If Gov. Doug Ducey wants to pass a budget that pockets higher tax collections due to changes in federal tax law, he may have to work across the aisle to get it done.
Sen. J.D. Mesnard told the Arizona Capitol Times that Ducey is in for a long and bumpy ride this legislative session after the governor vetoed a bill, backed by all but one Republican lawmaker, to offset estimates of higher tax collections this year by roughly $150 million or more.
What Ducey calls a windfall, Republican legislators call a dramatic spike in taxes.
Mesnard, R-Chandler, said his GOP colleagues won’t stand for it. And if Ducey is dead set to get his way, the most likely scenario for passing a budget entails the governor and legislative Democrats teaming up to roll Republican leadership, Mesnard said, perhaps as late as June.
“I’ve been around a long time. I can see rolls coming. And I think the present situation is so toxic that that is an inevitability,” he said.
“Rolling” leadership can take many forms, the most dramatic being a full replacement of the GOP leadership teams in the House and Senate if they refuse to advance bills supported by the majority of lawmakers.
The most recent, and less drastic, example came in 2013. Then-Gov. Jan Brewer, a Republican, was at odds with many GOP lawmakers about expanding the state’s Medicaid program. So Brewer and legislative Democrats teamed up with a handful of Republicans and threatened to remove House and Senate leadership if the Medicaid expansion legislation was blocked.
The chamber leaders relented, keeping their positions, but losing any power to control the flow of legislation through their chambers.
Mesnard’s comments come as the full Senate prepares to vote on two bills that highlight the staring contest GOP legislators find themselves in with Ducey, and could exacerbate the divide between the governor and his own party.
Republican senators on the Finance Committee advanced SB1166, a bill that would reduce income tax collections by partially conforming to changes in federal tax code that were signed into law by President Trump in late 2017. The maneuver would “decouple” certain income tax deductions from the federal code, including a deduction for state and local taxes and a deduction for interest on home mortgages.
Another measure, SB1481, would extend the deadline to file state income tax by two months, from April 15 to June 15. It passed the committee on February 13 with bipartisan support.
Though the method differs, the result of SB1166 is fundamentally the same as an earlier bill, also sponsored by Mesnard, that lowered income taxrates. SB1166, as did the earlier version, seeks to reduce the tax burden on Arizonans filing their 2018 tax returns.
Ducey vetoed that initial proposal, which he criticized as an “irresponsible measure that hastily changes Arizona’s tax laws without any reliable data to back it up.” There’s no reason to think Ducey will accept a second attempt to lower tax collections, as the governor has made it clear he wants to conform with the federal tax code on his terms.
Specifically, Ducey said conformity should be agreed to in the context of budget negotiations. The governor has dug himself into a hole with that stance, Mesnard said, since Ducey can’t get his way without legislative approval.
“I don’t know how a budget with a $200 million individual income tax increase ever gets out of the Legislature without really strong Democratic support,” Mesnard said, noting the sooner Ducey starts negotiating with the minority party, the sooner the session will wrap up. “Unless those negotiations with the Democrats start now, I think we’ll be in session until June.”
Sen. David Livingston, R-Peoria, echoed Mesnard’s disdain for the situation the governor and the legislators – by declining to act on conformity until now – have put themselves in. While he doesn’t like Mesnard’s latest plan to reduce harm to taxpayers, doing nothing is far worse, he said.
And he, like Mesnard, refuses to support a budget in which Ducey gets his way.
“I will not vote on a budget that raises $100 million, $200 million, $300 million in income taxes on the citizens of this state just because we don’t do conformity,” Livingston said during the Finance Committee vote.
House Republicans are similarly flustered by Ducey, according to Rep. Anthony Kern, R-Glendale, who told the Capitol Times he’s “pissed” at the governor, “and I think the caucus is pissed, too.” And he won’t vote for a budget that includes higher tax collections, either.
“I’m not going until conformity is taken care of, and if that means staying here until the fall, we stay here until the fall,” Kern said.
Senate President Karen Fann said talk of the governor “rolling” GOP legislators on the budget is premature and unproductive.
Though she acknowledged the budget negotiations this year will be tough, particularly given the power dynamics in the narrowly divided House, that doesn’t mean Republicans can’t work something out with Ducey.
“No issue – I don’t care what the issue is – should be in such a position that it creates this kind of a problem where threats are going on or people are talking about rolling each other. That’s ridiculous,” said Fann, a Prescott Republican. “Somehow, we’ll sit down and we’ll figure it out. But we can certainly do that without threats.”
A spokesman for Ducey declined to comment on Mesnard’s prediction of budget mayhem.
“We aren’t going to negotiate budget issues through the media,” said spokesman Patrick Ptak. “We continue to have productive discussions with leadership.”
Both Senate Minority Leader David Bradley and House Minority Leader Charlene Fernandez expressed reservations that the relationship between Ducey and legislative Republicans would deteriorate to the point that the governor would turn to Democrats for help.
“No one’s talked to us about that. I can’t imagine them doing that,” said Fernandez, D-Yuma.
Nonetheless, Fernandez said she’s hoping Ducey won’t budge and that some Republicans will realize they’ll just have to come to the side of the Democrats, who are supportive of the governor’s simple conformity plan. But that is, in fact, one method of rolling leadership, Fernandez acknowledged.
“We’re not actively out there trying to pull people,” she said. “We would not be disrespectful to the speaker. He’s got his caucus. We’ve got ours.”
Bradley, a Tucson Democrat, said his caucus is prepared to work with Ducey, if needed.
“I can’t speak to the discord of [Ducey’s] party, if it’s there,” Bradley said. “But obviously if they are divided, we’re going to try and take advantage of that to the extent that we can.”
Yellow Sheet Editor Hank Stephenson and Arizona Capitol Times reporters Katie Campbell and Carmen Forman contributed to this report.