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Issue: Inflation

Brnovich files appeal in tuition dispute with regents

Arizona Attorney General Mark Brnovich announces a lawsuit against the Arizona Board of Regents on Sept. 8. The suit alleges ABOR is not adhering to a constitutional requirement that tuition for residents attending state universities be “nearly as free as possible.” (Photo by Katie Campbell/Arizona Capitol Times)
Arizona Attorney General Mark Brnovich announces a lawsuit against the Arizona Board of Regents on Sept. 8. The suit alleges ABOR is not adhering to a constitutional requirement that tuition for residents attending state universities be “nearly as free as possible.” (Photo by Katie Campbell/Arizona Capitol Times)

Attorney General Mark Brnovich wants the Court of Appeals to rule he has the right to sue the Board of Regents over what he claims is illegally high university tuition, arguing that he has a constitutional right and obligation to protect taxpayer funds.

In new filings Wednesday, Brnovich argued that Maricopa County Superior Court Judge Connie Contes got it wrong earlier this year when she ruled that his office can sue only when specifically authorized by statute or when given permission by the governor. She rejected his arguments that he has broad powers to sue when the state has an interest. Gov. Doug Ducey, who is openly hostile to the lawsuit, has not given Brnovich the go-ahead.

But Brnovich said his office was set up in the Arizona Constitution as a separate and independent agency. And he warned of implications of requiring him to get permission to go to court, particularly to enforce constitutional rights.

“If specific legislation is required to permit the attorney general to enforce those rights, the Legislature and governor may decline to provide it and thereby possibly avoid the check on their powers the people intended,” he contends. And Brnovich sniffed at the idea that his powers to go to court are subject to permission from Ducey, saying such a ruling would interfere with his ability to get a court to take a look when state officials were acting beyond their legal powers.

“The alternative is that the governor or other executive-branch officials can simply decline to follow the law, which would promote executive supremacy at the expense of other branches, the people, and the rule of law,” Brnovich argued.

The fight is over contentions by Brnovich that the regents, in allowing tuition to increase by more than 300 percent since 2002, are violating a constitutional mandate that instruction be “as nearly free as possible.” He said the hikes far outstrip inflation overall and even increases at other public universities.

Board members have argued that the sharp price hikes became necessary because of cuts made in state funding.

A decade ago per-student aid from the general fund was $7,962; for the current year the figure is $4,098. And if inflation is factored in, current aid is worth only $3,572.

Brnovich argues that costs for students have gone up more than the reduction in state aid. But ultimately the lawsuit comes down to the question of whether the regents, in running the university system, are complying with that “nearly free” mandate.

Key to that is the attorney general’s contention that the regents have effectively ignored that mandate in their annual tuition-setting process.

“ABOR’s official policy did not even include as a criterion — let alone give primary weight to — the actual cost of instruction when setting tuition,” Brnovich said. Instead, he said, the regents look at other factors, ranging from the availability of financial aid to how much public universities in other states charge their students.

The entire appeal would be unnecessary had Brnovich secured Ducey’s consent to filing suit. But Ducey, who won his first election four years ago on claims of excessive tuition increases, has been openly dismissive of the attorney general’s litigation.

“Our universities are accessible and affordable,” the governor told Capitol Media Services last year, calling them “quite a value.” And Ducey said he believes that the universities are in compliance with that constitutional “nearly free as possible” requirement.

Ducey said he and lawmakers had to make some difficult decisions in prior years, making sharp cuts in funding for higher education and other priorities. What that means, he said, is the regents are doing the best they can to keep tuition not only affordable but maintain a high level of education.

He even took a slap at Brnovich for filing suit, criticizing the attorney general for going to court without first trying to talk with the regents.

Even if Brnovich gets the appellate court to rule he does have a right to sue, that still leaves other legal hurdles.

The most significant is a 2007 ruling by the Arizona Supreme Court tossing out a lawsuit filed by then-state Rep. John Kromko and other students challenging a nearly 40 percent year-over-year increase in tuition.

The justices acknowledged the constitutional mandate. But they effectively called the language nebulous — and judicially unenforceable.

“At best we would be substituting our subjective judgment of what is reasonable under all circumstances for that of the Board (of Regents) and the Legislature, the very branches of government to which our constitution entrusts this decision,” wrote Justice Andrew Hurwitz for the unanimous court.

