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Corporation commission computer glitch leaves state arts fund short

(Deposit Photos/Ras-Slava)

(Deposit Photos/Ras-Slava)

The Arizona Commission on the Arts could face drastic budget changes, including cuts to programs and grants, because of a software glitch.  

The agency earns about $1.3 million annually from a state fund subsidized entirely by business filing fees paid to the Arizona Corporation Commission, but budget projections show the arts commission’s Arts Trust Fund is on track to be nearly $500,000 short of its average annual revenue.

The Corporation Commision website may be partly to blame.

In May, the Corporation Commission switched to a new online system that was supposed to allow for more online filing of documents and be more user friendly. Since then, Corporation Commission staff and the people that use the website have noticed several bugs with the new software.

Arizona businesses are required to file annually with the Corporation Commission and pay a $45 fee. One-third of the fee, or $15, goes to the trust fund. The rest goes to the Corporation Commission, which has also noticed an unusual drop in fee revenue, commission spokesman Nick Debus said.

The arts commission relies heavily on the trust fund, established in 1989 by Gov. Rose Mofford and the state Legislature, as a funding source since the Legislature in 2012 scrapped a general fund appropriation for the arts commission.

Records from the arts commission show the arts trust has earned more than $1.3 million every year since at least 2010. But Jaime Dempsey, executive director of the arts commission, said abysmal numbers from the first half of fiscal year 2019 indicate the fund is on pace to earn about $870,000 for the year.

“Six months ago, starting June 2018, the numbers are worse than they’ve ever been,” she said. “This fund is 30 years old and these numbers, over the last six months, we have never seen numbers like that before.”

June 2018 — just after the Corporation Commission overhauled its online system — is when the numbers took a turn and haven’t recovered since.

The arts commission gets monthly earnings updates from the Corporation Commission. Eyebrows raise when the trust fund earns less than $100,000 per month, Dempsey said. The trust fund has consistently earned less than $100,000 since July, with the monthly earnings landing somewhere between $65,000 and $96,000 per month.

Arts commission records dating back to 2010 indicate the trust fund’s monthly earnings have never dropped as low as they have in the past five months.

Dempsey said she doesn’t know what’s to blame for the sudden drop in revenue, but she assumes software changes at the Corporation Commission must play a role.

She’s not wrong.

Automatic reminder notifications sent out to all corporations in advance of when annual reports and fees are due have been paused since May, said Debus.

The reminder function on the new online system was buggy so the automatic alerts have been off since May, Debus said. He could not say how many corporations did not receive reminders in the past six months to file an annual report and pay the fee.

But filings may start to rise again soon because representatives from the Corporation Commission up until this week, took steps to send reminders to all corporations whose reports are due this month and corporations that may have forgotten to file in the past six months.

“We’re hopeful that will at least start showing that our filing numbers are coming back up,” Debus said.

The Corporation Commission is also working with its software vendor to fix the automatic reminders and turn them back on so corporations get reminders 90, 60 and 30 days out from when their annual reports and fees are due.

But Debus also pointed to a couple of other issues that may play a role in revenue drops for the arts trust fund.

Over the years, more businesses have registered as limited liability companies instead of corporations, which does not require them to pay a fee to the Corporation Commission, he said. Plus there’s always corporations that dissolve or move to other states, without properly informing the Corporation Commission, he said.

Regardless, the Corporation Commission staff plans to keep a close eye on the filings.

“We’re definitely going to be watching this very closely moving forward,” Debus said.

But if the current trend continues, the arts commission could lose nearly all of the additional funding allocated by Gov. Doug Ducey and the Legislature in the state budget finalized this year. The budget Ducey signed this year included a $2 million appropriation to the arts commission — $500,000 more than state leaders appropriated the year before.

“I don’t think that they imagined that in increasing our budget that we would spend the year cutting programs,” Dempsey said.

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