Time may heal all wounds, but repairing some of the damage left in the wake of a contentious budget process and a divisive final week of the legislative session may take a bit more effort.
Fallout from the budget deal — brokered by Senate President Tim Bee with legislative Democrats and Gov. Janet Napolitano — began before the session even ended. Less than a day after the budget was approved by the House of Representatives and the Senate, a coalition of business advocates and tax-watchdog groups urged lawmakers to end the session quickly, “before any more damage is done.”
Dissatisfaction with the final budget, coupled with frustration over the tedious and generally secretive process used to create the spending plan, left many major policy issues unaddressed.
And the handful of Republicans who did vote for the budget will be left to face the criticism from conservative advocacy groups and colleagues regarding their support for policies that run counter to Republican principles.
Stan Barnes owns Copper State Consulting, one of the more prominent Republican lobbying and consulting firms in the state. A former legislator, Barnes has been involved in the annual legislative sessions in one form or another for the past 20 years.
“And I’ve never seen one that was this genuinely hurtful in its ending,” he said.
While sine die, the final day of the session, is traditionally a joyful day — a day when grudges are dismissed, wounds from hard-fought battles are healed and victories are toasted — this year’s event was anything but. Tears were shed on the Senate floor, feelings were trampled and people openly questioned their ability to work together in the future.
“As a person involved in politics, and a plain old citizen of Arizona, I’m broken-hearted by how things have evolved,” Barnes said. “I’m hoping this is as bad as it gets and I hope from here on out we begin rebuilding the honor of the Legislature.”
Dissatisfied
The business community’s dissatisfaction with the legislative session centered on the failure of lawmakers to permanently eliminate a state property tax that was suspended in 2006. The three-year suspension is set to expire next year, and business groups hoped to get the tax repealed this year to eliminate the possibility of its return.
Given the failure of the tax-repeal effort and other provisions of the budget, the Arizona Chamber of Commerce and Industry likely will oppose several legislators in their re-election bids this fall, said Glenn Hamer, the group’s executive director.
Just who will be targeted has not been determined, but Hamer made a promise in June that some lawmakers will be given the “opportunity to gain more private-sector experience.”
Tax-watchdog groups joined with business leaders to blast lawmakers for the budget.
“From a taxpayer’s perspective, the session left a lot to be desired,” said Kevin McCarthy, director of the Arizona Tax Research Association, one of the groups that signed the e-mail to lawmakers.
For McCarthy, the session contained many disappointments, from the veto of the permanent repeal of equalization property tax to the failure to enact any reforms of secondary property tax laws.
The lobbyist also criticized the debt financing, K-12 payment rollovers and special fund raids in the budget as “gimmicks” that do nothing to address next year’s estimated $1.3 billion deficit.
Steve Voeller, president of the Free Enterprise Club, described the budget as “wildly unbalanced” and a “debacle.”
“Not only were there not enough cuts to be responsible stewards of the state budget, we incurred even more debt through the borrowing package,” said Voeller, a former chief of staff for Arizona Congressman Jeff Flake. “It’s totally fiscally irresponsible and dependent on the state’s economy rocketing around — turning around on a dime soon. That’s not responsible because there is no indication that’s going to happen.”
Similar sentiments were shared by Tom Jenney, president of the Arizona chapter of Americans for Economic Prosperity.
“Our concern is there aren’t enough fiscal conservatives to carry both houses (the House and Senate),” he said. “As it turns out, there aren’t enough fiscal conservatives to carry one house.”
But perhaps the sharpest critique of the Legislature appeared in ATRA’s May 2008 newsletter, which stated “state policy-makers now appear incapable of representing the interests of property taxpayers over local governments and union representatives.”
Republican supporters of the budget said some of the anger over the budget was misplaced, while some can’t be justified.
“I think they had their hearts set on getting the tax repeal,” said Rep. Michele Reagan, a Scottsdale Republican who voted for the $9.9 billion budget. “When that didn’t happen, I think that anger translated over to (a sentiment that) everyone who voted for a budget that doesn’t have that in it was no good.”
But getting the property tax repealed was never going to happen with Napolitano standing as gatekeeper of the budget, Reagan said. A bill to repeal the tax was vetoed earlier in the year and a worsening economy wasn’t going to change the governor’s stance that the state couldn’t afford to wipe $250 million off its books permanently, she said.
Sen. Tom O'Halleran, a Republican who helped Bee negotiate the final budget deal, said many of the business community’s goals were contradictory. Even though they were asking for a property tax cut, business groups also were lobbying for more education funding and to prevent a cut in AHCCCS funding that would shift some health-care costs to the private sector, all while pushing a ballot initiative to fund transportation projects that would increase sales taxes.
“It’s talking out of two sides of your mouth,” he said.
Dead issues
A variety of proposals withered on the vine during the final hours of the session. That happens every year, as legislative leaders invariably declare ¡No mas! while some bills are still awaiting votes. But the magnitude of what wasn’t addressed speaks to the monumental breakdown of the legislative process, Barnes said.
“It wasn’t idle matters that fell by the wayside,” he said.
Among the policy matters that never came up for their final votes in the waning hours of the session:
n A bill that would have created a state-level guest-worker program.
n A measure that would have allowed Pima County to ask voters to increase the sales tax to fund improvements for a pair of baseball stadiums used in spring training.
n An omnibus energy bill aimed at increasing use of renewable energy and increasing energy efficiency in schools and new construction.
n Legislation that would have given tax breaks to businesses that manufacture solar panels in Arizona.
n A pair of referendums that would have let voters decide whether the property tax should be either repealed or suspended for another three years.
