Budget on life support again as sales tax fails
Published: August 12, 2009 at 4:53 pm
***UPDATED AT 8:45 P.M.***
After about seven months of trying, Republican leaders arrived at the Capitol on Aug. 12 with hopes that they had finally corralled enough votes in the Senate, including the support of a Democrat, to pass a budget for fiscal year 2010.
But all that evaporated when a senator whose support Republicans were counting on was absent from the floor.
Instead, the Senate approved a budget that excluded the governor’s proposal to ask voters for a sales tax increase as well as income tax reductions that conservatives said would mitigate the impact of the sales tax hike in the long run.
The measure that contained the sales tax referral failed — twice, in fact.
As it stood at the end of the day, the budget proposal approved by senators was essentially the same as the plan Gov. Jan Brewer line-item vetoed early last month.
Brewer, for her part, was not impressed.
“I trust the people of Arizona. But, I am deeply disappointed that some membrs of the Arizona state Senate do not,” she stated in a press release after the sales tax referral failed. “They have so little trust in the voters, that they would once again delay the passage of a sound state budget and deny the people an opportunity to protect critical funding for education, public safety and care for our most vulnerable citizens.”
Senate Republicans had adopted changes to the budget deal they had hammered out with Brewer specifically aimed at getting the support of Sen. Carolyn Allen, a Republican from Scottsdale and Sen. Richard Miranda, a Democrat from Tolleson.
Allen was not expected to show up because of a knee injury and health problems. In fact, she has been excused from the session in the last several days.
Miranda left the Senate before the vote took place and felt no need to come back since he had decided, after all, to oppose the budget plan.
Miranda later told the Arizona Capitol Times that he was working out a potential deal with Republicans who had been courting his support on the referral for a sales tax increase.
The Democrat said he asked for two things. One was to remove the provision to suspend Proposition 105, which restricts the Legislature’s ability to amend voter-approved initiatives. The other was a guarantee that the revenue generated from the sales tax hike, assuming voters approve it at the ballot, would not be used to backfill tax or spending cuts.
Specifically, Miranda wanted a guarantee that additional sales tax revenue would not used to cover any budget holes created by income tax reductions. He said the revenue should be appropriated as additional money for education, health and human services and public safety.
Senate President Bob Burns followed through by offering an amendment that deleted the Prop. 105 provision of the budget deal.
“But they still could not guarantee me that the 1-cent sales tax was not going to supplant the tax cuts,” Miranda said.
Sen. Jim Waring, a Republican from Phoenix, summed up what happened this way: “They changed it to get two votes they ultimately did not get.”
Republicans had started the morning hopeful they would get the votes to move the entire budget package forward.
But trouble was immediately apparent when senators failed to open the session at 10 a.m. as scheduled. If they had the votes, they would have been on the floor by the time, approving the budget plan.
The vote finally took place in the afternoon, and H2015, the bill that contained the proposal for a 1-cent increase in the sales tax for the next two years and a half-cent increase in the third year, went down by a vote of 14-11.
Three Republicans — senators Ron Gould, Pamela Gorman and Jim Waring — voted against the bill. So did Democrats, who were excluded from the budget talks and were expected to oppose the entire budget package.
Waring was opposed the moment H2015 was amended so the sales tax increase essentially became a stand-alone provision.
On Aug. 10, the Senate Appropriations Committee had voted 6-to-3 to approve amendments that split the sales tax hike and the tax cuts, and placed them in separate bills in an effort to get the elusive 16th vote to pass the entire budget deal between legislative leaders and Gov. Jan Brewer.
H2015 now includes the referral for a sales tax hike, a suspension of protections for voter-approved spending and a cap on state spending.
H2007, meanwhile, now contains provisions to repeal the state equalization property tax and the reductions to individual and corporate income taxes.
“I told them all along I was a ‘no’ on the referral as a stand alone,” Waring said. “It is not the same thing at all to my mind.”
Several Republicans had argued it was essentially the same package — only the format had changed.
Members of the House reacted with dismay after H2015 fell two votes shy of approval.
Rep. Bill Konopnicki, a Republican from Safford, called the H2015’s defeat “frustrating” and an “embarrassment for Republicans.”
