House finalizes budget, tax cuts, but kills ESA expansion

The Arizona House of Representatives wrapped up work Friday on a $12.8 billion budget that dramatically overhauls the state’s income tax code, shields some wealthy Arizonans from paying a voter-approved tax to boost teacher pay and mandates new civics curriculum in public schools.

Gov. Doug Ducey cheered the approval of the “landmark” tax plan and the budget.  

“This budget makes responsible, targeted and substantial investments in the things that matter while allowing hardworking taxpayers to keep more of the money they earn,” Ducey said in a press release. “It is a landmark plan and it is the result of one of the most successful legislative sessions in Arizona history.”

The bulk of the budget was approved on Thursday, but House legislators returned Friday to finish up votes on education policy provisions that accompany the spending plan. The bills were all approved along party lines, with Republicans in favor and Democrats opposed.

House Majority Leader Ben Toma, who authored the tax reforms, said the budget is a “balanced, responsible plan.” 

“The historic flat tax rate reform reduces income taxes for every Arizonan and will create a competitive business environment to attract more jobs and keep our economy growing,” Toma said in a written statement.  

Under the tax plan adopted by both chambers, Arizona will shift to two income tax rates: 2.55% for people who earn $27,272 annually and 2.98% for those who earn more than that. Legislative budget analysts estimate those cuts will reduce state revenues by about $1.3 billion annually.

And if state tax revenues hit certain thresholds over the next few years — $12.8 billion in 2022 and $13 billion in 2023 and subsequent years — lower rates will phase in, ultimately hitting the 2.5% flat rate that was initially proposed. The earliest that can happen is 2023. 

Democrats in the House called the tax plan “a slap in the face” of the voters who supported Proposition 208 last year, which increased income taxes on wealthy Arizonans to increase teacher salaries and better fund public schools. They said the tax plan violates the will of the voters to instead benefit those whose households make over $500,000. 

“This is a backdoor workaround that is not only wrong for our democracy, it’s wrong for our children,” said Rep. Judy Schwiebert, a Phoenix Democrat and teacher. “We are robbing children to give to millionaires.”

One of the companion budget bills caps income taxes at 4.5%, effectively negating the 3.5% surcharge that Prop. 208 placed on wealthy taxpayers.

Rep. Steve Kaiser, R-Phoenix, said Prop. 208 misled voters on who would be taxed by the 3.5% surcharge. He said it affects business owners, so creating a new filing mechanism would help them.

“This proposition was so distorted and not truthful,” he said of Prop. 208. “If it was truthful, it would’ve failed.”

3 Republicans join Dems to kill ESA expansion

An amendment to the K-12 education bill that would have greatly expanded eligibility for Empowerment Scholarship Accounts, the state’s school voucher program, failed after three Republicans joined Democrats.

Rep. Jasmine Blackwater-Nygren, aDemocrat and member of the Navajo Nation, said Navajo students are often seen “as poster children” to promote school vouchers. She spoke about the history of Native children going to “government-funded religious schools” that stripped them of their language, culture and, in recently uncovered cases in Canada, were also centers for abuse and death. 

Rep. Myron Tsosie, D-Chinle, also said Republican arguments that vouchers will improve public schools by increasing competition ring hollow, since the ESA program takes money away from district schools and instead gives it to private schools. 

“We should be investing in our public schools, in our tribal schools,” he said. 

Rep. Regina Cobb, who sponsored many of the education bills, said she disagrees with the statement that vouchers have not benefited tribal communities. 

“The districts have failed that area,” she said. “ESA in that area has brought diversity to all of those children and is able to give them the education that their parents want.”

Rep. Shawnna Bolick, who sponsored the ESA expansion amendment, said school choice is “a modern civil rights issue.” The Phoenix Republican added that parents should be able to pick the education for their children not by looking at a building, but by what outcome that school can provide for students. 

The measure failed when Republican Reps. Joel John of Buckeye, Joanne Osborne of Goodyear, and Michelle Udall of Mesa voted against it.

Beth Lewis, president of Save Our Schools Arizona — the group that came together in 2017 made up of teachers, parents and other advocates for public schools — praised the rejection of the ESA expansion in a statement. 

