AZ Legislative Update 6-25-2021
The Arizona legislature passed most of a state budget this week, approving funding for state agencies and a large tax cut package with just Republican support. Governor Ducey will sign the bills early next week, just in time for the start of the new budget year on July 1.
The $12.8 billion budget package includes many of the funding priorities that were first introduced a month ago, but House and Senate Republicans changed key provisions of the tax cuts and policy items to get all the members of their caucuses on board with the proposals.
The bills will turn Arizona’s multi-tier income tax rates into two rates: 2.55% for individuals who make up to
$27,272 in taxable income and $2.98% for individuals who make more than that amount. (The income level doubles for those who file as married couples or heads of household.) Those rates could change, however, if Arizona’s economy continues to grow. The budget includes “triggers” that automatically reduce the tax rates further if the state’s bank accounts reach specific funding levels. If tax dollars ever bring in more than $13 billion a year, the income tax rate will drop to 2.5% for all income levels. (Click here to see what the new laws could mean for your income level.) The budget eventually increases the cities’ share of state income taxes from 15% to 18% to offset cuts to the overall amount of their income tax revenues.
The tax changes also account for the Proposition 208 surcharge for education that voters approved last year. The budget sets a top rate of 4.5%, which is lower than the current maximum of 6.48% for individuals who make more than $250,000 a year. The budget uses state funds to backfill the more than $1.8 billion this would cut from the voter-approved funding for the next three years.
Governor Ducey and legislative Republicans hailed the changes as a big win that will cut taxes for all Arizonans and boost Arizona’s economy; legislative Democrats blasted the cuts as a disproportionate benefit for the wealthy and a missed opportunity to add funding for education and low-income assistance programs.
These arguments played out across hours of passionate – and sometimes angry – debate. In the House, Republicans dramatically cut the time for debate in clear retribution for the Democrats’ walkout that delayed budget votes earlier in the week. Partisan divides have become notable chasms in the relationships between House members, and there’s an unusual level of personal animosity between legislators who started the year with hopes for bipartisan cooperation.
The divisions aren’t just between political parties, however, and disagreements between Republicans delayed final votes on some parts of the budget. Senate Republicans inserted an amendment that would expand the state’s Empowerment Scholarship Account (ESA) program – a proposal that failed to advance earlier this year due to bipartisan opposition in the House. That opposition continues, so House and Senate Republicans will have to renegotiate the package of education policy changes that are a part of the budget plan. The dynamics have changed now, though, since those conversations will not block funding for state agencies in the new fiscal year that begins next Thursday.
Intraparty disagreement also unfolded in the Senate, where most Republicans joined with Democrats to override one of the vetoes Governor Ducey issued to force lawmakers to focus on the state budget. The vote was symbolic since the vetoed bill just corrected technical errors in state law and did not make any policy changes. It was a reassertion of the legislature’s role in state government, fueled by bipartisan frustration about months of unilateral executive actions on COVID-19 and public policy. “I hope that today [our constituents] realize that, when it is important to us, we can and will exercise our power to make sure that what is done represents everybody,” stated Senator Tyler Pace (R-Mesa), one of the leaders of the veto override.
If the House has bipartisan support to overturn the Governor’s veto, as well, it will be only the second time in Arizona history the legislature has done so. (In 1981, legislators overturned Governor Babbitt’s veto of a political redistricting plan.) Governor Ducey’s office dismissed the Senate’s vote as “pretty procedural in nature,” and said the Governor remains focused on the success of the budget and tax cuts he negotiated with Republican legislators.
What’s Next
The House reconvened today to debate their version of the education policies that should be included in the state budget package and to start voting on other policies unrelated to the budget. The Senate returns Monday.
Though some legislators hoped to continue the legislative session until they received a report from the Senate’s recount of 2020 Maricopa County ballots, most lawmakers say they’re ready to wrap up the session and go home for now.
With few bills awaiting final votes, the legislature is poised to end the 2021 regular legislative session very soon.
