Budget dissent
The House approved the budget in a series of votes June 19, despite dissent.

In early January, Arizona Capitol Times laid out what were expected to be the 10 most important issues of the legislative session. While legislation was introduced pertaining to each of the issues and significant progress was made on some, others were scrubbed during the ebb and flow of legislative work. Here’s an update:
1. Budget
So much for conventional wisdom.
Instead of the session winding down early because the state had less revenue to spend, the legislative branches sparred for more than a month with competing budget plans, dragging the session to 164 days — the same length as last year.
While Senate President Tim Bee decided early that, with only 17 Republicans, Democrats would be needed to pass a budget, House Speaker Jim Weiers opted to operate the way he had in the two years prior, despite the number of Republicans being sheared by six. The two strategies had wildly different outcomes.
Bee began negotiating with Senate Democrats and Gov. Janet Napolitano in February and, by May, had a budget deal in place. It didn’t include much in the way of tax cuts or increases to school choice, both common Republican platforms, but it did exclude borrowing to pay for new schools and public health care expansion.
Weiers, on the other hand, struggled to even get a budget passed in the House. A budget that was crafted, according to many Republicans, in a whirlwind fashion embarrassingly failed its initial floor vote after the three most conservative Republicans voted against it. A week later, four of the six Republicans who opposed the budget switched their votes and allowed it to pass, but the damage was already done.
When negotiations between the House and Senate leaders began in the final weeks of May, it was clear the Senate held the advantage. Not only did its budget have support from the governor and the House Democrats, the House budget limped its way to a passage and did not carry much sway with senators or Gov. Janet Napolitano.
Almost a month later, legislative leaders and the governor signed off on a budget. The negotiated product looked, in almost all respects, like the budget approved by the Senate in May, save for an extra $3.5 million in tax cuts — and the $10.5 million total tax relief was a far cry from the $64 million included in the House version.
The budget was approved easily in the Senate, with most Republicans joining with the Democrats to pass the bills. But in the House, more than two-thirds of Republicans voted against it, saying they felt the Senate excluded them from the process and the budget didn’t address their priorities. The budget passed the House, but on the backs of Democrats, who joined with the minority of the Republicans to send the bills to the governor.
What’s expected
Revenues will continue to slow from the unprecedented growth the state experienced in 2005 and 2006, and some believe the state may be left with a deficit for the 2008-09 fiscal year. If that happens, the budget fight will switch from what to spend money on to what programs can be trimmed or cut entirely.
Regardless of the state’s revenue outlook, legislative leaders say they plan on meeting this summer to discuss improvements to the budgeting process. Chief among the changes to be discussed will be finding a way to ensure House Republicans don’t feel frozen out of the budget discussions in the future. – Jim Small
2. Immigration
Consular cards, day laborers, civil liability of the National Guard — the Legislature addressed several components relating to illegal immigration but at the end of the session attention was fixed on Gov. Janet Napolitano and the employer sanctions bill that remained on her desk.
Federal reforms died in late June, while a more punitive citizens’ initiative to punish employers that hire illegal immigrants sent shivers through the business community.
A previous veto blasting a 2006 immigration bill for offering “complete amnesty to employers” and tough talk during her 2007 State of the State Address also made signing the bill almost certain.
And after 10 days of deliberation Gov. Janet Napolitano signed it into law — and she included a blatant swipe at the U.S. Congress, whom she labeled as “incapable” of addressing comprehensive reform. Knock off the demand for labor, she surmises, and the supply will follow.
Outcry was immediate as the Arizona Chamber of Commerce and Industry declared the bill a “crippling blow to Arizona business” and a “devastating setback to the state’s economy.”
Not surprisingly, several Democratic representatives and immigrant activists also wasted no time voicing their distaste for the bill.
What’s expected
Odds are the governor will call a special session to address what she cited as five shortcomings of the bill: There is no anti-discrimination clause, no exemptions for businesses servicing critical infrastructure, overbroad provisions on the revocation of business licenses, inadequate funding for enforcement and a typographical error in the bill’s text.
