Phoenix voters will again be asked to let city set its own spending limit

By Mark Carlisle
Mail | X: @mwcarlisle

Phoenix officials are sending a routine measure to the ballot that will allow the city to set its own annual spending limit rather than be bound by a cap in state law.

In 1980, Arizona voters approved a change to the state constitution setting a formulaic expenditure limit for cities and towns. That limit increases each year based only on population change and inflation.

Phoenix, like many Arizona cities, opts instead for an option outlined in the state constitution — asking voters to approve an alternative expenditure limitation. Phoenix’s alternative that residents have approved six times dating back to 1999 is known as the “Home Rule Option” — simply setting the annual spending limit equal to whatever is in the council-approved budget. Phoenix is still bound by another state law to have a balanced budget each year.

“There’s going to be very important stuff on the ballot. This may be one of the least understood but most important,” said Mayor Kate Gallego during a council meeting last week. She encouraged voters to continue to the end of the long ballot to vote on the local measures.

The ballot measure will appear on the Tuesday, Nov. 5 ballot.

Crowds line up to vote inside Surprise City Hall. (Independent Newsmedia/Jason Stone)

The voter-approved alternative lasts for four years, meaning Phoenix will have to ask for voters’ permission in 2028 to set its own expenditure limit.

Phoenix Budget & Research Director Amber Williamson said the city is currently about $2 billion over the state-set limit, which is about 30% of the city’s total operating budget.

“The city simply cannot provide the current level of expected services under the state-imposed limit,” said Monica Villalobos, chair of Phoenix’s Expenditure Limit Task Force.

Because the city has chosen an alternative to the state-set limit for decades, Villalobos noted the state’s limit does not factor in new city revenue sources, such as many new taxes approved by voters since 1980.

If Phoenix voters were to reject the ballot measure for the first time, the city would receive a noncompliance penalty from the state equal to one-third of Phoenix’s state-shared income tax. Phoenix staff estimates that would be a penalty of $120 million for the 2025-26 fiscal year, all taken from the general fund.

“By voting in favor of this measure, we are securing our city’s financial stability,” said Councilmember Betty Guardado. “Failure to pass this measure could result in a substantial penalty imposed by the state, reducing revenue to the city and jeopardizing our ability to continue important general fund programs and services for our residents.”

Phoenix voters have approved an alternative limit all 10 times it was on the ballot, dating back to 1981. The first four times, the ballot measures just exempted some of the city’s enterprise funds to bring the city into compliance with state law. In 1999, Phoenix switched to the Home Rule Option.

Williamson said the city cannot meet the expenditure limit outlined in the 1980 state law because it has the fifth-largest by population in the country, has grown considerably since 1980 and is a regional leader.

“It’s for these reasons we’re not able to meet that strict formulaic limit,” Williamson said.

Villalobos, chair of the taskforce that voted unanimously to again present the Home Rule Option to voters, pointed to Phoenix Sky Harbor International Airport as an example of Phoenix being a regional leader.

The airport serves more than just the city’s population and has seen an almost seven-fold increase in passengers since 1980. Enhancements such as the Sky Train and Rental Car Center were not included in the 1980 expenditure limit calculation, but Villalobos said they benefit both Phoenix and Valley residents.

In the 44 years since the state law was passed, there also have been significant environmental and security mandates by both the federal and state governments related to municipal costs for water, wastewater and solid waste, Villalobos notes.

“These services have outpaced the Phoenix population and inflation,” she said.

The task force considered alternatives. State law allows for a city’s voter base to approve a permanent base adjustment, which sets a new expenditure limit that again increases based off population change and inflation. However, Deputy Budget & Research Director Aaron Mertz noted this may not end up being permanent if the city’s growth exceeded that new limit.

The other tool in state law allowing a circumvention of the state-set expenditure limit is a one-time override, which lasts only one year. This option is designed for emergencies, “like a natural or man-made disaster,” Mertz said.

Villalobos’ task force decided to do what the city has done since the state law has been in effect: ask voters to approve an alternative.

“The city has a long, successful history with the Home Rule Option,” Villalobos said.

Phoenix City Hall, 200 W. Washington St. (Howard Center for Investigative Journalism/Emma Peterson)

The task force also recommended the city continue its practice of engaging residents in an annual budget process “to ensure each fiscal year’s budget reflects the needs of the community,” Villalobos said.

Phoenix will hold two public hearings on Wednesday, May 1 and 15, before council votes on May 15 to put the measure on the ballot. City council will adopt the form of the ballot on Wednesday, June 12.

We’d like to invite our readers to submit their civil comments on this issue. Email AZOpinions@iniusa.org. Mark Carlisle can be reached at mcarlisle@iniusa.org.

Mark Carlisle
Associate Editor | Phoenix

mcarlisle@iniusa.org

Meet Mark

Mark Carlisle joined Independent Newsmedia, Inc., USA, in 2017, covering Glendale. He has since moved to the Daily Independent team, primarily covering the city of Phoenix along with other topics affecting the Valley at-large.

Community: Mark enjoys taking his young son to BabyTime at the Phoenix Public Library, to the OdySea Aquarium and to various sporting events around the Valley.

Education: Chapman University with a BA in English Journalism and one in Screenwriting.

Random Fact: Mark worked at a tuxedo shop in college. Just don’t ask him to tie a bowtie.

 

Hobbies: Spending time with his wife, son and dog, watching sports and TV shows, listening to audiobooks and occasionally writing fiction or designing a board game.