Budget Update: Funding Priorities
The budget outlines the state’s ongoing spending and one-time investments, allocating resources to state agencies and priorities. Click here for a full list of appropriations, which include funding for:
- Courts & Criminal Justice
The budget provides funding for Department of Public Safety body cameras, a wide range of criminal justice and probation programs, and a task force to study Arizona’s increase in retail theft. It creates a mental health transition pilot program for up to 500 prison inmates, allows counties to create coordinated reentry planning services programs to provide behavioral health and substance abuse treatments, and increases resources for border security.
- Economic Development
The budget deposits $50 million into the Arizona Competes Fund, creates a four-year pilot program to promote special events through the Arizona Commerce Authority, and provides $300,000 to study southern Arizona tourism promotion.
- Environment
The budget allocates resources to wildfire suppression and prevention, expands the personnel dedicated to water adjudications, creates a tax credit for individuals and corporations that process forest products, and provides more funds for Arizona State Parks and the Arizona Heritage Fund. It invests $160 million in a Drought Mitigation Revolving Fund and $40 million in the Water Supply Development Revolving Fund.
- Government
The budget allocates millions of dollars for salary increases to state employees in specific agencies – including those related to courts, criminal justice, and water resources.
- Health & Human Services
The budget includes funding to increase rates for a variety of providers who care for foster children, the elderly, or individuals with disabilities, and invests in newborn health screenings and high-risk perinatal care. It adds funding for medical student loan reimbursements, services to youth who are homeless, and research on Alzheimer’s Disease.
- Higher Education
The budget provides some new funding for community colleges and state universities, which were at the top of the list of priorities for several lawmakers. In addition to operating funding for universities, the legislature directed $7.5 million a year toward the Promise Scholarship Program for university students and $25 million a year toward the Arizona Board of Regents’ New Economy Initiative.
- Infrastructure
The budget invests hundreds of millions of dollars in transportation projects around the state, pays off almost $1 billion of state debt, provides funding to renovate the old Capitol building that houses the Capitol Museum, and designates $10 million for unspecified priorities at the House and Senate.
The budget includes formulaic funding for schools, invests in specific school building and renewal projects, and allocates funding for specific education priorities, including:
- $50 million a year for Group B weight special education funding.
- $6.9 million for literacy and dyslexia programs.
- $5 million a year for CTED students to enroll in a fourth year of the programs.
- $1 million a year for gifted student programs.
- $30 million for a pilot project to issue K-12 transportation grants.
- $1 million for civics education this fiscal year.
- $850,000 for the procurement of a gifted student assessment this fiscal year.
- $5 million for the Extraordinary Special Needs Fund this fiscal year.
- Tax Cuts
In addition to the individual income tax reductions, the budget adjusts some tax credits and deductions. It reduces the tax assessment for commercial properties from 18% to 16% over four years.
- Technology
The budget sets aside funding for a National Guard Cyber Response Task Force at the Arizona Department of Emergency Management, provides $5 million for research on blockchain and wearable technology, and invests in IT projects in a variety of state agencies.
The budget increases Arizona’s unemployment insurance benefits from $240 a week to $320 a week beginning next summer and allows individuals to earn up to $160 a week without losing their unemployment benefits (currently, unemployment benefits end if someone earns more than $30 a week). It reduces the time someone can receive unemployment from 26 weeks to 24 weeks if the state’s unemployment rate is less than 5% and increases fraud prevention measures the Arizona Department of Economic Security must implement in the unemployment insurance program.
Budget Update: Policy Changes
Lawmakers used the budget bills as a chance to enact a wide range of policy changes – some of which failed to pass in separate bills earlier this year. Among those policy changes are new laws related to:
• COVID-19
The budget bans local governments from adopting COVID-19 mitigation policies that impact schools, churches, businesses, or other private entities – including mask mandates, curfews, and mandatory closures. Counties, cities, and towns are authorized to enact those mitigation policies only in buildings they own.
