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Preliminary Senate budget defies Ducey’s priorities

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A budget proposal from Senate Republican leaders woefully fails to meet Gov. Doug Ducey’s biggest spending and saving priorities, and has isolated some rank-and-file GOP senators who’ve vowed to vote against it.

Draft budget spreadsheets obtained by the Arizona Capitol Times show that senators are unwilling to meet Ducey’s primary objective of boosting the balance of the rainy-day fund to an excess of $1 billion.

Meanwhile, some Republican senators were flabbergasted by a lack of willingness to spend on everything from health care, including $1.6 million the governor requested to end a freeze of access to Arizona’s version of the children’s health insurance program, and higher education, where the Senate provides no new funding to Arizona’s three public universities, compared to the $35.1 million Ducey requested.

“I think it’s the worst budget I’ve seen since 2015,” said Sen. Kate Brophy McGee, a Phoenix Republican. “I hate it.”

Ducey’s office did not respond to a request for comment, but the governor has been tweeting about his priorities to save and moderate new spending ever since budget documents leaked from the Senate.

“Arizona has learned from the mistakes of the past. We’re not going on a spending spree. We’re making targeted investments in the #ThingsThatMatterAZ,” Ducey tweeted Thursday afternoon.

Across the board, Senate GOP leaders proposed less in spending than Ducey desired, including:

  • $10 million less than the $20 million Ducey sought in grant money for schools to hire resource officers and counselors.
  • $5 million for a teacher’s academy, for which Ducey requested $21 million.
  • $10 million for a Pima Community College aviation center, half of the $20 million Ducey sought.
  • $400,000 to hire new staff at the state Board for Charter Schools, half of the $800,000 Ducey proposed.
  • Zero dollars for the governor’s results-based funding model, a program that provides extra money to high-performing schools, for which Ducey requested $59.7 million.
  • Zero dollars for new school construction, for which Ducey sought $141.3 million in fiscal year 2020.

There’s at least some common ground. The Senate budget provides most of the $35 million the governor requested to provide pay raises to employees at the Arizona Department of Corrections. And there’s $40 million for the first phase of Ducey’s proposal to expand Interstate 17.

But rather than save and spend, Senate Republican leaders focused on a plan to pay off debt while sitting on a cash balance of nearly $500 million.

Senate President Karen Fann has repeatedly stated that paying down debt is a top Republican priority, as lawmakers hope to realize long term savings on interest they would otherwise owe from the sale and lease of certain state-owned property during the Great Recession

Sen. Vince Leach, vice chair of the Senate Appropriations Committee, attributed the large cash balance to senators taking a three-year look at the state budget.

“When you get cash in the front, it’s like payday,” the Tucson Republican said. “You get your check and there’s cash on the first and you have to make sure there’s cash on the 30th.”

Leach said there’s consensus for the Senate’s spending plan within the chamber’s Republican Caucus, and cautioned that the budget draft is just a “good start.”

“The Mona Lisa picture, when it was half-painted, didn’t really look very good,” he said.

If Leach and other GOP Senate leaders are counting on consensus among their own members, some senators have made it clear they’re already short the 16 votes they’ll need to approve the spending plan.

Sen. Paul Boyer already announced his opposition to any budget unless lawmakers agree to his proposal to expand opportunities for victims of childhood rape and sexual abuse to sue their assailants.

Brophy McGee told the Capitol Times she won’t support any budget without the funds necessary to ensure Arizona’s KidsCare insurance program will go on once the federal government stops providing 100 percent of the funding necessary to run the program. Lawmakers previously adopted a trigger that freezes KidsCare if federal funding drops below 100 percent – later this year, the federal government will cover only 90 percent of those insurance costs.

All it takes is $1.6 million to cover the difference, but the Senate’s budget provides no funding. Brophy McGee couldn’t fathom why.

“I need to understand how we got to this place,” she said. “I am concerned that the views of all caucus members are not represented.”

Sen. J.D. Mesnard, R-Chandler, said he won’t vote for the budget if senators go along with Ducey’s plan to change the state’s tax code. Mesnard has been negotiating with Ducey’s staff for months over how to provide some relief to Arizona taxpayers who are impacted by changes in federal tax code, signed into law by President Trump in 2017.

“I told them I’m off the budget. I will not support that. It makes our tax code more progressive,” Mesnard said of Ducey’s plan.

web_mesnard_8699Mesnard said he agrees with Ducey’s proposal to eliminate certain income tax deductions and create new tax credits for dependents and charitable giving. But Mesnard and other Republican lawmakers want to alter the state’s tax brackets.

In early April, Mesnard proposed eliminating three of the state’s five tax brackets, documents show. It’s the best way to provide tax relief for those who used to rely on itemized deductions, he said.

“There has to be an acknowledgement in my view that much of the elimination of deductions or capping deductions happened at the federal on the itemization side. So increasing the standard deduction is fine, but that’s not helping those who are actually enduring most of the tax increase,” Mesnard said. “Collapsing the brackets helps to mitigate that.”

Rep. Ben Toma said he’d be shocked if Ducey’s plan for tax conformity is approved in the Senate given Mesnard’s opposition. And he’d be shocked if all 31 Republicans in the House supported it, either. He certainly won’t.

Lawmakers estimate a $155 million windfall from income taxes Arizonans already filed for this year. The conformity plans would go into effect in 2020, and would provide some relief to taxpayers when filing their 2019 income taxes.

The Senate plans to use that windfall, plus another $35 million in the budget, to buy back certain state buildings. Spending $190 million now would save the state $50 million in interest payments over the next decade, according to budget analysts.

Senate and House Democrats aren’t pleased with the Senate Republican proposal either, and hinted that their own budget priorities may hew more closely to Ducey’s wishes than those of GOP lawmakers.

“Our values are very much aligned with what’s in [Ducey’s] budget: KidsCare, [District Additional Assistance], rainy-day fund. Those issues that were important to the governor are also important to us,” said House Minority Leader Charlene Fernandez, D-Yuma.

Sen. Sean Bowie said Democrats in his chamber are unified against the Senate budget, at least the version that leaked on Wednesday. Democrats won’t stand for a budget that shorts funding for new school counselors, the Phoenix Democrat said.

“There’s a lot wrong with it,” Bowie said. “It doesn’t fund a lot of our priorities.”

Fernandez said she hopes the budget leak is far from a finished product.

“It looked like a really rough draft, very preliminary – hopefully. Maybe that’s wishful thinking because I don’t want to see any of the education [funding] zeroed out or lowered,” she said.

Mesnard said that the budget, as it was leaked, is in fact in the early stages given that it’s “very narrow in who it’s trying to please” – and that’s certainly not Democrats.

The budget is probably aimed mostly at pleasing Sen. David Gowan, a Sierra Vista Republican who chairs the Senate Appropriations Committee, “and maybe some of the leadership,” Mesnard said.

The reaction from rank-and-file Republican senators is telling, Mesnard added.

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