“Save Our Schools Arizona was encouraged to see the bipartisan rejection of ESA voucher expansion today. We know that the key to a strong state is strong schools, and investing hundreds of millions of dollars in private school vouchers when our public schools are funded last in the nation makes no sense,” Lewis said. “We were devastated to witness the passage of massive tax cuts and SB1783, a workaround of Prop 208. Our ongoing surplus has been built up by underfunding schools – lawmakers owe it to our children to make our schools whole before enacting tax cuts for the rich.”

New policy included in budget bills

Udall highlighted some of the areas funded with the education budget like extraordinary special needs education and said more funds are going to early literacy, gifted student, and adult education programs, and career and technical education district courses. She said those are “incredible changes.”

“This bill in no way cuts education funding,” she said. 

Rep. Athena Salman, D-Tempe, said it’s “completely wild” that a litany of education policy changes bills that were never considered by the House Education Committee are in the budget. 

“Why weren’t we given an opportunity to fully vet these in the Education Committee?” she said. “This is a Christmas tree of bad ideas for this education budget.”

One of the issues Salman and other Democrats criticised is requiring the Arizona Department of Administration to hire a non-profit, private group to administer the Public School Transportation Modernization Grants Program. Over a period of two years, the pilot program will be funded with $30 million to “support K-12 transportation innovations” and “improve access to reliable and safe transportation for students who attend school through open enrollment.” 

As has been a theme in this year’s budget talks, lawmakers passed policy issues unrelated to the budget in companion bills that are intended to make policy changes needed to implement the spending in the general appropriations bill — a practice that some critics say is unconstitutional. 

One such policy would prohibit teachers and other school staff from instruction “that presents any form of blame or judgment on the basis of race, ethnicity or sex.” Schools and teachers that break the new law could have their teaching certification revoked and face fines up to $5,000. 

The policy change is an outgrowth of a recent fervor among conservatives to reject “critical race theory,” the academic study of how racism in America shaped public institutions and laws, and how those effects are still felt today. But for modern conservatives, “critical race theory” has become a catch-all term for teaching about race and racism. 

Another measure included in the budget would require the State Board of Education to establish academic standards in civics studies to include “a comparative discussion of political ideologies that conflict with the principles of freedom and democracy essential to the founding principles of the United States.” The State Board of Education must work with the Center for the Philosophy of Freedom at University of Arizona and the School of Civic and Economic Thought and Leadership at Arizona State University to develop those academic standards. Those so-called “freedom schools” focus on free-market philosophies and were created by the Charles Koch Foundation. 

Rep. Jake Hoffman defended the new civic studies requirement and said schools should teach the stories of people who fled totalitarian governments. 

“The reality is that one of the greatest threats facing the world today is communism and totalitarianism. The threat of Marxism is on our front porch,” he said. “I am shocked that there are people that are against teaching children against the evils of Marxism and totalitarianism.”

Rep. Daniel Hernandez, D-Tucson, responded to Hoffman by arguing that white supremacy is also among “biggest threats to our nations.”

Rep. Quang Nguyen, R-Prescott Valley, shot back at Hernandez. He said communism brought death and displaced millions of families in Vietnam, where he fled from as a refugee in 1975.

“White nationalism did not put me here, communism did,” Nguyen said. “I don’t take it lightly, so don’t mock me. I lost most of my family members due to communism.”

Previously vetoed policies come back

Legislators brought back some bills that had gotten to Ducey’s desk previously but he vetoed in May to tell lawmakers to focus on finalizing a budget. 

Among those bills was one prohibiting training for all state, city, town or county government workers “that presents any form of blame or judgment on the basis of race, ethnicity or sex” and a bill that makes it a felony for an election official to send a ballot to a voter who hadn’t requested one. That provision was a response to Democratic election officials across the country, including former Maricopa County Recorder Adrian Fontes, who sought to send early ballots to all voters last year during the height of the COVID-19 pandemic. A Maricopa County judge barred Fontes from carrying out his plan for the Democratic presidential preference election in March. 

In a pushback to Ducey’s use of emergency powers to mitigate the spread of COVID-19, legislators also voted to limit a Governor’s declaration of emergency to 30 days. It can be extended to another 30 days but the legislature must approve extending the emergency if it will last more than 120 days.