Hurwitz said the regents set tuition “after making a series of policy decisions” about the quality of the state universities and the level of instruction to be offered. Once those decisions are made and the Legislature decides how much it will fund, the remaining costs are covered through tuition.

The justices acknowledged the cost of tuition could be reduced if the regents and lawmakers made different policy decisions, like reducing faculty salaries or increasing class size. And they said the students, in challenging the tuition, effectively are arguing for different decisions, something the justices said is beyond their powers.

Brnovich contends this case is different, as he is challenging the legality of how the regents set tuition, not a specific increase.

But if the courts don’t buy that argument, Brnovich has a fallback position, telling the judges they should reconsider — and overrule — that 2007 ruling.

Fix inflation, don’t pass big spending bills

President Joe Biden speaks on Tuesday, July 6, 2021, in Washington. (AP Photo/Evan Vucci)

As an Arizona business owner, I’ve seen the pain of higher prices facing our business and our employees. It’s not news that Arizonans are feeling the effects of inflation – from the grocery store to the gas pump. Prices of basic goods have soared to the highest rate in 40 years. Households across the country have seen electricity bills spike, and there is little relief in sight.

These rising prices are having a negative impact on Arizonans. A recent poll from the National Association of Wholesaler-Distributors found that 64% of Arizonans have already felt the impact of higher inflation. We have been working to recover from the pandemic, and now is certainly not the time to hamper that recovery or cause prices to rise even more.

Douglas York

In his State of the Union Address, President Biden prioritized the same massive new spending measures that were included in his Build Back Better agenda. While it may have had a new name, these are the very same policies that would increase operating costs for businesses, driving prices up even further for Arizona consumers when our state is already seeing inflation outpacing the national average.

Our state has always valued common sense solutions and pro-growth policies, and that continues to hold true today. In that same poll, 56% of Arizonans agree that requiring American businesses to pay more in taxes than their competitors in China and Europe would hurt our state. Arizonans understand higher taxes and higher spending lead to inflation, and they don’t want to see policies enacted that will put us at an economic disadvantage, especially compared to Chinese or other foreign companies.

We need Washington to focus on policies that will help keep Arizona competitive – not massive new spending bills filled with politicians’ pet projects or pipe dreams.

As an Arizona business owner, I have a responsibility to my employees and to our customers to step up and say something. Even as the White House mistakenly continues to push the same tax and spend agenda, it is my hope that our Senators Krysten Sinema and Mark Kelly reject these massive new spending proposals and listen to their constituents instead. Nearly two-thirds of our fellow Arizonans agree on this point: now is not the time to pass enormous spending bills that could make inflation worse and put our economic recovery at risk. My employees, our customers, and everyday Arizonans want their elected officials to focus on economic growth, job creation, and putting a lid on inflation.

Douglas W. York is president and CEO of Ewing Irrigation & Landscape Supply in Phoenix.

 

 

Inflation drives minimum wage raise

wages

Workers at the bottom of the Arizona wage scale appear to be in line for a pay hike of $26 a week.

And you can credit — or blame — inflation.

New figures reported Tuesday by the Bureau of Labor Statistics show that prices as measured by the Consumer Price Index for urban consumers, have risen 5.3% between August 2020 and last month.

What makes that important is that laws approved by voters in 2006 and again in 2016 require annual inflation adjustments based on the August figures.

The official calculations won’t come until later this week when the Arizona Industrial Commission, which is in charge of such things, makes the pronouncement.

But tacking that 5.3% figure onto the current $12.15 an hour minimum translates out to 64.4 cents. Rounded to the nearest nickel, as the law requires, puts it at 65 cents and pushes the minimum up to $12.80.

By contrast, the federal minimum wage, which can be adjusted only with congressional action, has been stagnant at $7.25 an hour since 2009.

How many workers might be affected is unclear.

The most recent data compiled by the state Office of Economic Opportunity, from last year, shows a series of occupations where at least 10% of workers earn less than $12.15. That was at a time when the minimum wage was just $12.

The biggest category is in food preparation and service. And those workers make up about 8.5% of the state economy.

But Steve Chucri, president of the Arizona Restaurant Association which opposed both voter initiatives, said the latest scheduled increase won’t have as big an effect as might be anticipated, at least not immediately. The issue, he said, is supply and demand.

It starts with what Chucri said has been a bounce in customers.

