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Ducey, GOP legislative leaders agree on $11.8B spending plan

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Gov. Doug Ducey would get much of what he asked for as part of an $11.8 billion budget deal struck with Republican legislative leaders, including savings of more than a billion dollars.

Budget documents obtained by the Arizona Capitol Times show a path forward for Republicans to adopt a spending plan and end protracted negotiations that have pitted Ducey’s desire to save against Republican efforts to pay down debt and spend more of a $1 billion  surplus.

The compromise, hashed out over the weekend by the Governor’s Office and GOP leaders from the state Senate and House of Representatives, achieves those savings and debt-payoff goals while also increasing state spending by roughy $1.4 billion over the $10.4 billion budget adopted in May 2018.

A plan to stash away $542 million by July 1 would bring the total balance of Arizona’s rainy-day fund to more than $1 billion. The governor has turned this key legislative proposal into a common talking point, with his tale of turning a $1 billion budget deficit he inherited in 2015 into a $1 billion surplus and more than a billion dollars in savings.

Rank-and-file Republican lawmakers, who were presented budget details Monday, were wooed by plans to pay off $220 million in debt, offset higher taxes due to changes in federal tax law and phase out a controversial $32 public safety fee over five years.

The early returns seemed promising, as some GOP representatives were spotted high-fiving one another as they walked onto the House floor Monday afternoon.

Rep. Leo Biasiucci, R-Lake Havasu City, said he was  impressed by a budget presentation from House leaders. Rep. David Cook, R-Globe, said the rural caucus was pleased with the budget details they’d discovered even before getting a full briefing from House leadership.

Some Republican senators were similarly pleased.

“What I see, I like,” Senate Majority Whip Sonny Borelli, R-Lake Havasu City said.

Lawmakers will have to wait another day for budget bills, however, as the House adjourned without introducing a package of bills. The Senate has yet to do so either, meaning committee hearings on the spending plan won’t occur until Wednesday at the earliest.

Some parts of the spending plan seem designed to have bipartisan appeal, a sign that Republican leaders may be hedging their bets in case any GOP lawmakers hold out for their own pet projects.

A range of Republican senators, in particular, have threatened to vote against the budget for a variety of reasons.

Sen. Michelle Ugenti-Rita, R-Scottsdale, wants a clean repeal of the public safety fee.

Sen. J.D. Mesnard, R-Chandler, said Monday he isn’t satisfied with a plan to change the state’s income tax code.

Sen. Paul Boyer, R-Phoenix, has vowed to vote no on the budget unless his colleagues agree to expand opportunities for victims of child sex abuse to sue their abusers.

House Republicans are pushing a bill to increase the statute of limitations for civil lawsuits over sexual abuse, but not in a way that Boyer desires.

With that in mind, some Democratic budget priorities made it into the spending plan, at least when they align with GOP interests.

That includes a $15 million grant program for schools to hire counselors or school resource officers – with a plan to let schools decide which position to hire, not dictate the decision from the state level. There’s also $10 million in funding for the state’s Housing Trust Fund to help address homelessness, though the amount is not as much as some Democrats sought.

Democrats will also be pleased that the budget incorporates a bill, sponsored by Sen. J.D. Mesnard, R-Chandler, to set a cap on the growth of a tax credit program that provides private and parochial school scholarships to Arizona kids.

Senate Minority Leader David Bradley said the concessions to Democratic priorities are not enough.

“It appears that some of our ideas were incorporated perhaps on the premise that fulfilling a series of small requests of the minority will achieve our silence and consent,” the Tucson Democrat said. “Placating is not negotiating.”

Monday afternoon, Senate Democrats presented their own spending plan, which calls for $50 million in the next fiscal year and $40 million in future years for the Housing Trust Fund, and $34 million in ongoing funding for universities, whereas the GOP budget deal provides $35 million in one-time funding for higher education and $10 million for homelessness.

Bradley said he was confident there are enough votes to pass the Senate Democrats’ amendments – or at least pressure Republicans to bring Democrats to the table.

“I’m confident that we can thwart this effort to pass their version of the budget at this point,” he said.

But House and Senate Democrats rumored as targets for their budget votes said they haven’t been approached by Republicans.

“Generally, they don’t come to us unless they need us,” said Rep. Daniel Hernandez, D-Tucson. “And I don’t know that they need Democratic votes.”

Elsewhere, the spending plan includes enough funding to follow through on Ducey’s promise to boost teacher pay – $165 million is dedicated to a 5-percent raise for teachers, the second phase of a three-year plan to boost teacher pay by 20 percent.

There’s also extra money in additional assistance for computers, books and minor repairs, in addition to $88 million in school building renewal grants and $79 million for new school construction.

Ducey would get the 10 new employees at the Arizona State Board for Charter Schools he requested, though only five will be funded in the next fiscal year. The other five will be funded in 2020.

Republicans also agreed to boost spending on infrastructure, including a $130 million project to widen I-17 over the next three years, plus another $77 million in transportation projects spread throughout Arizona.

Pinal County farmers would get $20 million they were promised to help start building wells, a concession that’s part of the drought contingency plan lawmakers approved earlier this year.

Republicans will also be asked to agree to a tax reform package, designed by Republican Rep. Ben Toma of Yuma, that reduces the number of income tax brackets from five to four, while slightly lowering tax rates for each bracket. Combined with matching the federal standard deduction – $12,000 for individuals, $24,000 for joint filers – while also providing a new charitable tax deduction and child tax credit, that amounts to a $320 million income tax cut.

That cut is designed to offset higher income taxes caused by conforming to changes in federal tax law and an estimated $85 million in new revenue from enforcing online sales taxes. Another $24 million in interest savings, thanks to paying down debt, ensures the plan is revenue neutral.

Democrats have argued in favor of pocketing new revenue, not eliminating it with offsets.

The tax plan has already cost Republicans the support of at least one of their own. Mesnard said Toma’s plan provides tax relief to some, but not enough relief to all who are impacted by conformity.

“That’s just unacceptable,” Mesnard said late Monday after he was briefed on the budget proposal. “I won’t vote for a budget that doesn’t hold taxpayers harmless. At this moment, I’m not the only one.”

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