PHOENIX β State lawmakers are moving to adopt a $10.4 billion spending plan for the coming fiscal year that finds funding for a teacher-pay hike plan β in part, by passing along expenses to local taxpayers, including those living in Tucson Unified School District.
The budget is built on the premise that additional auditors at the Department of Revenue and other tax enforcement measures can bring in an additional $55 million. It also relies on getting an extra $35 million out of hospitals by increasing an assessment, saving $52 million in Medicaid prescription drug costs, and taking $20 million from a consumer-fraud settlement that Attorney General Mark Brnovich is negotiating with Volkswagen.
And taxpayers in nine school districts will pay more in local taxes through an accounting maneuver on desegregation programs, including a $16.7 million shift to homeowners in TUSD.
TUSD and Maricopa unified school districts are the two most affected in the state. But a political maneuver by Sen. Steve Smith, R-Maricopa, will protect taxpayers in his district, leaving only Tucson residents with a big hit.
Political interests
This spending package has enough leeway to allow Republican Gov. Doug Ducey, up for re-election this year, to keep the promise he made when campaigning for office four years ago to cut taxes every year.
The plan increases the amount that people receiving military pensions can exempt from state income taxes. The figure is currently $2,500.
But the increase will be to just $3,500 rather than the original $10,000 proposal the governor made in January. And it has a delayed effective date until 2020.
There are some other carrots in the package for various political interests.
Those include an additional $4.2 million in one-time funding for Arizona State University, $2.2 million for the University of Arizona and $1.6 million for Northern Arizona University.
But Republican lawmakers also insisted on another $2 million for continued operation of the βeconomic freedom schoolsβ that were established several years ago at UA and ASU with seed money from the Koch brothers, with $100,000 of that to develop a βcivics and constitutionalism curriculum for K-12 and postsecondary education institutions.β
The package also includes $2 million for the arts, $1 million for food banks and $13 million for programs for the developmentally disabled, about $1 million more than last year.
Also in the spending plan is $7 million to pay the stateβs share of new veterans homes in Flagstaff and Yuma and $4 million for rural fire departments to help in fire prevention.
The big ticket items, however, are the $273 million for the 9 percent pay raise being offered to teachers this coming school year and $100 million to start restoring money the state took in prior years in aid to schools for things like computers, books and minor repairs.
To make the books balance, however, the governor has given up on his proposal to have the state pay for more school-resource officers as part of his yet-to-be-approved school-safety plan. His request to hire more Department of Public Safety officers to serve on the Border Strike Force and to capture wrong-way drivers also is taking a hit.
Once again there will be no state aid for Pima and Maricopa community colleges.
Desegregation spending
Then thereβs the accounting maneuver on desegregation programs.
A 1980 voter-approved constitutional amendment caps primary property taxes at 1 percent of a homeβs full cash value. That means all primary taxes β generally the basic costs of running government and schools β can be no more than $10 for every $100 of assessed valuation.
Most residential property is assessed for tax purposes at 10 percent of its βfull cash value,β a figure that is supposed to represent its market value. So on a $150,000 home, the maximum primary property tax can be no more than $1,500.
But the cost of desegregation programs comes on the primary tax side.
And once a homeownerβs primary property tax rate hits $10, the state is responsible for the excess.
The budget plan places the cost of desegregation programs into the secondary levy, the one for voter-approved measures β and the one that has no cap.
Property tax shift
Even in school districts not near that 1 percent cap, the shift from primary to secondary levy also will have an effect because of how property taxes are computed.
Added together, all the additional revenues will leave the state with a βstructural balanceβ of $150 million by the end of this coming fiscal year, legislative budget staffers predict. That is the surplus of ongoing revenues compared with ongoing expenses.
But Rep. Eddie Farnsworth, R-Gilbert, pointed out that structural balance is set to decrease to less than $45 million the year after that β and a relatively minuscule $2 million by the following fiscal year.
That, said Farnsworth, is not a good trend line.
βThatβs a valid point,β acknowledged Richard Stavneak, staff director of the Joint Legislative Budget Committee.
βThe direction is not encouraging.β
But House Speaker J.D. Mesnard, R-Chandler, seemed less concerned, saying it simply reflects the big investment in teacher pay in the next three years.