“I think this is probably going to be the busiest June on record for Arizona restaurants,” he said. “A lot of people stayed here.”

At the same time, however, there are more eating places looking for help than people willing to do the job.

“We had a lot of people leave our industry,” he said, some going back to school and others pursuing a different line of work.

What that did is drive up wages, to the point where Chucri said some restaurants were paying $24 an hour to hire someone to wash dishes.

But he said this 65-cent-an-hour wage boost — and others that will follow annually — will make a difference.

“Now there’s a new floor,” he said, which will set the minimum that eating establishments can pay even when there are more people looking for work.

Other industries also are likely to be affected.

Another group with starting wages that are less than the new minimum are those in what are called health care support occupations, everything from pharmacy aides to physical therapy aides.

Then there are all the folks who now are earning more than $12.15 but less than the new minimum. They, too, are in line for a raise.

And, on top of that, you add in the people who currently are being paid $12.80 who may argue that they are entitled to be paid more than the minimum.

Arizona voters mandated in 2006 that the state have its own minimum wage not tied to the federal figure. That set the bottom of the pay scale here at $6.75 an hour, $1.60 higher than what federal law mandated at the time.

Plus there were inflation adjustments.

A decade later, voters decided to turbocharge the raises, imposing a $10 minimum with automatic increases up to $12 as of 2020.

Last year, with inflation at just 1.3%, that gave workers at the bottom an extra 15 cents an hour.

What’s driving this year’s inflation figure is the cost of fuel.

BLS reports that gasoline prices are up 41.9% over a year earlier.

There also has been a 21.1% increase in the cost of piped gas, versus a 5.2% hike in electricity.

Grocery prices, while rising, are up just 3.0% year over year. But the cost of eating out has risen by 4.7%.

The other big hike has been the price of used cars and trucks, up 31.9%.

At least part of that might be attributed to the fact that there are fewer new vehicles available, with supply chain issues holding up computer components and other parts that manufacturers need. New car prices are up 7.6% year over year.

Shelter prices, including rent and what the BLS calls the owners’ equivalent rent of residences, are up 2.8% nationally.

Of note, that figure is significantly less than for the Phoenix metro area, for which the agency does a separate computation. There, shelter costs are up 6.4% in the past year, a reflection of the tight housing market in Arizona and rising rents and home prices.

The latest state minimum wage hike comes as voters in Tucson are set to decide in November whether to impose their own $15-an-hour minimum wage by 2025.

That would start with setting the floor at $13 on April 1, going to $13.50 in 2023 and $14.25 in 2024 before hitting the target. After that, as with the state minimum, adjustments would be made based on inflation.

Inflation, rising energy costs could squeeze families

Americans have their hands full right now. The COVID pandemic has made a major resurgence. And at the same time, inflation just hit 7 percent—the highest rate in 40 years. 

Matt Kandrach

Some of the toughest increases are happening in energy costs. In December, gasoline prices were up roughly 50 percent from a year ago. And the price of natural gas nearly doubled in 2021, driving up heating costs and power bills. 

As bad as things are, they could be worse. Energy prices in Europe have exploded, and European households are now paying 54 percent more for their electricity than two years ago—even with aggressive government assistance to reduce costs. Essentially, the pain felt across the Atlantic might be a preview for what’s coming in the U.S., if we don’t make an energy policy course correction. 

Europe’s energy crisis can largely be attributed to a bungled approach to the renewable energy transition—with “decarbonization” goals overwhelming considerations for energy security and affordability. Well-operating coal and nuclear power plants have been closed across the continent, and at the same time investment in new natural gas production hasn’t kept pace with demand. Europe’s all-in pivot to renewable power—and away from a balanced, on-demand energy mix—has left it painfully vulnerable to spiking natural gas prices and Vladimir Putin’s willingness to sell Russian gas. 

Without the dispatchable fuel diversity it once had, Europe has no safety valve when natural gas prices soar and renewable power won’t cooperate. There’s simply no alternative available when the wind won’t blow or cloudy skies curtail solar power. In those instances of a winter freeze, limited natural gas supplies, and exorbitant prices, the optionality and fuel security provided by a now-dismantled coal fleet is deeply missed.  

In comparison, the United States still has a significant coal fleet to take pressure off consumers. And in markets where coal still remains an option, coal plants have picked up market share and helped to keep power prices in check by reducing dependence on higher-priced natural gas.  

