Arizona lawmakers pass $9.8 billion budget

Arizona lawmakers passed a $9.8 billion budget early Friday that provides 2 percent pay hikes for public-school teachers, a modest income-tax cut for residents and $1 billion in extra bonding authority for the state’s public universities.

The final spending plan for fiscal 2018 featured key elements Republican Gov. Doug Ducey outlined in January, as lawmakers began their work. But it also underwent significant changes at the hands of Republicans in the House and Senate. No Democrats voted for the budget.

“Arizona has passed a budget that prioritizes education, boosts teacher pay, and invests in our universities — all without raising taxes on hardworking Arizonans,” Ducey said in a statement minutes after the budget won final approval at 3:55 a.m. “For the first time in a decade, we are making significant and lasting investments to grow our state.”

Ducey won’t receive the budget bills until Monday, when the Senate is scheduled to send the final documents to his office. He is expected to sign them.

The teacher pay raises are phased in over two years instead of the five years Ducey wanted. The state’s revenue loss from the income-tax cut grew from less than $3 million to more than $10 million. And lawmakers changed the timing and revenue source for the university bonding plan, which had bottled up the budget for weeks.

In the end, Ducey hailed the overall plan as “an education budget” that will help cut turnover among K-12 teachers and invests in the universities in a way that will benefit the state into the future.

Democrats rejected the budget, saying it should have boosted teacher pay by 4 percent in a single year, and watched helplessly as their hopes to expand the lifetime limit on cash aid to the poor faded.

State government workers will get no pay raises under the budget.

Heading into a climactic week for the Legislature, Democrats had hoped to serve as Ducey’s needed partners on the bonding measure.

Instead, the governor cut deals with Republicans that made the budget more palatable to conservatives, who didn’t want Democrats shaping the state’s spending plans.

Senate President Steve Yarbrough, R-Chandler, said the bonding measure, which had been holding up the budget, came together after several frantic days.

“We worked our fannies off. I wanted to light my hair on fire multiple times the last two days,” he said, adding that it took “amazingly little” to earn support from conservative Republicans. “It really cost nothing.”

K-12 or universities? 

Democrats found themselves in the uncomfortable position of having to choose between two of their long-standing priorities: K-12 and universities. Most of the Democrats voted against the university bonding package, but not, they said, because they don’t support higher education. Rather, this was the year to make a push for improved teacher pay.

Sen. Martin Quezada, D-Glendale, vented the anger and disappointment that had built over recent days as it became clear Ducey had bypassed Democrats.

“I can tell you from my caucus, we fought for universities when there was a proposed $115 million cut,” Quezada said. “We fought for the universities when that was negotiated down to a much more manageable $99 million cut. We were the ones standing up fighting for the universities.”

Overall spending will grow 1.9 percent in the next year, and the state is expected to finish the budget year with about $42 million left over. By comparison, the state is expected to finish the current budget year with $171 million.

There is more than $200 million in new spending in the budget, with most of it concentrated in K-12 education.

At the center of the new budget are 2 percent pay raises over the next two years for public-school teachers. That will pencil out to a $1,000 over two years raise for many teachers, something House Speaker J.D. Mesnard called a significant step. The raises will cost $34 million extra in 2018.

Mesnard echoed Ducey in calling the coming year’s spending plan an “education budget,” noting increased spending for K-12 as well as universities.

Democrats took a darker view. House Minority Leader Rebecca Rios, D-Phoenix, said the budget harms Arizona’s most-vulnerable citizens, citing insufficient for the services to the developmentally disabled and the refusal to restore to two years a cash-aid program for poor families.

Ducey has maintained the extra money for K-12 in the budget is only part of an influx of cash that includes $3.5 billion from extra land sales under 2016’s Proposition 123 and any raises school districts are giving on their own.

Arizona School Boards Association spokeswoman Heidi Vega said the legislative language involving the 2 percent pay raises is written so that they are more like bonuses, not permanent increases.

MORE: Are Arizona teachers getting a raise or a bonus?

Daniel Scarpinato, Ducey’s deputy chief of staff, accused Democrats and education-advocacy groups of plotting, “‘How can we try to play politics? How can we try to delegitimize this policy?’ And this was the best they could come up with.”

Ducey also secured support for several other education priorities he had outlined in his January State of the State address, though they were heavily reworked. 

The state will offer $38 million in results-based funding for schools that reach certain achievement targets. Analysts expect two-thirds of the money to go to schools where fewer than 60 percent of the students receive free or reduced-price lunches.

There is also $8 million that districts can use for all-day kindergarten or to set up an early-literacy program.

For the first time in a decade, the state will help pay to construct new schools. That will cost $63 million in the next year for six schools in Chandler, Vail and Queen Creek.

The university bonding program, which is intended to fund construction of research facilities, will receive direct appropriations from the Legislature starting at $27 million in 2019 and running through 2043.

Ducey had sought to allow the schools to keep sales-tax revenues to help pay for the bonds, but many lawmakers were unwilling to effectively hand over their funding duties for decades.

Highway funds, labor costs and tax cuts

As Republican leaders reworked the bonding plan, Ducey agreed to let rural areas again keep $30 million in annual highway funds that had been redirected in recent years to help pay for the state police budget needs.

The state’s Medicaid program and the Department of Economic Security will divide an extra $33 million that is used mainly to fund higher labor costs after voters in November boosted the minimum wage with passage of Proposition 206.

The disability community maintains the extra money won’t cover their extra labor costs, but those needs were essentially deferred to next year’s legislative session.

