Senate panel OKs ballot proposal to hike special sales tax for education funding

PHOENIX — State lawmakers took the first steps Tuesday to asking voters to sharply increase the special sales tax for education, setting the stage for voters to be able to pick and choose between two separate proposals — or potentially adopt or reject them both.

With all Democrats opposed, the Senate Education Committee voted 5-3 to put a proposal on the November ballot to increase the current 0.6-cent levy first authorized by voters in 2000 to a full penny. Legislative budget staffers estimate that could raise an extra $580 million a year.

Putting the issue on the ballot avoids the possibility of a veto by Gov. Doug Ducey, who has remained adamantly opposed to any new taxes. Ducey said the state has enough money to take care of its education needs.

Meanwhile, education advocates, including the Arizona Education Association, operating under the umbrella of Invest in Education, already have filed their own proposal to raise $940 million a year for education through a surcharge on the income of individuals making more than $250,000 a year or $500,000 for married couples filing jointly. Backers have until July 2 to collect the necessary 237,645 valid signatures to put that issue on the November ballot.

That potentially paves the way for both to go to voters to choose.

But Sen. Martin Quezada, D-Glendale, worried that having two competing measures on the ballot — and lots of money spent on both — would leave voters so confused that they will reject both, leaving education with no new funds at all.

Central to the issue is the concession, even by the governor, that the allocation of state aid for education in his budget for the coming school year still would not bring state funding for K-12 education back to where it was before the recession.

The question now is how much more is needed — and how to raise it.

Ducey insists the state has enough without any new taxes. But both the Invest in Education initiative and SCR 1002 are crafted to go directly to voters, giving the governor no official voice in their outcome.

The more far reaching of the proposal is the Invest in Education initiative.

David Lujan, director of the Arizona Center for Economic Progress, one of the groups behind that measure, said polling has shown a tax on the most wealthy is the most acceptable.

He said it also makes the state income tax system more progressive, meaning those at the top pay an even greater percentage than those at the bottom. Lujan said that makes sense given that most of the tax breaks of the past decade and more have benefited corporations and the wealthy with things like additional tax breaks for capital gains.

Lujan objects to the idea of higher sales taxes in SCR 1002, saying it would place a disproportionate burden the plan will place on those at or near the bottom of the income scale who spend a greater percentage of their income on sales taxes than those at the other extreme. Lujan said that 20% of the money proposed to be raised would be borne by those earning less than $23,000 a year.

“It would only make Arizona’s regressive tax code even more regressive,” he said.

Sen. Sylvia Allen, R-Snowflake, disagreed, calling it “a fair and equal tax,” with everyone paying the same rate.

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And Sen. Kate Brophy McGee, R-Phoenix, the sponsor of SCR 1002, said there’s no way the Invest in Education measure can raise the kind of funds that Lujan predicts.

“Taxing the wealthy does not work,” she said. Brophy McGee said people who would be hit with the surcharge “are wealthy enough to take measures to not pay it.”

Phil Francis, the retired CEO of PetSmart, who has been a champion of raising money for education through sales taxes, called the Invest in Education proposal “shortsighted.” He said that any tax increase on the top wage earners will harm the ability of the state to attract and retain businesses to hire Arizona graduates.

And John Graham, CEO of Sunbelt Holdings, a Scottsdale-based real estate development firm, called the SCR 1002 “thoughtful, clean, clear and something that our business community could easily support.”

Aside from the methods of raising money, there’s another key difference between the two plans.

Virtually all of the proceeds for the Invest in Education plan would be earmarked for K-12 education. By contrast, SCR 1002 would spread the money raised among various recipients.

After some money taken off the top, the measure would give about 83% of what’s left to public schools. There also would be some cash to stabilize tuition at the state’s three universities while continuing to put dollars into technology and research.

And it also would earmark some funds for community colleges largely for trade and workforce development programs.

Lujan, under questioning from Brophy McGee, conceded that the Invest in Education proposal does nothing to help the higher education system. But he said that backers believe they need to focus on K-12.

“We have a funding crisis in our public schools right now,” he said, saying it would take an additional $4 billion a year in resources to bring per-pupil funding up to the national average.

And Sen. Andrea Dalessandro, D-Green Valley, said the need is particularly acute in public schools where a survey of schools found about 1,800 classrooms without a certified teacher.

That comparison with the national average drew a strong response from Sen. Rick Gray, R-Sun City, who said it was unfair to compare Arizona education funding to other states.

He said only about 17% of the land in Arizona is in public hands — meaning it’s taxable — with everything else in federal hands or tribal reservations. By contrast, Gray said, 98 percent of Texas is private land.

And Sen. Tyler Pace, R-Mesa, said he sees sales taxes as the most fair way to collect additional revenues. He pointed out that there are corporations that pay no income taxes.

“But all of these companies are purchasing something,” Pace said. “This (sales) tax would guarantee that those who run these large companies that are declaring billion dollars in losses are still paying some tax in our state on the things they are consuming as a business.”