AZ Legislative Update 4-23-2021

This week brought the 100th day of the 2021 legislative session, but the session continues despite House and Senate rules that suggest legislators should wrap up their work at this point every year. There are only two more deadlines to guide the rest of the session: The 120th day, when legislators’ daily allowance decreases, and June 30, when the state must have a budget plan in place for the next fiscal year. Some legislators want to close the session in two weeks, but there’s no sign of a budget agreement yet.

The budget negotiating teams say they’re “rolling in the right direction” toward a budget agreement, but there’s still disagreement behind the scenes about whether to restructure Arizona’s individual income tax system. Supporters believe the change would make the tax system fairer; opponents say it would threaten local revenues for public safety.

While House and Senate Republicans focus on their closed-door budget conversations, the legislature’s progress on other bills is very slow. This week was consumed by lengthy, passionate debates about several controversial bills. Some advanced; others stalled.

The House and Senate both approved a revised version of a bill that sets new penalties and limits on abortions, despite Democrats’ attempt to leave the Capitol to stall a vote on the issue. A conference committee amended the bill to earn support from a key Senate Republican, but the changes did not allay Democratic opposition.

A group of Republicans pushed back against opposition to their proposals to change state election laws, but a high-profile bill that would alter Arizona’s Permanent Early Voter List failed when one Republican senator said the bill doesn’t do enough to address her concerns about the 2020 election processes. She joined with Democrats – who have opposed the bill all year – to sideline it for now.

A small number of Democrats joined with Republicans to collect more data on law enforcement’s use of force and allow courts to assign community service instead of fines for traffic violations.

Outside of all the debate, other proposals advanced with broad bipartisan support this week. A large majority of legislators advanced bills to expand access to telemedicine, minimize the number of young students who are suspended or expelled, notify voters about the outcome of an overvote, increase reporting on missing children, and study blockchain and cryptocurrency.

Priority Bills

This week, the Senate:

• Amended and unanimously approved HB 2123 (pupil suspensions and expulsions; schools), which limits when students up to 4th grade can be expelled or suspended.
• Amended and gave preliminary approval to HB 2427 (attendance boundaries; schools; open enrollment), which requires schools to accept non-resident pupils throughout the year as “grade-level” capacity allows and prohibits districts from establishing capacity levels for special education programs.
• Unanimously approved HB 2863 (ASDB; local education agencies), which designates the ASDB as local education agencies in order to restore ASDB’s ability to receive IDEA, Title and Medicaid funding.

Governor Vetoes Sex Education Bill

Governor Ducey vetoed his second bill of the session – a controversial proposal that would have required parental permission for sex education that included gender identity, sexual orientation, or HIV/AIDS. The Governor said the bill was “overly broad and vague” and instead issued an executive order that requires the State Board of Education to give parents more involvement in sex education curriculum.

The Governor approved the other bills that reached his desk and signed another 41 bills into law this week. He has enacted 274 new laws so far in 2021. Another 33 proposals now await his approval or veto.

What’s Next?

Next week is the 16th week of the session, and there are almost 300 bills still awaiting final action in the House or Senate. Legislators will continue to hold abbreviated floor sessions and votes to slowly consider those bills while they wait for details on a budget agreement.

Budget Update: There’s Still A Surplus

New details on Arizona’s tax revenues from the legislative budget office this week show that overall, the state is still on track to exceed economists’ predictions and have a comfortable budget surplus this year. During March, the state took in $638.4 million – 3.7% lower than last March because of income tax refunds, but still $126.4 million above what was expected.

A variety of factors drove the higher revenues:

• Arizonans are still spending money.

Sales taxes went up by 11.2% – partly because of online sales and home and garden supplies, and partly because people spent more in bars and restaurants for the first time since the pandemic started. Arizonans increased their spending on food and liquor sales to use at home, as well.

Taxes on construction projects grew, but at a slower rate. Economists say it’s too early to tell whether the dip in construction is temporary or caused by a shift in the economy.

