Cash-flush Arizona lawmakers seek options to budget impasse

AZ lawmakers at budget impasse

Despite being flush with cash, lawmakers remain at an impasse over the coming year's state budget.

PHOENIX - Arizona is flush with cash but lawmakers are weeks into an impasse over the coming year’s state budget and now looking at unusual solutions to try to break the logjam.

Republicans who hold just one-vote majorities in both the Senate and House began openly talking about enacting a "continuation budget," that funds government at only the current year’s level plus inflation adjustments last week.

That plan surfaced April 18 in the House, although its prospects appear iffy at best.

The current budget is $12.8 billion, and Republican Gov. Doug Ducey had proposed increases for the coming fiscal year to being spending to $14.3 billion.

Gov. Doug Ducey looks to increase state spending to over $14B

In his last budget plan, Gov. Ducey listed water, education, and border security as his priorities.

The new plan would leave a whopping $5.3 billion in surplus cash sitting in the state treasury, even after accounting for $1.7 billion in income tax cuts enacted by the Legislature over unified Democratic opposition last year. The actual tax cuts are on hold because opponents collected enough signatures to block them until voters can approve or reject them in November.

Republican-aligned groups sued over the referendum, but a judge in December said voters have a right to decide the issue. The Arizona Supreme Court is hearing an appeal of that decision on Tuesday, the same day lawmakers hit the 100th day of the 2022 session, when they are supposed to adjourn for the year. GOP lawmakers hope to avoid the referendum by repealing the tax cuts and reenacting them.

A host of other priorities would also be bypassed, with an eye toward enacting them after the main budget or in a special session.

"We have one constitutional duty and that is to pass a budget," Republican Senate President Karen Fann said last week. "We have been waiting five weeks to get moving on the budget and we have not been able to do it because we have a member who is trying to negotiate the budget all on his own."

House Republican Majority Leader Ben Toma also used the "constitutional duty" term.

"And passing a continuation budget appears to be just a good option at this point," Toma said. "We don’t have to (adjourn) right away afterwards. However, that is an option. And once we have finished with our constitutional duty, then we can do that, and if members want to stay unreasonable then at least we did what we were supposed to do."

The one person that Fann was referring to is Republican Sen. Paul Boyer of Glendale, who wants to use $850 million to boost K-12 school funding nearly to the level voters approved in 2020 the now-dead Proposition 208.

Education supporters left devastated after court strikes down Prop 208

Proposition 208, which was approved by voters in 2020, raised tax on high-earning Arizona residents to fund education spending. That initiative is now dead, after it was struck down by a judge on March 11, months after the state's Supreme Court ruled that the tax was unconstitutional if it put schools above a legal spending cap. FOX 10's Stephanie Bennett reports.

Boyer also wants school vouchers for all low-income students, which does not have the votes in the House. He’s seeking the elimination of a constitutional spending cap on schools that almost led to a statewide shutdown earlier this year, and a permanent solution to a looming school funding "fiscal cliff" looming from Proposition 123. Voters approved that measure designed by Ducey in 2016.

It boosts yearly withdrawals from the state land trust and added new state cash to increase school funding by about $300 million a year but those stop after 2025. Boyer wants voters to continue that funding and to eliminate a provision that caps school funding at 50% of the state’s general fund spending.

Education supporters react to Arizona legislature's passing of education funding waiver

In recent weeks, schools across Arizona have been facing the possibility of big budget cuts, as the State Legislature debates a waiver to constitutionally-mandated budget limits for education in the state. The waiver passed on Feb. 21. FOX 10's Stephanie Bennett reports.

School spending is close to that mark, and any funding increases or cuts in other parts of the state’s spending would trigger an end to yearly school inflation increases.

Also left behind if a basic budget is enacted would be a host of priorities Ducey laid out in his January budget proposal for the fiscal year that starts July 1. The $14.3 billion spending plan envisions spending $1 billion over three years for new water projects, spending on a new earned income credit for low-income taxpayers and much more.

"I could be wrong, but I don’t know that he wants his legacy to be leaving $5 billion for his predecessor and not tackle water," Boyer said.

Boyer said he also believes it is unrealistic to assume anything can be accomplished in a special session. That’s especially true in an election year when members want the session to end so they can campaign.

Ducey spokesman C. J. Karamargin said Monday that the governor is confident a budget deal will be reached considering his shared priorities with GOP lawmakers and agreement on important policy matters.

"And because of the policies we have worked on together we have created a $5 billion surplus," Karamargin said, "This will get worked out."

House Speaker Rusty Bowers said weeks of impasse has left the Legislature "stymied."

"We can move around, but the governor’s said he’ll veto anything that isn’t part of the budget plan that he wants," Bowers said.

Sen. Rebecca Rios, the Democratic minority leader, acknowledged that there’s an interest among Republicans to get around Boyer by passing a basic budget with some Democratic support. But she said she doubts if anyone actually believes Ducey will sign it given his stated spending priorities, which includes big raises for the Department of Public Safety and a host of other new spending.

"I really don’t see him all of a sudden saying OK, yeah, never mind," Rios said. "So why spin our wheels and send something to the governor that we’re pretty darn sure he’s going to veto?"