The passing of Rep. Russell Pearce’s H2779 also doesn’t clear the initiative he is also sponsoring off the table. The lips of the staunch opponent of illegal immigration are sealed, but the ballot threat will probably remain to prevent the bill from being neutered in special session. Given Arizona’s track record of easily passing anti-illegal immigration ballot measures, this is a powerful weapon that Pearce, R-18, will likely be unwilling to surrender.
In the meantime talks are already underway between Rep. Steve Gallardo, D-13, and several business figures in the state that hope to get a federal injunction to stop the effects of H2779. — Christian Palmer
3. Economy
The picture of the state’s economy is far from rosy, concluded a recent University of Arizona study. The homebuilding industry, for one, remains in recession, and construction jobs have declined. Research also points to subdued spending by consumers.
Yet significant tax cuts enacted during the last few years are expected to further improve the state’s competitive tax position, the Arizona Department of Commerce says on its Web site. On the legislative front, two major bills will potentially impact the state’s business climate. The Arizona Chamber of Commerce and Industry calls the employers’ sanctions bill, signed into law by Gov. Janet Napolitano on July 2, “a devastating setback” to the economy. The League of Arizona Cities and Towns also laments the enactment of a proposal to prohibit municipalities in Maricopa and Pinal counties from offering tax incentives to lure businesses. The league fears that the bill sends a “clear message that Arizona is not a business-friendly state.”
What’s expected
Some lawmakers and analysts are worried that the state is facing a structural deficit of $400 million next year, meaning the state budget has more permanent spending than permanent revenue. University of Arizona research includes this warning: “Below-trend growth but no recession is the best bet. But if fallout from the sub-prime mortgage market brings a flood of repossessed homes to the market and precipitates a free fall in housing prices, or if the hurricane season damages production and refining capacity thereby pushing the price of gasoline to over $4 per gallon, or if inflation surprises to the upside and drives the interest rates significantly higher — all bets are off. The odds of recession are the highest that we’ve seen in a long time.” — Luige del Puerto
4. Transportation
At the beginning of the 2007 session, policy- makers agreed that Arizona must speed up highway construction. A couple of ideas and 164 days later, executive and legislative officials extended the maturity of highway bonds for another 10 years to generate approximately $500 million. The fiscal 2008 budget also appropriated $10 million to the Statewide Transportation Acceleration Needs or STAN account. The Legislature also established the Blue Ribbon Transportation Committee to recommend ways as to how best to solve the state’s transportation woes.
Along the way a couple of suggestions about how to better move motorists were brought to the table; many ideas were defeated. Early on Sen. Robert Burns, R-9, the influential chair of the Senate Appropriations Committee, suggested taking $450 million out of the Budget Stabilization Fund, popularly known as the rainy day fund, and pumping the money into the STAN Account. The proposal failed in the Senate. Alternative proposals were introduced, such as converting the high-occupancy vehicle (HOV) lane on I-17 into a toll lane. The idea, pushed by Sen. Ron Gould, R-3, chair of the Senate Transportation Committee, was to allow lone motorists to use the usually faster HOV lane for a fee. Another idea was to establish authorities that would construct roads and pay for them with tolls. In the end it was the budget negotiators, including lawmakers with direct contact with the governor, who determined how to fund road construction.
What’s expected
This session Burns felt that transportation was eclipsed by other issues, such as immigration, a controversial and emotional issue. “My sense is that some of the intensity of the support kind of cooled down a little bit,” he said. But transportation will remain a priority for the state. Expect to hear more about the issue now that the proposal to penalize employers for knowingly hiring undocumented workers has been signed into law, he said. Top players will include the transportation and appropriations chairs of the House and Senate, as well as leaders of both chambers. Yet if the GOP leadership again decides to negotiate with the Democrats over a state budget next year, it is likely that the numbers will be decided by that small number of negotiators, depending on what the governor is willing to sign. — Luige del Puerto
5. Water
Groundwater in rural Arizona got the Legislature’s attention in 2007.
For most Arizonans — who live in and around Phoenix and Tucson — water comes from a few big river systems. Colorado River water, for example, is delivered by the Central Arizona Project. Roughly speaking, these urban water users fall within what are known as active management areas (AMAs). Groundwater in AMAs can be used but generally must be replaced by CAP or other surface-water supplies. In addition, developers in AMAs cannot build without assuring a 100-year supply of water.
