Senate passes repeal of car registration fee, showdown with Ducey imminent

Arizona Gov. Doug Ducey gestures while giving his state of the state address talking about Arizona’s economy, new jobs, and the state revenue Monday, Jan. 14, 2019, in Phoenix. (AP Photo/Ross D. Franklin)

State lawmakers are picking another fight with Gov. Doug Ducey over taxes and fees.

On a 24-6 margin the Senate voted Monday to repeal a year-old $32-a-vehicle registration fee designed to fund the state Highway Patrol. The measure now goes to the House.

But even if it gets approved there − and there appears to be strong support for that − it faces an uncertain future.

Ducey built his budget on the presumption the state will collect about $185 million a year from the levy. And he has sent warnings that he would veto the measure if and when it reaches his desk.

Press aide Patrick Ptak said Monday the governor’s views have not changed.

But given the level of support there are more than enough votes for an override if lawmakers opt to pursue the issue.

The Senate vote to pursue the repeal despite threats of a veto comes just weeks after Ducey quashed yet another effort by lawmakers to limit the tax bite on Arizonans. That measure would have required a $150 million reduction in individual income tax rates to compensate for an identical additional amount the state will collect due to changes in federal tax laws.

Monday’s vote is a reversal of sorts for lawmakers who approved the fee just a year ago. But Sen. Kate Brophy McGee, R-Phoenix, said lawmakers were promised at the time that the fee would be only about $18 for each vehicle.

But here’s the thing: Lawmakers never set the fee themselves. That would have required a two-thirds vote of both the House and Senate.

So proponents did an end-run of sorts, crafting the measure in a way to leave the actual levy up to John Halikowski, director of the state Department of Transportation. He was told to set it high enough to cover the cost of the Highway Patrol and have some left over.

But the fallout from that back-door effort came back to haunt lawmakers when ADOT began sending out vehicle registration renewal notices in December, with the fee now nearly twice as high as lawmakers were promised.

“I think $32 is too high,” Brophy McGee said Monday in voting to repeal it.

Sen. Jamescita Peshlakai, D-Window Rock, who also supported repeal, said one problem with the fee is that it amounts to a sharp increase in what many owners have to pay to register their vehicles.

Registration fees are based on the value of the vehicle, a figure that drops every year. That means that, at a certain point, those who hang onto their wheels pay as little as $10 a year.

What that also means, Peshlakai told colleagues, is that costs have quadrupled for some of her constituents.

And then there’s the question of who benefits.

The purpose of funding the Highway Patrol out of the new fee was to free up gasoline tax revenues that now help finance the agency. That, in turn, was supposed to make more money available for road construction and repair.

Peshlakai said she’s not convinced that helps those in rural areas.

“Every time the state adds fees and taxes and nickel-and-dimes us, especially for highways, then the benefits are kept down here in the Valley or in the urban area,” she said.

Sen. Andrea Dallesandro, D-Green Valley, acknowledged that $32 fee set by ADOT is far more than what lawmakers were told in voting for the measure last year. And she agreed with Peshlakai that the levy is regressive, with people who own expensive luxury vehicles paying the same as those with much older cars.

But Dallesandro said she voted for the bill last year as a method of bringing more dollars into state coffers for critical needs including public education. And on Monday she was unwilling to support outright repeal, with no prospect of replacing those dollars.

Sen. Lisa Otondo, D-Yuma, also voted against repeal based on the needed revenues.

“We look at our forests, our infrastructure, our public education system, a lot of things that government should be taking care of,” she told colleagues. “But if we remove this fee … we will be $185 million negative on the general fund.”

Anyway, Otondo said, lawmakers need to put that $32 fee into perspective, especially with the idea that using it to fund the Highway Patrol would mean more money for roads.

“I can hit a pothole and that’s going to cost me more than $32 to fix it,” she said, saying some roads are “unsafe” because of the gas tax revenues that have been siphoned off for other priorities.

Sen. Sylvia Allen, R-Snowflake, who voted against the fee last year, did a bit of “I told you so” with her colleagues in choosing to let the head of ADOT set amount to avoid the requirement for a two-thirds vote, accepting the verbal promise of $18, and now appearing surprised at it coming back at $32.

One option to replace the revenues from the $32 fee would be to reduce the fee to $18 − the amount promised − and then make up the difference with higher gasoline taxes.

Rep. Noel Campbell, R-Prescott, has been proposing a gas-tax hike for years, pointing out the current 18-cent-a-gallon levy has not been changed since 1991. But he has yet to get approval from his colleagues for the plan. And Ducey has been steadfast in his opposition to any tax hike while claiming the $32 is a fee.