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Legislature passes sales tax referral

It took nearly a year, but lawmakers finally gave Gov. Jan Brewer the special election for a temporary sales tax increase she had been calling for since last March.

The issue was a point of contention between Republican lawmakers and Brewer for much of last year, and the inability of legislators to approve the election, at times, ground the budget process to a halt.

The fight over the tax increase also was the major reason legislative action dragged on through the summer in a special session.

Republicans cited a negative economic impact in their opposition to the sales tax increase. Democrats, meanwhile, opposed the measure because they weren’t allowed to help craft the overall budget proposal.

But because the state’s problems are so severe, some Republicans said they had no choice but to let voters weigh in.

“I’m not sure this is a wise thing to do, but the way we have dithered… I feel forced into voting for this,” said Rep. Nancy McLain, a Republican from Bullhead City.

The House approved the sales tax referral by a 34-25 vote on Feb. 4.

The measure had bipartisan support, garnering votes from 22 Republicans and 12 Democrats.
Republican opponents said the economy was too bad to raise taxes.

Plus, some said, the root of the state’s budget problems is over- spending.

“We don’t need a tax increase. There’s no doubt about that,” said Rep. Carl Seel, a Republican from Phoenix. “All we need is some members with the moral courage and fiber to do what’s right.”

But Rep. Jim Weiers, a Phoenix Republican, said the problem was too large to fix by cutting spending without new revenue.

“It’s a reality of what is, not what you want it to be,” he said.

Several of the dozen House Democrats who supported the ballot referral said their constituents had asked them to let voters decide whether to raise taxes.

Democratic opponents, though, pointed out that the tax increase wouldn’t solve the entire deficit and there is no guarantee that education, health care and public safety will be saved from deeper cuts.

“I cannot vote for this because it’s not fair and it won’t work,” said Tucson Democrat Daniel Patterson.

Although the House voted for the special election, it did not give final approval to four other special session bills that would delay education funding and borrow $750 million against future lottery revenue and the sale and lease-back of state buildings.

House Majority Whip Andy Tobin said it was unclear if the votes were there to pass those bills. He suggested there might be enough support if the Senate acts on a House bill that was aimed at creating more jobs.

“We’ve still got issues with the numbers. We’ve still got issues on the jobs package,” he said.
Although House Republicans would like swift Senate action on that bill, which would cut business taxes and create economic development tools, Senate President Bob Burns has said he won’t hear the bill until all the budget work is done.

The House delayed action on the special session measures until they had been approved by the Senate. That occurred on Feb. 2, when senators voted to pass all six measures.

Burns acknowledged it took a significant effort by Republicans and Democrats to muster the votes to move the budget bills out of his chamber, even though he said he wouldn’t “put it in the fiscally responsible plan category.”

The special session bills would generate $1.2 billion for fiscal 2010.

Meanwhile, the sales tax increase would raise $943 million in fiscal 2011, $968 million in fiscal 2012 and $1.1 billion in fiscal 2013.

It would be too late for the sales tax to generate revenue, even if approved in May, to help close the fiscal 2010 deficit.

The vote on the sales tax increase was tenuous in the Senate.

Sen. Meg Burton Cahill, a Democratic from Tempe, kept changing her mind as the votes were registered. But she finally relented and provided the 16th vote for the measure after Sen. Carolyn Allen went to her desk and talked to her.

“I just reminded her of the individual issues out there and that, ‘We need you, girl, as never before,'” Allen said.

Seven Senate Democrats voted for the sales tax referral. Five Democrats voted against it.
Nine Republicans voted for the referral, and seven voted against it.

Even the leadership teams were split.

Special Session Bills:
• SCR1001 would raise the state sales tax by 1 cent for the next three years. The measure is conditional on voter approval. A special election will be held on May 18.

• S1001 would authorize a special election on May 18 to allow voters to decide whether to increase sales taxes by 1 cent for the next three years.

• S1002 would defer payment of $350 million to K-12 and $100 million to universities until fiscal year 2011.

• S1003 would require the Arizona Department of Administration to issue $450 million in state Lottery revenue bonds. It also would require the Arizona Department of Administration to sell state buildings for $300 million and then lease them back.

• S1004 would authorize the Arizona Lottery to continue until 2035.
This bill is conditional on the enactment of S1003.

• S1005 would require pro-rated income tax deductions for people who work in the state but live outside of Arizona and to pay Arizona income taxes. Right now the state requires those taxpayers to pro-rate only itemized deductions. This bill would require standardized deductions to be pro-rated as well.

– Reporter Luige del Puerto contributed to this story.


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