“We have a Republican governor, a Republican House, a Republican Senate, and we can’t get a budget out?” he said. “This just makes no sense.”
Rep. Lucy Mason, a Republican from Prescott, said she thought leadership would have never brought the bill to the floor for a vote unless they were sure they had the votes.
“You don’t bring it to the floor unless you have the votes. I think somebody needs to learn how to count,” she said. “If we can’t be successful within the party we are going to have to go to the Democrats. They have been perfectly reasonable and trying to help us. I think we need to go to the Democrats. There’s no choice.”
The timing of the vote on H2015 caught some lawmakers by surprise.
After a debate on the budget bills, Ron Gould moved for an immediate vote on the bill. Burns, who was presiding over the session, allowed the motion to pass.
Gould, who is opposed to the sales tax increase, said he didn’t think that his motion would pass. Gould usually employs parliamentary maneuvers to advance a bill he supports or to kill a measure he dislikes.
Burns explained that they were planning to vote on the bill immediately anyway and that they actually didn’t need Gould’s motion to third-read it.
When pressed if he knew beforehand whether he had 16 votes for the bill, Burns said, “We were hopeful we would have them. We didn’t know for sure, so we found out. We know now where the votes are.”
After the measure containing the sales tax increase failed, some senators wanted the opportunity to vote for the entire tax package.
Otherwise, they would have been on the record voting for a referral for a sales tax hike without having voted for the income tax reductions and repeal of the state equalization property tax, which were in a separate measure, H2007.
Indeed, the sales tax hike, the $400 million income tax reductions and the repeal of the $250 million equalization tax originally were rolled into the one bill — H2015. It was a deliberate attempt to couple the tax increase with tax cuts so lawmakers could view it as a reform package. The measure also included capping state expenditures at $10.2 billion and suspending Prop. 105 for three years.
Concerns had been raised that splitting the tax provisions would result in votes being lost in the House, but many argued it’s essentially the same tax package.
So the Senate voted on the rest of the budget bills, including S1029, which used to be identical to the pre-amended H2015.
Waring voted “yes” on S1029. But even with his support, S1029 was a vote shy of the minimum needed to pass.
The Senate also adopted an amendment to S1025 that repeals the state equalization rate and makes statutory adjustments to set the fiscal 2010 qualifying tax rate.
But the proposal, as passed by the Senate, does not include the individual and corporate income tax reductions, the suspension of voter-protected spending or the state spending cap.
The Senate planned to send all the bills to House, which is scheduled to meet Aug. 13.
Republican leaders won’t say they have given up on the sales tax referral, but they are facing a wall of resistance that neither they nor the governor’s office has cracked.
“Do we just continue to insist that we have a referral without being able to get the votes? I don’t know how you manufacture votes,” Burns said after H2015 failed by a vote of 14-11.
“I voted for it. I’ve tried to convince other members to vote for it, and we have come up short. And so I don’t know what else to do at this particular point in time,” he added.
Burns’ statement pretty much summed up the Legislature’s situation at this point. As of this press time, there were no definitive answers as to what the Legislature would do next.
Lawmakers have the option of sending the bills without the sales tax hike referral to the governor again and risking another veto.
Another option is for Republican leaders to go back to the negotiating table with Democrats. But Republicans do not seem to be leaning in that direction.
Democrats have been waiting for Republicans to meet with them and hammer out a final solution to the fiscal 2010 budget. Minority members say they’re still waiting to restart bipartisan negotiations.
Senate Majority Leader Chuck Gray said he hopes that Brewer would sign the budget bills without the sales tax increase, calling the latter a “dead horse.”
“It got killed two different times here today — two different bills, two different iterations of it, two different versions of it,” Gray said. “It’s been a dead horse for a long time, and we have been beating it for a long time trying to bring it to life.”
Senate Assistant Minority Leader Rebecca Rios said all eyes are now on the governor since the budget package is basically the same as the July 1 budget she had rejected.
“She took a lot of credit for line-item vetoing those bills and (saying she was) protecting education and protecting social services,” Rios said. “And so the question becomes: Does she stand true to her word and re-veto the same provisions that she said were devastating and that decimated education?”
-Reporter Christian Palmer contributed to this story.