• Business is booming. Income taxes on corporations went up almost 60% during March – the highest this category has been in March since 2016. Corporate income taxes are up by 18.4% compared to last year. Individual income tax withholdings increased, as well, signaling optimism about overall earnings during 2021.
• The state is measuring marijuana taxes. State agencies have started tracking more data about the sale of marijuana products. Arizona received $2.1 million in taxes from medical marijuana sales last month and $1.3 million from recreational marijuana sales.
• People are buying Lottery tickets. In March, Lottery ticket sales totaled $130.4 million – 57.9% higher than last March. Arizonans have spent $1 billion on Lottery tickets so far this year.

There are still some areas of the economy that aren’t thriving, and the impact plays out in a variety of measurements:

• The state unemployment rate is 6.7% – a slight decrease from 6.9% in February, but still higher than it was before the pandemic.
• AHCCCS enrollment grew by 0.7% this month and is almost 15% higher than it was a year ago. Enrollment is up in all programs except long-term care and services for individuals with developmental disabilities – those populations have decreased by 3.2% since last year.
• The number of Arizonans receiving TANF Cash Assistance is 12.2% higher than it was a year ago, and Supplemental Nutrition Assistance Program (SNAP) participation great by 25.4% since last spring.
• Hotels are still struggling because tourism hasn’t fully recovered, and the number of people flying through Phoenix Sky Harbor Airport is almost 53% lower than it was before the pandemic. These industries are seeing some increases, though.

State economists will continue to watch all the signals that measure the health of Arizona’s economy. While much of the current budget surplus is one-time funding from federal aid, it’s clear that the state overcame big challenges over the last year and is poised to continue to do so. The General Fund balance is 18.8% higher than it was last year, in part because the delayed tax deadline bumped income tax payments to this fiscal year, but also because the economy is stronger than it was last year.

As legislators consider how to allocate the state’s funding balance, they will also debate how to continue to grow Arizona’s economic success and ensure their budget decisions don’t turn the surplus into a deficit in the years ahead.  

Governor Issues New COVID-19 Executive Orders

The growing debate on vaccine passports led Governor Ducey to issue an executive order on the topic this week. His order prohibits state and local governments – or businesses that contract with those governments – from requiring COVID-19 vaccine documentation for service or access to facilities.

He also rescinded a statewide requirement that students wear face masks in schools, asking school leaders to determine how to implement public health guidelines for their students. Superintendent of Public Instruction Kathy Hoffman believes the Governor’s decision will cause tension between schools and parents.

In the Election

Senate Republicans’ review of the 2020 Maricopa County election is ready to start. Democrats asked a judge to stop the effort. You can watch what’s happening.

In the Courts

The Arizona Supreme Court heard arguments in a case that can decide whether the voter-approved education funding under Proposition 208 can be spent. The Court of Appeals said the Attorney General filed his challenge to university property development too late. The Pima County Attorney wants to delay the Attorney General’s efforts to restart executions.

In the News

U.S. Census data is coming soon, and it will have a big impact on Arizona’s congressional districts. There are more COVID-19 vaccination sites in Arizona, but demand is dropping. Legislative Republicans joined Governor Ducey in southern Arizona to support his decision to send the National Guard to the Arizona-Mexico border. The First Lady visited the Navajo Nation. Superintendent of Public Instruction Kathy

Hoffman announced $21 million to fund the two-year-old waiting list of schools that applied for counselors and social worker positions under the School Safety Program. The Arizona Attorney General said the Governor has authority to change gaming compacts, despite one lawmaker’s objections. Some new laws will provide more tax data. The state held a lottery to select new marijuana licensees in rural Arizona. ASU wants to combat disinformation. The federal government will keep providing free school lunches. This survey says most Arizonans are following the hands-free driving law.

On the Bright Side…

Arizonans agree on a lot, and Congress unanimously supports Officer Clarence.