The budget proved to be such a distraction that many lawmakers weren’t open to considering other legislation, said Rep. Lucy Mason, a Prescott Republican who sponsored the pair of energy bills left on the docket.
“It was a colossal meltdown, and it just created this black hole that sucked all of these lingering bills … into it,” she said.
The anger within the Senate Republican caucus over the budget was a factor in her omnibus energy bill’s death, Mason said. Several of that chamber’s more conservative Republicans threatened to filibuster the bill if it was brought to the floor for discussion on the final day, reacting to the procedural maneuvers used the day before to limit debate on the budget bills.
“It’s so disappointing to see that there’s a contingent of people that just don’t want to hear the issues,” she said. “They don’t want to learn, they don’t want to listen, then they want to obstruct with everything they’ve got.”
Rep. Sam Crump, a Republican from Anthem, sponsored the two property tax referendums that never received a Senate vote. The secretive budget process kept issues at bay all session long, he said, because lawmakers were never sure what would or wouldn’t be included in the budget.
Making more use of the Appropriations committees to draft the budget would make the process more transparent, he said, and not disrupt normal legislative business as much.
“Let’s hash it out like — not that Congress’ spending is any kind of a model, but at least they have an appropriations process and discuss things in the open,” he said.
Budget acrimony
Acrimony over the budget is just one more difficult issue facing a Republican Party in Arizona that is already “in the midst of a civil war,” said Barnes.
The cycle is predictable enough: With a majority comes power, which ensures there will be some dissention and even infighting.
“It’s almost like the way winter follows fall,” Barnes said. “These things go in a cycle, a cycle that lasts decades.”
One doesn’t have to look hard to find evidence of the infighting. In addition to the Arizona Chamber’s threat that it will target of some Republican candidates this fall, the Free Enterprise Club is setting its sights on ensuring a pair of the Republican supporters of the budget won’t win their elections.
Voeller said his group will support Steve Pierce, O’Halleran’s opponent for the District 1 Senate seat. Also drawing the ire of group is Rep. Pete Hershberger, a Tucson Republican running for the Senate; the Free Enterprise Club is supporting the more fiscally conservative Al Melvin.
Political consultant Constantin Querard, president of consulting firm DiCessio, said he thinks the state of Arizona’s economy and its budget will be campaign issues.
“If you want to talk about the state’s economy and how the state spends — or misspends — your money, it’s something to talk about,” he said. “The notion we’re going to get out of the problem by relying on photo radar and lottery tickets — people aren’t buying it.”
Querard, who is managing Melvin’s campaign against Hershberger, sees O’Halleran as being more vulnerable to attacks on his budget vote. There already were stark differences between the fiscal positions of Hershberger and Melvin, and that race will likely revolve around social issues, Querard said, while the District 1 Senate race is more likely to focus on financial issues.
O’Halleran worked to pass “the governor’s budget” through a Republican-led Legislature, Querard said, and Pierce likely will make that a focal point of the campaign.
But O’Halleran said characterizing the budget as only including Napolitano’s initiatives is flat incorrect.
“Many people want to say that was the governor’s budget, but you can see what her original cut levels were and where our cut levels are,” he said. “She wanted a lot more additional spending than she got.”
Indeed, the final budget included $343 million of agency cuts and an additional $339 million in fund sweeps. In Napolitano’s February budget proposal, she called for less than $125 million in agency cuts and about $100 million in sweeps.
Her February budget plan also relied on $90 million in revenue from photo radar and $31 million generated by increasing the number of state tax auditors to balance the budget. Neither of those revenue streams was included in the final budget.
The bottom line, O’Halleran said, is the budget allows Arizona to sustain needed programs during the deficit. And if it becomes campaign fodder, that’s fine by him.
“I have to do things not based on what my next election looks like, but on what’s the best public policy,” he said.
Reagan, too, knows her Republican colleagues are upset at the budget and her support of it. And though she is not facing a challenge in the primary election this year, she has still heard some of the criticisms.
But the budget deal that was approved was as good as it was going to get, she said. If the session had dragged on any longer, the spending would have increased, she contended.
Reagan also pointed to a pair of provisions she was able to include in the final package, one that makes the state cover excess utility costs for schools next year and one that increases the tax credit for businesses that do research and development.
The excess utilities component means the Scottsdale Unified School District won’t have to fire the 170 teachers on the chopping block in order to pay its electric bill, which is paid by a special property tax that Reagan said costs residents of her district $8 million a year.
The R&D tax credit expansion, meanwhile, means a number of Scottsdale businesses will be able to expand their operations, she said.
The two provisions she fought for, Reagan said, are the only tax-relief components in the budget.
“It isn’t like I was being some rogue, bad Republican,” she said. “I could have voted ‘no,’ and maybe I would have felt better, but that wouldn’t have been representative of my district.”
Despite the bad blood surrounding the budget now, Reagan is confident lawmakers will be able to work together next year.
“I would really think it was petty if, six months from now, someone was harboring feelings about what happened in July,” she said.
Barnes shares that optimistic outlook.
“Yes, it’s been the roughest and most disappointing session I’ve seen in 20 years,” he said. “But we should be optimistic, because the Legislature is a flower that blooms every year. There will be new members and possibly new leadership.
“It will be a new day.” ?