However, in states that have followed Europe’s lead—and rushed to close coal plants—consumers are paying the price. New England, for example, is facing a 30 percent hike in electricity costs due to the jump in natural gas prices. And consumers are now on alert to conserve power since the region’s grid operator is warning of potential outages during a prolonged cold spell. 

The return of energy-driven inflation and the European energy crisis are stark reminders that the global energy transition could take a very perilous road if we don’t recognize the value of a balanced energy mix. Americans need fuel diversity to ensure that consumers will be shielded from price spikes, fuel shortages, and underperforming renewable power generation. Maintaining fuel diversity means recognizing the coal fleet while there’s still time—as an invaluable and affordable insurance policy that must be retained for American consumers and our economic recovery. 

 

Matthew Kandrach 

President of Consumer Action for a Strong Economy 

Judge allows ballots to say proposed tax on rich affects all taxpayers

No new taxes

Voters will be told that a proposed income tax hike on the richest Arizonans to fund education also would affect taxpayers who earn a lot less.

But the effect on the average Arizonan would be nowhere near as much as the impact on those at the top of the income scale.

Maricopa County Superior Court Judge Connie Contes ruled that the evidence supports the argument that Proposition 207, if approved, would repeal a 2015 law designed to protect Arizonans from paying more income taxes solely because their wages keep pace with inflation.

The net effect in revenues is only a fraction of the $690 million a year that the Invest in Ed initiative is designed to raise by boosting income taxes on individuals earning more than $250,000 a year and couples with incomes exceeding $500,000. Legislative budget staffers put the first-year cost to Arizona taxpayers of the repeal of inflation indexing at about $49 million.

To put that into perspective, though, that is only 1 percent of the $4.38 billion in individual income taxes expected to be collected this budget year from all Arizonans.

Without future inflation indexing, however, those effects would grow, to the point that legislative budget staffers predict the cost in a decade would be $288 million. But it is impossible to say what percent of the total income taxes owed by Arizonans that would be in 2028.

Contes’ ruling is a major setback for initiative organizers who argued that the entire burden of the plan for new education funding would fall entirely on the top 1 to 2 percent of Arizonans. Unless they can get the ruling overturned by the Supreme Court, it gives foes of the tax hike the ability to urge people to reject the initiative because it could affect them, too.

The judge’s ruling was not entirely a loss for initiative proponents.

Contes said Arizona law requires that explanations of ballot measures provide an accurate description and avoid advocacy. She said that explanation, which goes into brochures mailed to the homes of all 3.6 million registered voters, must be “an evenhanded assessment that does not omit, exaggerate, or understate material provisions.”

But Contes said the language crafted by the Republican-controlled committee effectively advocates that people vote against the measure by telling them they would be repealing a law “that protects taxpayer from paying more income tax due to inflation.” And Contes said the GOP lawmakers, who oppose the initiative, were overplaying the effect of the inflation-indexing provision, calling in an “ancillary issue” to the main focus of hiking income taxes on the most wealthy to fund education.

But Contes found no fault in lawmakers telling voters that the proposed 8 percent tax rate on earnings above $250,000 for individuals and $500,000 for couples will be increasing by 76.2 percent, with the 9 percent rate proposed on individual earnings above $500,000 and $1 million for married couples filing jointly translating out to a 98.2 percent increase.

The current tax rate on those earnings is 4.54 percent. So initiative proponents had sought to have the change described as an increase of 3.46 and 4.46 percent, respectively, essentially the difference between the current and proposed rates. And they argued the higher figures lawmakers sought to use in the description was designed to scare off voters.

Contes, however, said there’s nothing wrong with the analysis.

“This language is mathematically accurate and not misleading when considered in the contexts of each full sentence,” she said, pointing out the analysis does mention both the current and new rates. Anyway, Contes said, large percentage figures used in describing the impact on high-wage earnings “may be as or more likely to cause of voter to favor the initiative rather than against it.”

Attorney Jim Barton who represents initiative supporters said no decision has been made whether to appeal.

Whether the initiative even makes the ballot remains undecided.

Earlier this month Maricopa County Superior Court Judge James Smith slapped down a bid by the Arizona Chamber of Commerce to keep the measure off the November ballot. He rejected the claim that initiative organizers mislead people into signing petitions by understating the effects of the tax hike and failing to inform them that it also would affect income tax bracket indexing.

That case is now before the Arizona Supreme Court.