But rural developers outside an AMA — in areas generally reliant on groundwater — are under no such restriction. They can build regardless of whether there’s adequate water.
That could change with S1575, titled water adequacy provisions.
The legislation grew out of a recommendation by the Statewide Water Advisory Group (or SWAG), a 52-member panel that advises the Arizona Department of Water Resources. Gov. Janet Napolitano signed the measure into law June 4. Under the provisions, a county board of supervisors can adopt a rule requiring developers outside AMAs to assure a 100-year water supply for new subdivisions. But the board can do so only by unanimous vote.
If the board rejects the adequacy provisions, cities and towns can adopt them on their own.
Sen. Tom O’Halleran, R-1 — who sits the SWAG panel — calls S1575 “a baby step in the right direction.”
But he added: “I was very disheartened to see the amendment that went on it, requiring the unanimous approval of the board of supervisors.”
O’Halleran also said the law failed to offer incentives to conserve or develop new supplies of water. For example, credit or financing could be provided to developers who build systems to recharge groundwater, O’Halleran suggests. In addition, communities could bring in outside water by taking “lands out of production that are using water,” he adds. Desalination plants might be another answer, he says.
The Legislature went part way in helping rural communities build facilities to augment water supplies — with the water supply development revolving fund (H2692). The fund can be used by water providers within AMAs or in those areas where adequacy requirements have been adopted. Gov. Janet Napolitano signed H2962 into law May 24.
The infrastructure to be funded, O’Halleran says, “has to be for new water.”
But the fund has a shortcoming, he adds. It’s under-funded.
“The reality is we’ve passed a law and then in our wisdom, we put a grand total of $250,000 into the fund,” he said.
There’s not much that can be done with a quarter-million dollars, even when leveraged for bonding, he says.
In another bill, the Legislature tackled groundwater use in southern Arizona, focusing on aquifers that feed into the San Pedro River. Here, H2300 allows for creation of the upper San Pedro water district to augment and conserve groundwater in and around Sierra Vista. The governor signed the bill June 20.
The San Pedro River itself is a federally protected national conservation area. The river is also home to a number of endangered species, including the Southwestern willow flycatcher. But growth in the Sierra Vista area threatens the river flow, as water is tapped from the underground basin that feeds it.
The special district would work to conserve Sierra Vista’s groundwater, as well as bring in water from other sources, says Sen. Marsha Arzberger, D-25, who — like O’Halleran — sits on the groundwater advisory panel. Arzberger’s district includes the San Pedro watershed.
But the legislation’s primary goal is not conservation for its own sake. It’s to save Fort Huachuca, which depends on groundwater from the Sierra Vista watershed. If the federal government determines that the watershed cannot sustain both the base and the
San Pedro, the base could be closed, Arzberger says.
“Unless they were to mitigate that in some way,” Arzberger says, “they would then consider that there was not enough water to sustain the fort, and they would close the fort.”
In addition to its role in national defense, Fort Huachuca is crucial to the Sierra Vista area’s economy, she adds.
“Fort Huachuca brings in more money to the state than any other base,” Arzberger says.
As for the San Pedro water district, it would be established in two steps. A nine-member organizing board would set the basic ground rules. Five members will be appointed by the governor, while the House speaker and Senate president will each appoint two. In the next step, voters within the proposed area will elect a seven-person governing board. That’s if they chose to have a district in the first place. The ballot will give them the option of killing the special district outright. If the district gets a green light, it will have the power to levy taxes — if the voters approve that as well.
Sen. Jake Flake, R-5, for one pushed the idea of putting the district’s fate in the hands of the local electorate. Flake, chairman of the Senate Natural Resources and Rural Affairs Committee, objects to the state telling cities and counties how to manage their water.