It prohibits schools from requiring a COVID-19 vaccine (or any other immunization with FDA authorization for emergency use) for school attendance. It bans state and local governments from establishing COVID-19 passports or COVID-19 mandates and blocks those governments from requiring that businesses obtain proof of vaccination status for entry. It requires employers to provide reasonable accommodations for most employees who do not get a COVID-19 and prohibits enforcement of any COVID-19 vaccine passport law or ordinance within Arizona.
The budget also incorporates Governor Ducey’s recent executive order on university COVID-19 mitigation policies into statute, prohibiting public universities and community colleges from mandating COVID-19 vaccines or other mitigation strategies for student attendance in most circumstances.
The provisions go beyond the COVID-19 virus, as well: They allow anyone to have a religious exemption from a mandatory vaccination during a state of war or emergency where vaccinations are ordered to prevent smallpox, plague, viral hemorrhagic fevers, or similar disease.
• Elections
The budget includes a wide range of changes to election law, including a legislative committee to evaluate the Senate 2020 ballot recount, a bigger role for the Arizona Attorney General, closer legislative ties to the voter registration database, and new “election integrity” measures mostly associated with some Republicans’ concerns about the 2020 election. It requires the Arizona Auditor General to do an audit to determine what private, nongovernmental grants were used in Arizona’s 2020 elections and Maricopa County’s voting systems.
• Local Government
The budget increases the legislators’ ability to require the Arizona Attorney General to investigate the constitutionality of the policies, rules, or regulations of any state agency or local government entity. (This is an expansion of the current statute, which allows legislators to demand an Attorney General investigation into actions taken by governing bodies of cities, towns, and counties.)
• Nursing Homes
The budget overlooks the Governor’s earlier veto of the Board of Examiners of Nursing Care Institution Administrators and Assisted Living Facility Managers, instead altering Board membership and continuing it until March 31, 2022. It requires the Arizona Department of Health Services, as well as the Board, to approve any licenses and certifications. The budget also establishes a study committee to recommend how to best oversee nursing homes and assisted living facilities.
• State Emergencies
None of the many bills related to state emergency declarations made it through the full legislative process this year, so the legislature incorporated those provisions into a budget bill about the operations of state government. The amendment limits the duration of a Governor’s state of emergency declaration and asserts a much more active role for the legislature in future emergencies.
The Governor agreed to this change because the budget also bans local governments from enacting their own COVID-19 mandates – one of the Republicans’ arguments for keeping the statewide policy in place. Some legislators say the Governor also pledged to repeal the COVID-19 emergency declaration soon, once the state is confident it will receive $450 million in federal emergency funding.
In the Elections
Former Corporation Commissioner Kris Mayes and Representative Diego Rodriguez joined the Democratic race to be the next Arizona Attorney General. Representative Shawnna Bolick (R-Phoenix) is the third lawmaker to join the Republican race for Secretary of State.
Governor Ducey wants the U.S. Census to release census data soon. This group hopes to collect enough signatures to ask voters to overturn the legislature’s action and keep the Permanent Early Voting List in statute.
There are more Senate e-mails about the recount of Maricopa County’s 2020 ballots. Here’s why the Republican Maricopa County Recorder thinks it’s important to speak out about the recount. This report outlines concerns about the recount process.
In the Courts
The Arizona Senate thinks it should be exempt from the state’s public records laws. The Arizona Attorney General wants the U.S. Supreme Court to allow him to defend an earlier federal rule that considered economic possibilities in immigration decisions. The Arizona Supreme Court explained why it kicked Kanye off the ballot last year.
In the News
This Arizona hero left a legacy. The federal government wants to do more to curb gun violence. The CDC extended the national eviction moratorium, which has impacted a lot of Arizonans. Some Republican governors are responding to Governor Ducey’s request for law enforcement assistance at the U.S.-Mexico border. The state gave $2 million to reopen a Tucson water treatment plant. Enrollment in colleges and universities is dropping. This Arizonan got a new job. There are a lot of wildfires in Arizona – here’s how they get their names. This partnership wants to help with water conservation.
On the Bright Side…