. 208’s funders attempted.”
Governor Doug Ducey concurred that this ruling signaled that the end was near for Prop 208.
“There is a clear legal path to Prop 208 being knocked down entirely, it’s only a matter of time,” tweeted Ducey. “The out-of-state proponents of this measure drafted bad language, and now they are paying the price.”
Proposition 208 (Prop 208) tacked on 3.5 percent to the existing 4.5 percent income tax for individuals making over $250,000 or couples making over $500,000. Previously, Arizona’s income tax rate was capped at 4.5 percent for individual incomes above $159,000 or joint incomes above $318,000. The revenue from the income tax increase would fund a wide variety of educator salaries and programs.
About 52 percent of Arizonans voted in favor of Prop 208 last November, and about 48 percent voted against it.
Positive reactions continue to come in from business groups in response to the Arizona Legislature’s passage this week of a Fiscal Year 2022 budget package which includes more than $1.3 billion in tax cuts, $1 billion in payments toward state debt, and a transition of the state’s multi-tied income tax system to a flat rate.
The nonprofit, nonpartisan Arizona Tax Research Association called passage of the FY2022 budget “a watershed moment” for Arizona, while Scot Mussi, president of the Arizona Free Enterprise Club, commended the Legislature for passing what he called “historic” tax cuts.
“Every single taxpayer in Arizona will now get a tax cut,” Mussi said. “This is great news for the future of our great state!”
The National Federation of Independent Business, which advocates for small and independent businesses across the country, gave a shout out to the Legislature via Twitter for adopting “landmark property & income tax reforms” which support small businesses. “Your work will allow small businesses to grow our state economy and create more jobs #ForArizonans,” the message said.
On Friday, Gov. Doug Ducey issued a video statement celebrating passage of the 11 bills which make up what he calls the state’s “fiscally conservative, forward-looking budget” that starts July 1.
“Here in Arizona our economy is booming,” said Ducey, thanking House Speaker Rusty Bowers, Senate President Karen Fann, and all the legislators. “New people and businesses are moving here every day. And at the state level that’s resulted in record revenue. With this budget we’re investing those dollars in the things that matter: schools, universities, community colleges, and new roads and bridges, just to name a few.”
Ducey added that “most importantly we’re giving a bulk of the surplus dollars back to the people who earned them.”
A budget signing ceremony must wait until at least Monday when the Senate returns from recess to formally transmit the budget bills to the governor.
Meanwhile, supporters of the voter initiative known as Proposition 208 are promising a court fight over a bill Ducey is also expected to sign next week.
Prop 208 passed last November by a slim margin of 51.75 to 48.25 percent. The purpose of the initiative was to provide additional funding for public and charter school by way of a new 3.5 percent income tax surcharge for many Arizonans.
Among those subject to the new tax surcharge would be thousands of small business owners who currently report business profits on their state personal income tax return. SB1783, however, provides a small business alternate income tax as an option for those who operate as sole proprietors, LLCs, professional partnerships, and S Corporations.
Under the alternate tax, income derived from small business can be reported on a special small business income tax form. This will ensure the income is not added into personal income for purposes of calculating the amount of Prop 208 surcharge a taxpayer owes.
Critics contend SB1783 is a way to unlawfully circumvent the taxation provision of Prop 208. Proponents of the bill point to the many statements made prior to the 2020 General Election which assured business owners that “business income” would not be subject to the surcharge.