The water district, if approved, could acquire new water from outside the upper San Pedro basin, as well as construct facilities to transport it. This water then can be used for recharge, replacing water drawn from the aquifer. Or it can be delivered directly to users. Though no specific plans are on the drawing board — crafting them will be the organizing board’s job — Arzberger offers some possibilities. She says the district could tap into the Central Arizona Project canal, which extends into Tucson. Or it could look to Tombstone, where high groundwater flooded out silver mines in the 1880s.
In addition, the district can take measures to conserve existing groundwater. With the proper facilities, for example, water could be reused.
The act, however, bars the district from imposing mandatory conservation measures.
What’s expected
With continued drought and climate change, water will remain on the front burner, O’Halleran says. He adds: “We have some significant problems in the Southwest and we have to deal with them as fast as possible.” — Bill Coates
6. Clean Elections
While previous efforts to amend Arizona’s publicly funded campaign system have proved futile, the 48th Legislature, led by Rep. Michele Reagan, R-8, stunned many by passing H2690 — the most far-reaching collection of changes to date. Gov. Janet Napolitano signed the bill July 2.
The alterations were far from minor and the trade-offs were substantial. Clean Elections’ enemies voted to improve the system they loath, and may have diminished their ability to mount a successful future attack by means of citizen initiative.
Proponents, on the other hand, had to come to grips with weakening the ideological bedrock of publicly funded campaigns: the minimizing lobbyists’ influence over candidates and rock-bottom contribution limits.
The payoff for both parties is, well, a payoff. Publicly funded candidates, particularly those running for statewide office, will now get more funds to run campaigns. Privately funded candidates will have greater ability to build their war chests thanks to increased contribution limits for individuals and political action committees.
Several legislators praised Reagan’s political feat, which was made more difficult by having to obtain the necessary three-quarters majority of House and Senate votes. Less contentious management by the Citizens Clean Elections Commission, and their hiring of a private lobbyist, probably didn’t hurt matters either.
In the end, only two senators filed no votes on H2690.
What’s expected
Many observers credit “Clean Elections” with creating a more partisan Legislature, but it’s hard to say if H2690 will spur more candidates to run private campaigns that tend to favor moderate contenders. Most are likely to continue running as they have in the past.
And whether “special interests” will get a more secure grip on candidates or the Legislature is also debatable. Special interests help the publicly funded collect qualifying contributions as much as they help their private counterparts raise cash. The value of independent expenditures, public endorsements and skilled consultants also seems constant.
The next campaign finance reform milestones are likely to occur in court. A federal appeals panel threw out a challenge to the constitutionality of matching funds without addressing its merits, but an en banc review is under consideration. Proponents argue matching funds don’t violate or dilute free speech, but in fact, aid voters by creating more speech. Time will tell. — Christian Palmer
7. Flores v. Arizona
Because the Legislature did nothing to address the 15-year-old lawsuit, the state and top Republican leaders face possible sanctions for being in contempt of court.
Legislative leaders declined to entertain a plea offer from the plaintiff that would have increased per-student costs for English programs, though the increase wouldn’t have been as high as some activists have fought for. In March, a federal judge ruled the state still hadn’t satisfied the original 2000 judgment and ordered the Legislature to act by the end of the session.
Instead of doing that, lawmakers asked a higher court to overturn the ruling. The appeal is likely to be heard later this year.
What’s expected
Any action to resolve the case is dependent on the ruling of the 9th Circuit Court of Appeals, which could come later this year or early next year. Even if the appeal fails, a settlement may not necessarily be in the works, as the Legislature could opt to take the case to the U.S. Supreme Court. — Jim Small
8. Lawmakers
With the landscapes of both the House and Senate changing drastically after the November elections, pundits were expecting growing pains as Republican leaders adjusted to having fewer members.
And, in the end, they were partially right. While the Senate quickly realized it would take working with the Democrats to get major things done, the House more stubbornly tried to forge a Republican-only policy on a number of issues, including the budget.
The most telling difficulty House GOP leaders had was on the budget, where opposition from both the moderate and conservative wings of the caucus caused the spending plan to fail its first vote.
The change in numbers provided its share of problems internally, as well, for each House caucus.
