State pushes $10B budget; some may pay more for teacher pay
PHOENIX — State lawmakers are moving to adopt a $10.4 billion spending plan for the coming fiscal year, balancing the books — and finding the dollars for a teacher pay hike plan — at least in part by passing along expenses to some local taxpayers.
The budget is built on the premise that additional auditors at the Department of Revenue and other tax enforcement measures can bring in an additional $55 million. It also relies on getting an extra $35 million out of hospitals, saving $52 million in prescription drug costs and taking $20 million from a consumer fraud settlement that Attorney General Mark Brnovich is negotiating with Volkswagen.
And there’s something else: Taxpayers in 17 school districts will pay more in local taxes through an accounting maneuver on desegregation programs.
The two districts most affected are Tucson and Maricopa unified school districts. But a political maneuver by Sen. Steve Smith, R-Maricopa, will protect taxpayers in that district, leaving only Tucson residents with a big hit.
This spending package has enough leeway to allow Gov. Doug Ducey, up for reelection this year, to keep the promise he made when he was campaigning for office four years ago to cut taxes every year.
The plan increases the amount that those receiving military pensions can exempt from state income taxes. The figure is currently $2,500.
But that increase will be to just $3,500 rather than the original $10,000 proposal the governor made in January. And it has a delayed effective date on that until 2020.
And there are some other carrots in the package for various political interests.
They include an additional $4.2 million in one-time funding for Arizona State University, $2.2 million for the University of Arizona and $1.6 million for Northern Arizona University.
But Republican lawmakers also insisted on another $2 mil-
lion for continued operation the “economic freedom schools’’ that were established several years ago at UA and ASU with seed money from the Koch brothers who are big supporters of state funds for private and parochial schools.
Rep. Ken Clark, D-Phoenix, who calls them “propaganda schools,’’ said that’s on top of $5 million they already get. And he noted the budget earmarks $100,000 of that to develop a “civics and constitutionalism curriculum for K-12 and postsecondary education institutions,’’ which Clark described as using public dollars to teach “antipublic school economics in public schools.’’
The package also includes $2 million for the arts, $1 million for food banks and $13 million for programs for the developmentally disabled, about $1 million more than last year.
Also in the spending plan is $7 million to pay the state’s share of new veterans homes in Flagstaff and Yuma and $4 million for rural fire departments to help in fire prevention.
The big ticket items, however, are the $273 million for the 9 percent pay hike being offered to teachers this coming year and $100 million to finally start restoring money the state took in prior years in aid to schools for things like computers, books and minor repairs.
To make the books balance, however, the governor has given up on his proposal to have the state pay for more resource officers as part of his yet-tobe-approved school safety plan. And his request to hire more Department of Public Safety officers for the Border Strike Force and capture wrong-way drivers also is taking a hit.
Then there’s the accounting maneuver on desegregation programs.
A 1980 voter-approved constitutional amendment caps primary property taxes at 1 percent of a home’s full cash value. That means all primary taxes — generally the basic costs of running government and schools — can be no more than $10 for every $100 of assessed valuation.
Most residential property is assessed for tax purposes at 10 percent of its “full cash value,’’ a figure that is supposed to represent its market value. So on a $150,000 home, the maximum primary property tax can be no more than $1,500.
But here’s the thing: The cost of desegregation programs comes on the primary tax side. And once a homeowner’s primary property tax rate hits $10, the state is responsible for the excess.
The budget plan places the cost of desegregation programs into the secondary levy, the one for voterapproved measures — and the one that has no cap.
Even in school districts not near that 1 percent cap, the shift from primary to secondary levy also will have an effect because of how property taxes are computed.
Added together, legislative budget staffers predict all the additional revenues will leave the state with a “structural balance’’ of $150 million by the end of this coming fiscal year. That is the surplus of ongoing revenues compared with ongoing expenses.
But Rep. Eddie Farnsworth, R-Gilbert, pointed out that structural balance
is set to decrease to less than $45 million the year after that — and a relatively minuscule $2 million by the following fiscal year.
That, said Farnsworth, is not a good trend line.
“That’s a valid point,’’ acknowledged Richard Stavneak, staff director of the Joint Legislative Budget Committee. “The direction is not encouraging.’’
But House Speaker J.D. Mesnard, R-Chandler, seemed less concerned, saying it simply reflects the big investment in teacher pay in the next three years.