PHOENIX — Gov. Doug Ducey and Republican legislative leaders cleared a crucial hurdle Monday in their efforts to enact a new state budget and tax cut — though not as much as they originally proposed.
But they still may lack the votes needed for final approval.
The mayors of 21 cities said they support the plan to slash income tax collections now that they've been assured that plans to cut state income taxes won't cut sharply into their own revenues. That's because the deal offers them both a bigger share of what is collected and an up-front bump.
What makes this important is that Sen. Paul Boyer, R-Glendale, had been withholding his support from the approximately $12.8 billion spending plan amid concerns that the tax-cut provisions would harm local communities.
That's because cities and towns currently get 15% of what the state collects, part of a deal that goes back to the 1970s where local communities gave up the right to collect their own income and excise taxes. He said the plan to permanently remove $1.9 billion in revenues was unacceptable because it would have cut city revenues by hundreds of millions of dollars.
The new plan changes that in two ways.
First, it reduces the size of the tax cut to $1.3 billion, at least initially, though that could ramp up to $1.8 billion depending on future revenues.
Second, it guarantees cities will get 18% of what is collected rather than 15%. More significant for the mayors is that they will get that 18% figure based on revenues before the tax cuts kick in.
That concession by the governor and GOP leaders, the mayors said, makes all the difference.
"Recent adjustments to the proposed state budget will increase Urban Revenue Sharing to cities and towns to 18% beginning a year prior to cities feeling the effect of the income tax cut," they wrote. "This is excellent news, and we are supportive of this package."
Boyer said if the deal holds, that's enough for him to now support the package.
But there may be a political bent to all of this.
The list represents only a fraction of the 91 incorporated cities and towns. And, in general, they tend to be mayors of towns with a more Republican bent.
It also does not include the mayors of the two largest communities, both Democrats, who remain opposed to the package.
In Tucson, Mayor Regina Romero said there are bigger problems than city revenue sharing.
"Instead of investing in Arizonans, this budget fails to sustainably fund our schools and core services, which hurts all of us, including cities and towns," she told Capitol Media Services in a prepared statement. And she remains opposed to giving the lion's share of the tax cuts to the people at the top of the income scale.
"This budget proposal is short-sighted accounting gymnastics, which will hurt our state's economic stability in the long-run with the vast majority of benefits going to the wealthiest Arizonans," she said.
An aide to Phoenix Mayor Kate Gallego said her boss also cannot accept a tax-cut package that gives virtually all of its relief to the richest.
Even with Boyer on board, that doesn't guarantee that the plan has the necessary votes in the 30 member Senate where Republicans control over 16 seats — and they need every one of them to agree with the plan. Sen. Kelly Townsend, R-Mesa, told Capitol Media Services on Monday she still remains opposed.
Her concern is something beyond the budget itself.
It starts with the fact that Arizona remains under a state of emergency to deal with the COVID-19 pandemic more than a year after it was declared. Townsend said that declaration, which has given Ducey broad unilateral authority, has outlived any usefulness it might once have had.
"If we're going to ballgames and whatever without masks and all that, I don't think we're in an emergency," she said. And
Townsend said the governor was able to exercise that authority without any real oversight for most of last year because the legislature had sent itself home.
She said the situation would be repeated if lawmakers approve a budget and adjourn for the year.
"I'm not interested in giving him back that power," Townsend said.
Ducey continues to use that power. But the most recent act was not not to enact restrictions to protect public health but actually in a way that could be considered the reverse: restricting the ability of state universities and community colleges to demand that students be vaccinated or submit to regular testing.
But gubernatorial press aide C.J. Karamargin said ending the state of emergency could cut off certain federal reimbursement dollars. And Ducey also has made it clear that his order is designed, at least in part, to preclude cities from enacting their own emergency declarations.
Townsend has one other issue she'd like resolved before voting on the budget: An audit of sorts on the results of the Proposition 208 measure.
That's the voter-approved proposal to raise about $900 million a year for K-12 education, financed by a 3.5% surcharge on earnings about $500,000 a year for couples. The deal calls for having some of that burden essentially subsidized by the state.
Townsend, however, said she remains unconvinced that the ballot measure, officially approved by 51.7% of voters, actually passed. And if it didn't — something she said a quick, informal audit could prove — there's no reason to give all the tax relief in the plan to the most wealthy.