The Democrats, bolstered with six new members, struggled at times to remain a cohesive unit. In January, a handful of the minority successfully lobbied the speaker to change their committee assignments, causing a very public split. The wound was reopened in May, when three of the upset Democrats supported the Republican budget in a committee hearing and drew criticism from their legislative peers, the governor and Democrat activists.
Meanwhile, Republicans struggled to come to grips with the fact that, while they were still in the majority, their command over the policy and process wasn’t as absolute as it had been in recent years. Budget negotiations were a struggle internally and, by the time the final proposal came up for a vote, nearly two-thirds of the House Republicans opposed it, many saying they felt left out of the process.
What’s expected
The Senate adapted well this year and all indications are — unless Senate President Tim Bee resigns to run for Congress and a new Republican takes the helm — the upper chamber will continue to find ways to work with both Democrats and the governor.
But the House may face many of the same challenges it did this year, on both sides of the aisle. Many Republicans unrelentingly feel they should be able to impose their will on the Democrats and Gov. Janet Napolitano, and the Democrats remain split, despite public shows of unity on the budget and other key issues late in the session. — Jim Small
9. Vouchers
Two separate school voucher programs for foster children and students with disabilities withstood the first round of scrutiny before a Maricopa County Superior Court judge after the Arizona Supreme Court declined to hear a petition for special action.
The programs were vehemently opposed by the Arizona School Boards Association, the Arizona Education Association and the Arizona Chapter of the ACLU, among others, which argue the programs unconstitutionally provide public money for use in private schools and drain needed resources from the public school system.
Those positions were almost immediately rejected by Judge Bethany Hicks, and the Institute for Justice, which helped defend the programs on behalf of several families, turned up the heat by calling for an end to “frivolous” lawsuits against school choice measures.
The Legislature this session also considered creating similar programs. House bills were introduced to create vouchers for children of military personnel, voucher managers at the three state universities and to create Parental Educational Choice Grants, but none of the measures advanced to the Senate.
What’s expected
Don Peters, an attorney hired by the teachers’ unions, said Hicks’ decision will be appealed and bets the losers of round two will go to the Arizona Supreme Court for a final decision on the programs, each of which provides $2.5 million from the state’s general fund.
On the legislative side, it’s probably unlikely the existing lukewarm support for voucher expansion will boil over and sufficiently motivate all the main players. Tom Horne, the state schools chief, isn’t wild about vouchers, and in fact, opposed them when he was a legislator.
Proponents of vouchers are quick to brag that similar lawsuits against income tax deductions for individuals and corporations that donate to private schools have failed miserably — and that the quest to squash vouchers will also fall.
That seems an apples-to-oranges comparison, but if the high court wasn’t interested in letting opponents skip the trial and appellate route and Hicks wasn’t sold, a full-scale reversal at this point seems unlikely. — Christian Palmer
10. Health care
None of the pie-in-the-sky programs offered by Democrats — most notably House Minority Leader Phil Lopes’ desire for universal health care and Gov. Janet Napolitano’s State of the State proposal to give public health care to all Arizonans under 19 whose family earns less than $60,000 a year — were given a hearing.
Instead, much of the health care debate focused on medical malpractice tort reform and Healthcare Group, a state-sponsored program that caters to small businesses.
For the second year in a row, Sen. Carolyn Allen, R-8, pushed legislation to increase the standard of proof for malpractice cases involving emergency treatment as a way to help lower medical malpractice insurance premium costs. While the 2006 bill was vetoed, this year’s measure never even got the chance to be weighed by the governor, as it failed in the House in May.
Battles on Healthcare Group were waged regularly in the House, as Republicans fought for more oversight of the health insurance plan’s spending and Democrats accused them of trying to kill the program. In the end, $8.5 million was included in the budget to continue Healthcare Group, but with the caveat that the program be audited.
What’s expected
Maybe the third time will be the charm for Allen on her emergency room bill. More likely, though, is that any future bill on the subject will again face difficulties in the House, where more Republicans are willing to join with Democrats and vote against the measure.
And while Democrats will continue to enjoy controlling the Executive Branch and the gains they made in both the House and Senate, the power they have won’t increase the odds of their more sweeping reforms to health care in Arizona getting heard. — Jim Small