Attorney General: More Lending Regulation

Arizona Attorney General Terry Goddard would like to see additional regulation and disclosures from lenders offering high-cost home loans.

A “high-cost” loan is one that has an annual percentage rate of more than 8 per cent greater than the current yield on U.S. Treasury securities of comparable length for first lien mortgages or more than 10 per cent greater than comparable Treasury securities for subordinate lien (second) mortgages or a home loan in which the total points and fees on the loan is more than 5 per cent of the loan of at least $20,000 or is more than the lesser of $1,000 or 8 per cent of a loan less than $20,000. (A 10-year Treasury note closed trading on Dec. 28 at a yield of 4.28 per cent.)

The legislation would require a lender to compare the prospective borrower’s current loan and proposed refinanced loan on monthly payment, home equity, time remaining to pay of the loan, total remaining interest payments, annual percentage rates for the current and new loan, prepayment penalties and balloon payments.

Mr. Goddard said that complaints about “predatory” lenders have skyrocketed even as mortgage rates on a 30-year loan typically are offered at less than 6 per cent. The regulations would not apply to banks, because federal rules set down in February 2004 pre-empt states from pursuing complaints against banks regarding predatory lending.

AHCCCS: Larger Enrollment Requires Bigger Budget

AHCCCS Director Tony Rodgers said in December the agency’s 2006 budget could become his top legislative priority this year, depending on what an analysis of enrollment growth showed. That analysis was completed just before press time, and it showed the state Medicaid program will need at least a $60 million increase in funding for the next fiscal year.

AHCCCS, which covers more than 1 million Arizonans and operates on state, federal and other funds totaling $4.3 billion, could require more than a $60 million budget boost because December enrollment figures were not yet available.

“If it turns out that we continue to see significant growth in our Medicaid general fund requirements, then that’s going to be the major issue, Mr. Rodgers said last month. “I’m not ready to say the sky is falling yet…”

He added, “However, we think it’s going to level off, and we may even see it settle down in terms of the total number of members that we’ll have into next year.”

In the meantime, continuation of a federal program that expires June 30 is near the top of what Mr. Rodgers said is his “limited agenda” for the Legislature.

The federal program, Health Insurance Flexibility and Accountability (HIFA), currently provides 75 per cent funding of medical coverage for 11,000 parents of children enrolled in KidsCare, and the Legislature must decide whether to continue the program.

KidsCare, with restrictions on family income, provides coverage for children who have had no health insurance for the past three months. Monthly premiums range from $10 to $25 per month for one child and $15 to $35 per month for two or more children.

Judicial Council: More Fiduciary Program Funding

The Arizona Judicial Council, which oversees all courts in the state, has a number of legislative priorities, but none bigger than securing additional funding for the Fiduciary Program, said Tom Augherton, spokesman for the Administrative Office of the Courts. Under Arizona law, a fiduciary is someone appointed by a Superior Court judge to serve as a guardian, conservator or personal representative for a person unrelated to the fiduciary and who charges a fee for the service. A spouse or relative often serves the role of fiduciary, but because they are related by marriage or blood and don’t charge a fee, they aren’t required to be certified for the task that they probably will serve only once in a lifetime.

The Fiduciary Program licenses, regulates and, when needed, disciplines professional public and private fiduciaries in Arizona. Although the program has seen a number of successes in heading off potential problems with fiduciaries and has launched investigations that have led to the prosecution of some others, nearly half of the 163 complaints filed since 1999 remain open because the program just doesn’t have enough money to speedily resolve them, officials say.

Twelve of the cases have involved the theft of at least $1 million from wards of the fiduciaries, Mr. Augherton said. The program now has an annual budget of about $481,000. Adding a 50-cent surcharge to the $10 fee for birth certificates and a $1 surcharge to the $10 fee for death certificates would raise an additional $300,000 to $350,000 for the program, Page Gonzales, until recently the lobbyist for the Administrative Office of the Courts, told Arizona Capitol Times in November.

Economic Security: Bigger Budget, Leasing

Four months into his new position as director of the Department of Economic Security (DES), David Berns in December 2003 was accounting for nearly every dime his agency was spending and wanted to spend. It was all part of a special session of the Legislature on proposed reforms in Child Protective Services and Governor Napolitano’s request for an additional $30 million to implement the reforms.

Not surprisingly, Mr. Berns says money is his number one legislative priority for 2005.

“There’s no question the budget is going to be the biggest priority issue, but the specifics of the budget I’m not prepared to talk about today because I haven’t had my final wrap-up meeting with the governor…” he said in a recent interview. DES’s current budget is around $600 million.

Aside from the budget, Mr. Berns said a top DES priority is to get the Legislature to change existing law that prohibits leasing or subleasing the agency’s property to community agencies that are part of DES’s services network — to create efficiency with one-stop service centers.

“We need statutory authority to allow us to do it,” he said. “I haven’t talked to a legislator yet who thinks this is a bad idea, but there’s some fears that if we tried to get into a retail leasing business that we would be competing with [the] private [real estate] industry. If we tried to make that a business deal, then it would certainly raise eyebrows.”

Health Services: More Money To Deal With ‘Maintenance’

Anticipated growth in the number of people qualifying for AHCCCS will find its way into next year’s budget for the Department of Health Services, and subsequent funding in two areas is the department’s top legislative priority, DHS Director Cathy Eden says.

“Our budget is almost maintenance,” she said, “except for people who qualify for AHCCCS and for inflation.” DHS provides services for AHCCCS recipients in two areas — mental health and rehabilitation for children with complicated health problems, and the agency expects increased costs in those programs.

DHS currently operates on a general fund budget of around $365 million.

Ms. Eden said her new budget has been submitted to Governor Napolitano.

Revenue: Tax Conformity

Officials with the Arizona Department of Revenue haven’t yet decided whether they will seek any legislation beyond the annual conformity bill. That measure codifies any changes in federal tax law that also will affect Arizona income taxes, since the state typically allows deductions that are claimed on federal returns to also be claimed on Arizona returns.

That isn’t automatic, though — the Legislature has to decide annually whether to conform state taxes to federal tax law, said Anthony Forschino, legislative liaison with the Department of R
evenue. One of the bigger issues on the conformity bill could be whether the state adopts the federal change, enacted during the summer, that will give taxpayers the option of choosing to deduct either the state sales taxes they paid or their state income taxes paid, but not both. Such a change could be beneficial to a taxpayer who has made a large purchase of a new automobile or a boat, and have sales taxes that may be larger than the income tax they owe the state.

The change also could be beneficial to taxpayers who use a variety of state income credits to reduce or eliminate entirely their state income tax, some tax advisers say. Those credits include the total of $1,100 that a married couple filing jointly may claim by contributing a like amount to the Citizens Clean Elections Commission, the $625 credit claimed for contributing to a private school tuition organization or the $250 credit for contributing to extra-curricular activities at public schools.

Education: Adjust Accountability Measures

The priority for the Arizona Department of Education this session will be adjusting AZLEARNS, said department lobbyist Art Harding. He said the department wants to be given the power to apply accountability measures to school districts that have been deemed as participating in a school’s “failing” status. Mr. Harding said the department also will seek to conform AZLEARNS with federal law to allow the state to address problems that arise within school districts. —

Reporters Dan Burnette, Phil Riske and Jim Small contributed to this report.