Spending 2020: From $1B windfall to survival

When they returned to work in January, Arizona lawmakers faced a financial situation colleagues everywhere would envy: an extra, unbudgeted $1 billion.

At the time, their biggest challenge appeared to be deciding how to spend that windfall. Should they slash taxes? Build roads and bridges? Pour more money into education?

Then spring hit, bringing with it a wider spread of a disease that had once been an abstract threat on foreign shores. Arizona, and the United States at large, hunkered down and the economy ground to a virtual halt.

Almost overnight, that $1 billion surplus became an estimated $1.1 billion deficit.

“At the beginning of the session, we were all talking about how we were swimming in money,” Sen. J.D. Mesnard said. “We have enough, if you add up everything right now, to tread water. If it gets much worse, we could sink.”

The Chandler Republican, who spent last fall crafting an ambitious plan to cut about $300 million in taxes, primarily through property tax adjustments, is one of many lawmakers who shelved spending plans when the coronavirus pandemic hit.

While he still supports tax cuts in principle and maintains that Arizona’s previous revenue cuts positioned the state to have a strong economy that could weather downturns — though his Democratic critics would say the opposite — Mesnard does not plan to push for his original tax package or any other tax cuts when the Legislature reconvenes. At this point, the state shouldn’t be doing anything to increase or decrease revenue, he said.

“As much as I was pushing for tax cuts, it’s hard for me to see that because it does have an economic impact right away,” Mesnard said.

The staunchest advocate for tax cuts in the House, meanwhile, says there still might be an opportunity to put some money back in the hands of taxpayers, albeit at the expense of extra cash in state coffers. Rep. Ben Toma, R-Peoria, was the champion of an omnibus tax proposal that would have cut revenues by   $161 million in the 2021 fiscal year alone.

That proposal, like many others, “is probably not on the table,” he said, citing changing needs in the age of coronavirus. But that doesn’t mean the underlying principle is dead.

“We have to seriously consider helping certain businesses and taxpayers survive,” he said.

But diminishing state revenues in any manner isn’t in the cards for Rep. Regina Cobb, R-Kingman, who as chair of the House Appropriations Committee plays a significant role in setting spending priorities for the state. To be fair, neither is increasing taxes – a proposal that would be anathema for the majority of Republican lawmakers.

“When you’re coming back [to the Legislature], you’re coming back to just focus on the deficit, to focus on COVID,” she said.

Tucson Rep. Randy Friese, Cobb’s counterpart on the committee, is among the chorus of Democrats who see the majority’s fondness of tax cuts as something that has crippled Arizona’s ability to cope with crises both financial and epidemiological. He said that to start, no option should be discounted — even tax increases, however sacrilegious they may be in Arizona politics.

“Revenue generation needs to be on the table,” Friese said.

Either way, it’s clear the Legislature’s focus during its eventual return will be on righting the ship. Budgetary priorities from the good old days are looking increasingly unlikely to move forward, including plans favored by Gov. Doug Ducey.

“Project Rocket,” a Ducey plan to invest around $44 million in per-pupil funds for low-income and poorly-performing schools, might not be possible to pull off this session, said Rep. Michelle Udall, R-Mesa.

“I hope that we can keep it in the mix, but obviously we don’t know at this point,” Udall said.

Udall shepherded the bill through her own House Education Committee and through an occasionally hostile Appropriations Committee, where Democrats and Udall’s fellow Republicans expressed misgivings. But by the time COVID-19 hit, the legislation was still awaiting a full hearing in the House.

Now it looks like it’ll be stuck in limbo, at least until next session.

“Unfortunately for many members, there are a number of bills that just aren’t going to make it to the finish line,” said House Speaker Pro Tempore T.J. Shope, R-Coolidge.

Some of these bills were personal and won’t be relinquished easily. Senate Majority Whip Sonny Borrelli, R-Lake Havasu City, pushed for a $19 million appropriation to help build an 80-bed care center for veterans in Kingman. Similar centers exist in Phoenix and Tucson and are being built with state funding in Flagstaff and Yuma, leaving the Mohave County area the one part of the state without a dedicated veterans’ home.

Borrelli, a retired U.S. Marine Corps gunnery sergeant, said he will continue to advocate for state funding for the veterans’ home as soon as the state can afford it. But for now, all he and the veterans in western Arizona can do is wait, he said.

“We’ll just weather this storm,” Borrelli said. “We need to make the state well again before we start spending on things that are really not that hot.”

Sen. Sylvia Allen, R-Snowflake, is pinning her hopes on the federal government. Allen and Rep. David Cook, R-Globe, introduced bills to allocate $15 million toward constructing a bridge over Tonto Creek, following a tragic Thanksgiving incident in which three children drowned after being washed away by flood waters.

Residents of the rural community of Tonto Basin now have two options to reach basic services on the other side of the creek – crossings through the riverbed, which becomes treacherous during a monsoon or after snowmelt, or by driving more than 70 miles on a forest road that can also become impassable during bad weather.

Legislative funding for a bridge over the creek was in drafts of the fiscal 2021 budget before COVID-19 forced lawmakers to abandon their original budget plans, pass a pared-down version and get out of Phoenix, Allen said. Now, with state dollars unlikely and Gila County unable to cover the full cost of a new bridge, Allen is stepping up her advocacy for the project to receive federal grant dollars.

“I will continue to see what I can do for funding this bridge,” Allen said. “I’m just heartsick because it was in the budget.”

Allen’s not alone in hoping the feds step up. Shope said he’s still waiting to see whether Congress will pass a fourth stimulus package, which could free up extra funds to help pass smaller proposals from the session — expanding access to broadband in rural Arizona, for example. But national Republicans and Democrats have been so far unable to reconcile different visions for how the plan should take shape.

“To the extent that exists, there may be some things we can do,” Shope said.

Higher-than-expected revenues at the start of the year raised Democratic politicians’ hopes for their own budget requests. Sen. Lela Alston, D-Phoenix, passed a bill out of the Senate that would have increased to $250 the meager $75 monthly stipend the state makes available to grandparents, aunts, uncles or other relatives who take in children their parents can’t care for anymore.

Gov. Doug Ducey called for doubling the stipend to $150 in his State of the State Address, and some increase was likely to appear in the budget. Alston also had reason to believe another issue she has long pushed for — expanding property tax subsidies for low-income seniors who risk losing their homes because they can’t afford their property taxes — could make it this year because Cobb expressed interest in including that $5 million appropriation in the budget.

Both requests are now dead, at a time when Alston fears her constituents in a high-poverty central Phoenix district, and Arizonans across the state, will most need the extra help. Grandparents who may have been working part-time jobs to help pay for the children they didn’t expect to raise are losing those jobs, and low-income seniors face losing their houses, Alston said.

“A month ago, I saw a silver lining on some of these issues,” she said. “And now to imagine it’s not going to happen at all, it’s very emotionally wearing on me.”