The state will forgo more than $100 million in revenues, mostly due to the continued phase-in of corporate tax cuts passed in 2011. But the budget includes a tax cut, something Ducey has promised to propose every year. 

Republican lawmakers did him one better, enlarging the governor’s original $2.8 million proposal to $10 million by raising the personal income tax exemption by $100 over the next two years. It’s estimated to save $4 per family. After that, the state will adjust the exemption with inflation annually. 

The increased exemption, brought by Rep. Michelle Ugenti-Rita, R-Scottsdale, was one of the provisions added in recent days to bring in more Republican votes.

Rep. Anthony Kern, R-Glendale, said he agreed to vote for the bonding measure if the House prohibited universities from hiring contract lobbyists with state general funds, and included another measure that would ensure cities couldn’t vote on tax hikes in years when few voters show up at the polls. The elections measure for cities passed the House but failed in the Senate.

 “I’m not really in favor of the bonding issue … but I needed to feel comfortable moving my vote over to a ‘yes,’ and the only way I could feel comfortable is if there were some conservative items that I wanted to bring forth,” Kern told The Arizona Republic. He said he asked for four items, and got three. 

Rep. Kelly Townsend, R-Mesa, got a bill to tighten rules on removing children from their family homes.

Another move took $1.6 million from the Maricopa County Sheriff’s Office for gang enforcement, a move that critics called a partisan affront to new Democratic Sheriff Paul Penzone. Penzone, in a news conference called at the same time the funding debate was happening, said the citizens of Maricopa County are the losers.

Republic reporter Alia Beard Rau contributed to this article

How they voted:

$1 billion university bonding package,
House Bill 2547/Senate Bill 1532

Senate Republicans in support:

• Sylvia Allen, Snowflake
• Nancy Barto, Phoenix
• Sonny Borrelli, Lake Havasu City
• Kate Brophy McGee, Phoenix
• Judy Burges, Sun City West
• Karen Fann, Prescott
• David Farnsworth, Mesa
• Gail Griffin, Hereford
• John Kavanagh, Fountain Hills
• Debbie Lesko, Peoria
• Steve Montenegro, Litchfield Park
• Frank Pratt, Casa Grande
• Steve Smith, Maricopa
• Bob Worsley, Mesa
• Kimberly Yee, Phoenix
• Steve Yarbrough, Chandler

Senate Republicans opposed:

Senate Democrats in support:

• Sean Bowie, Phoenix
• Olivia Cajero Bedford, Tucson
• Steve Farley, Tucson
• Robert Meza, Phoenix
• Catherine Miranda, Phoenix

Senate Democrats opposed:

• Lupe Contreras, Phoenix
• Andrea Dallesandro, Tucson
• Katie Hobbs, Phoenix
• Juan Mendez, Tempe
• Lisa Otondo, Yuma
• Martin Quezada, Glendale

House Republicans in support:

• John Allen, Scottsdale
• Brenda Barton, Payson
• Rusty Bowers, Mesa
• Paul Boyer, Phoenix
• Noel Campbell, Prescott
• Heather Carter, Cave Creek
• Todd Clodfelter, Tucson
• Regina Cobb, Kingman
• Doug Coleman, Apache Junction
• David Cook, Globe
• Mark Finchem, Oro Valley
• Drew John, Sierra Vista
• Anthony Kern, Glendale
• Jay Lawrence, Scottsdale
• Vince Leach, Tucson
• David Livingston, Peoria
• J.D. Mesnard, Chandler
• Darin Mitchell, Litchfield Park
• Paul Mosley, Lake Havasu City
• Jill Norgaard, Phoenix
• Becky Nutt, Clifton
• Kevin Payne, Peoria
• Tony Rivero, Peoria
• Don Shooter, Yuma
• T.J. Shope, Coolidge
• David Stringer, Prescott
• Maria Syms, Paradise Valley
• Bot Thorpe, Flagstaff
• Kelly Townsend, Mesa
• Michelle Udall, Mesa
• Michelle Ugenti-Rita
• Jeff Weninger, Chandler

House Republicans opposed:

• Eddie Farnsworth, Gilbert
• Travis Grantham, Gilbert

House Democrats in support:

House Democrats opposed:

• Lela Alston, Phoenix
• Richard Andrade, Glendale
• isela Blanc, Tempe
• Reginald Bolding, Phoenix
• Kelli Butler, Paradise Valley
• Mark Cardenas, Phoenix
• Cesar Chavez, Phoenix
• Ken Clark, Phoenix
• Eric Descheenie, Chinle
• Kirsten Engel, Tucson
• Mitzi Epstein, Tempe
• Diego Espinoza, Tolleson
• Charlene Fernandez, Yuma
• Randy Friese, Tucson
• Rosanna Gabaldon, Green Valley
• Sally Ann Gonzales, Tucson
• Daniel Hernandez, Tucson
• Ray Martinez, Phoenix
• Tony Navarrette, Phoenix
• Pamela Powers Hannley, Tucson
• Rebecca Rios, Phoenix
• Jesus Rubalcava, Gila Bend
• Macario Saldate, Tucson
• Athena Salman, Tempe

$9.8 billion budget bill,
HB 2537/SB 1532

Senate Republicans in support:

Senate Democrats opposed:

House Republicans in support:

House Democrats opposed:

• All 24 members present (Rep. Wenona Benally of Window Rock was absent)

READ MORE:

Blog: See how the budget came together

Pet projects, policies move Arizona budget deal closer to finish line

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