Budget details: Ducey gets ‘rainy day’ money, GOP gets to scrap vehicle license fee

By: - May 20, 2019 5:05 pm

Gov. Doug Ducey will get his billion-dollar rainy day fund while Republican lawmakers will get to gradually erase a controversial vehicle licensing fee under a budget agreement forged by the governor’s office and legislative leadership.

Rank-and-file lawmakers received briefings on the $11.9 billion budget plan throughout the day on Monday. It remains to be seen whether the deal for the fiscal year 2020 budget, which begins July 1, has enough votes to pass.

One of the biggest sticking points in the protracted budget negotiations had been Ducey’s insistence that Arizona increase its rainy day fund, a reserve of cash to offset budget shortfalls, to $1 billion. It currently has about $468 million.

Under the agreement, the fund will be increased to Ducey’s desired $1 billion.

Legislative Republicans had balked at the size of Ducey’s request for the fund, proposing instead to pay off a sizeable chunk of the state’s K-12 education budget rollover, which stands at about $920 million. The rollover is an accounting trick that allows the state to delay funding to public schools from the end of one budget year to the beginning of the next, and it effectively constitutes a loan from the K-12 system to the state’s general fund.

The proposed budget will only pay off $30 million of that rollover, and not until fiscal year 2022.

However, GOP lawmakers get a major objective of theirs: the elimination of the new vehicle license tax, which has been a flashpoint of Republican opposition all session.

A small handful of Republicans joined Democratic lawmakers last year to authorize allowing the director of the Department of Transportation to impose a fee to help fund the state’s highway patrol. ADOT Director John Halikowski estimated that the fee would be $18, but ended up setting it at $32, which generates about $107 million in revenue annually.

Under the budget agreement, the VLT would phase out over five years, starting with a reduction to $26 per car next year, and eventually reaching zero in 2024. The state’s general fund will replace that funding.

And the budget resolves the session-long fight between the governor’s office and legislature over tax conformity. Under a plan that became public earlier this month, Arizona will conform its income tax code to the 2017 federal tax overhaul, which will eliminate a host of itemized deductions.

The $217 million the state took in by not conforming for the 2018 tax year, along with $85 million it will gain by imposing sales taxes on out-of-state goods purchased online, will be used to fund tax cuts for most Arizonans starting in the 2019 tax year. The state’s standard income tax deductions of $5,312 for individuals and $10,631 for married couples will be raised to match the federal standard deductions of $12,000 and $24,000. The state’s income tax rates will be reduced by very small amounts, and one tax bracket will be eliminated.

Rather than use the additional 2018 revenue to bolster the rainy day fund, the budget plan will use $190 million to pay off debt from when the state mortgaged several government buildings to help cope with a massive budget deficit in 2010. The state will save $24 million annually by paying off that debt.

The budget proposal will also include:  

  • $88 million in building renewal funding for K-12 schools.
  • $70 million for a “results-based funding” program for K-12 schools.
  • $35 million in one-time funding for universities, to be used at their discretion.
  • $15 million to fund a teachers’ academy at Arizona’s universities.
  • $1.6 million to avoid a freeze in the KidsCare program, which provides health care to low-income children.

Ducey’s chief of staff, Daniel Scarpinato, touted several other K-12 funding provisions. He noted that the proposed budget provides an additional $136 million in district additional assistance funding that Ducey and lawmakers cut during a budget shortfall in 2015, and that the full $371 million cut will be eliminated by 2023.

In addition, the budget will include $15 million for schools to hire new counselors and school resource officers, and will fund the next installment of the 20-percent pay raise for teachers that Ducey committed to last year.

The budget agreement doesn’t include funding for the Arizona Department of Corrections to replace faulty cell door locks at the Lewis prison. Instead, the department will replace the doors using money saved by not filling vacant positions, possibly with additional funding next year.

Now that Ducey, House Speaker Rusty Bowers and Senate President Karen Fann have a deal, they must win over Republican legislators. And several holdouts could be problematic.

Sen. Michelle Ugenti-Rita, R-Scottsdale, had pledged to vote against the budget if the VLT fee wasn’t eliminated. She declined to comment on the phase-out or whether it would be enough to earn her vote until after she’d received a briefing on the budget plan.

Perhaps more problematic is a dispute over a proposal by Sen. Paul Boyer, R-Glendale, to extend the statute of limitations for victims of childhood sexual abuse to sue their abusers and others who allowed the abuse to occur in civil court.

State law currently allows people just two years from the time they turn 18 to sue, which Boyer decried as among the shortest windows in the United States. He wants the statute of limitations to extended to at least seven years, but also wants to give people who are past that range the opportunity to sue, either a one-year window for everyone after the bill is passed, or a set timeframe after a person discovers that they’ve been abused.

Boyer has emphatically rejected a proposed compromise pushed by Bowers that would extend the statute of limitations to 12 years after a victim turns 18 because it lacks the other provisions he wants. He is refusing to vote for a budget until his bill gets a vote, and Sen. Heather Carter, R-Cave Creek, has stood by Boyer in withholding her budget vote until his with him in that pledge.

Carter on Monday didn’t explicitly say she will refuse to vote for the budget until Boyer gets a vote on his bill, but suggested that her position hasn’t changed.

“Some issues transcend everything else we do down at the Capitol, and I think protecting and giving a voice to children who have been assaulted is a priority that this legislature should undertake,” Carter said. “This issue is the most important thing we need to talk about first. And we can do two things at once, so I will also be having budget conversations. But this issue is a priority.”

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Jeremy Duda
Jeremy Duda

Jeremy Duda is a Phoenix native and began his career in journalism in 2003 after graduating from the University of Arizona. Jeremy Duda previously served as the Mirror's associate Editor. Prior to joining the Arizona Mirror, he worked at the Arizona Capitol Times, where he spent eight years covering the Governor's Office and two years as editor of the Yellow Sheet Report. Before that, he wrote for the Hobbs News-Sun of Hobbs, NM, and the Daily Herald of Provo, Utah. Jeremy is also the author of the history book “If This Be Treason: the American Rogues and Rebels Who Walked the Line Between Dissent and Betrayal.”