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Prop. 204 splits business community


The initiative to permanently keep an additional penny on the sales tax recently secured the backing of a group of company executives in northern Arizona, but the endorsement also highlighted a polarized business community.

Several business groups are wary of extending a tax increase that is supposed to expire and are concerned about its impact on the state’s economy.  At the same time, company executives are arguing for more money for schools, saying the funding stream is important to produce the workforce their companies need.

This split became more apparent when the Flagstaff Forty, a group of company executives, joined two similar organizations — the Greater Phoenix Leadership and the Southern Arizona Leadership Council — in backing Proposition 204.  If approved by voters, it is estimated to generate about $1 billion annually.

The bulk of that money will go to schools. The rest is earmarked for construction and welfare programs.

Meanwhile, major business chambers criticized the measure as unnecessary and a “blank check” to school districts that has no connection to reform measures.

The split shows that the business community’s desire to improve the state’s education system, but reaffirms the varying opinions about how to achieve the goal.

In opposing the initiative, the Arizona Chamber of Commerce doesn’t deny the need for resources to produce a skilled workforce. But the chamber said the ballot measure seeks a permanent tax increase without increasing accountability or demanding that schools perform better.

Company CEOs, on the other hand, have zeroed in on meeting the demand for skilled workers in the 21st century and on investing adequate resources for it.

“A stable funding source for our school system is a necessary ingredient to meet that demand,” said Stephanie McKinney, chairman of the Flagstaff Forty board.

Doug Pruitt, a former president of the Greater Phoenix Leadership, put it more forcefully.

“As the CEOs of some of Arizona’s largest employers, we know that the quality of education affects our ability to keep and recruit excellent employees, as well as recruit new companies with good-paying jobs,” he said.

Ann-Eve Pedersen, chairwoman of Quality Education and Jobs, told the Arizona Capitol Times that business chambers were misinformed about the initiative.

One claim in particular swayed the chambers against the initiative, she said.  That is that Prop. 204 locks in the entire sales tax base, which would make it virtually impossible to make changes to the sales tax system without going back to the voters for approval.

But Pedersen said a recent Arizona Supreme Court ruling already debunked the claim.

The court had ruled that only the one-penny tax is protected while lawmakers can make changes to the rest of the sales tax.

“We asked to come back before the state chamber to correct the misinformation, and we were not allowed to,” Pedersen said, adding she believes the chamber already had its mind made up.

The “yes” campaign’s chairwoman also said the state business chamber is dominated by lobbyists who are averse to offending lawmakers.

“There is just a relationship there. They want to curry favor with legislators and legislators don’t like this, and so the lobbyists can be the folks out there who are helping to sabotage it,” she said.

But Kevin McCarthy, president of the Arizona Tax Research Association and a vocal critic of the initiative, flatly rejected the insinuation that groups such as the state business chamber and ATRA are against the ballot measure because they’re afraid to be on side opposite lawmakers.

He called it “laughable,” adding that’s what his group does — disagrees with policymakers.

Responding to Pedersen, Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, said the issue is not the “poor flow of information” from the initiative’s backers, but the initiative itself.

“The issue is that it’s a stinker. The issue is that it’s a billion dollar boondoggle that will do nothing to improve student achievement but will permanently lock in the second highest sales tax in the nation,” he said.

“That’s a concern for anyone who’s concerned about increasing jobs in the state,” he added.

Like McCarthy, he rejected the suggestion that the state business chamber was misled.

Other business chambers have also opposed the proposal, and they are “sophisticated,” he said.

“It’s almost an embarrassing argument to suggest that the Arizona chamber or any other reputable business group took a position based on a lack of information,” Hamer said.

Actually, business groups that oppose the ballot measure focus on the disadvantages of keeping a sales tax rate that’s among the highest in the country.

“The proposed permanent increase in our state’s sales tax will impact everyone and fails to increase standards and accountability to improve the performance of Arizona schools and teachers,” said Rick Murray, chief executive officer of the Arizona Small Business Association.

Dr. Craig Barrett, a former CEO and chairman of Intel Corporation, also opposes the initiative.

In an email sent out by the “no” campaign, Barrett reiterated the major points against it.

There are many ways to improve education, but Prop. 204 is not among them, he argued.

“Prop 204 throws money at education and numerous other special interest groups, but doesn’t tie that money to performance improvements,” he said, adding, “Unless we fix the system, we won’t see any improvement in results.”

Quality Education and Jobs, which is spearheading the “yes” campaign, rejects that characterization, insisting the state already ranks high in accountability measures and standards but is lagging in school funding.  The initiative provides those needed resources to schools, the group said.

And in an email, Pedersen called Barrett an “apologist” for lawmakers.

“Mr. Barrett is now parroting politician Doug Ducey’s inaccurate talking points and has joined him as an apologist for state legislators, who have dramatically defunded our children’s classrooms,” Pedersen said. Ducey is heading the opposition campaign.

Pedersen noted that Barrett made headlines last year when he decried cuts to education and suggested that if Intel were starting anew, Arizona wouldn’t be on its list of places to go to.

“It’s disappointing that Mr. Barrett has decided to take a position that hurts Arizona families and their children, as well as the state’s economy,” Pedersen said.

Hamer said the “yes” campaign should take back its comments attacking Barrett and apologize to the former Intel executive, arguing that the campaign’s response is “far more personal than it needs to be.”

“We can all agree that we want Arizona’s education system to be the best that it can be and that we want Arizona’s kids to be ready for tomorrow’s economy,” the chamber officer said.

“This is a legitimate policy debate that we are having in this campaign. But to malign Dr. Barrett or any of the opponents, to question our integrity and character and to use coarse language does not speak well of the proponents’ ability to argue for their side on the merits,” he added.


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