Republican legislative leaders and Gov. Doug Ducey solved two big problems standing in the way of a budget deal, only to see other issues emerge as one GOP senator vowed to withhold her vote and Democrats denied them a quorum in the House.
A proposed compromise ended Rep. David Cook and Sen. Paul Boyer’s opposition to the budget by reducing — at least temporarily — a massive income tax cut, increasing the share of state income tax revenue that cities and towns receive, and paying off some of the state’s debt. Boyer, R-Glendale, and Cook, R-Globe, had withheld their votes over the size of the tax cut and the projected loss of revenue to municipalities.
However, Democratic lawmakers forced the House of Representatives to abandon plans to debate and vote on the budget on Tuesday, taking advantage of four Republicans who were attending remotely to ensure there wasn’t a quorum. Lawmakers are able to vote remotely, a rule both legislative chambers implemented in response to the COVID-19 pandemic. But the House still needs 31 members in the building to reach a quorum, and with four Republicans participating virtually, all of the Democrats except for Minority Leader Reginald Bolding left the building. That ensured there weren’t enough lawmakers to vote on anything.
Democrats are opposed to the budget, especially the income tax cut package, which is worth up to $1.9 billion in state revenue. It also gives an extra cut to high-income earners to partially negate Proposition 208, a ballot measure approved by voters last year to raise taxes on people who earn $250,000 or more per year in order to better fund public schools and increase teacher salaries.
Bolding, R-Phoenix, said lawmakers needed more time to analyze the proposed amendments that were introduced on Tuesday morning, and he said the budget was crafted without any input from the Democratic caucus, which constitutes 29 of the House’s 60 seats.
“You can’t simultaneously ignore the wishes of half the state and then take us for granted to pass a partisan budget,” Bolding said in a press statement.
“Their plan was already a massive gift to campaign donors and special interests, and full of retaliatory attacks on educators and Democratic elected officials. Dropping a dozen new amendments this morning that rewrite major portions of their plan to vote on this afternoon is inappropriate,” Bolding said. “A budget should be developed with all voices at the table, but they don’t want the public to know what’s in this plan until it’s too late.”
House Speaker Rusty Bowers, a Mesa Republican, lamented that Democrats blocked the GOP from voting on the budget, saying that they’ll try again on Thursday and noting that government services will shut down if there’s no budget in place by July 1, when the next fiscal year begins.
“This is absolutely a new experience for me, in spite of my advanced years,” Bowers said. “I would ask us all — it may really be tough, but could we contemplate growing up and shouldering the responsibility together and think of together more than individually, and pass a budget?”
The delay will be short-lived, at least in the House. Majority Leader Ben Toma, R-Peoria, said Reps. John Fillmore, Travis Grantham, Frank Pratt and Bret Roberts are all expected to attend in person on Thursday, giving the Republicans a quorum and allowing them to pass a budget, regardless of what the Democrats do. And Cook — whose opposition defeated the budget earlier this month — told the Arizona Mirror that he’s now supporting the budget thanks to the proposed changes, giving Republicans the 31 votes they need.
That doesn’t mean things will go as smoothly in the Senate, though. While Boyer is now a yes vote, Sen. Kelly Townsend has threatened to vote against the budget unless there’s an audit of the vote on Prop. 208, which passed by about 113,000 votes in November. Townsend, R-Mesa, told the Mirror on Tuesday morning that she remains opposed to the budget until she gets her way.
As of Tuesday afternoon, the Senate was still hearing budget bills in committee of the whole, though none of the budget bills had yet gone up for a roll call vote.
Townsend’s call for an audit of the Proposition 208 votes comes as another self-styled audit of the general election in Maricopa County that Senate President Karen Fann ordered neared completion. There is no credible evidence that any races in Arizona were affected by fraud of other malfeasance.
Tuesday marked the third time that Bowers scheduled a vote on the budget, only to see other lawmakers throw wrenches in the plans. Both chambers called off planned budget votes in late May when it became clear that they didn’t have the votes in either chamber. Bowers scheduled a new vote on June 7, but Cook’s opposition doomed the budget in the House.
Boyer and Cook had opposed the budget over the size of the income tax cut and the resulting loss of revenue to cities and towns, which get a share of state income tax dollars and would therefore lose money from any cut.
The original budget plan called for a 2.5% flat income tax rate to replace the current graduated rates, which range from 2.59% to 4.5%. To partially offset the new 3.5% surcharge from Proposition 208 on individuals who earn at least a quarter million dollars per year and couples who earn at least a half million, the plan would cap income tax rates at 4.5%, meaning high earners would pay the new surcharge plus an additional 1%.
The flat tax rate was projected to cost up to $1.9 billion in tax revenue by fiscal year 2025, when it would be fully phased in. The League of Arizona Cities and Towns estimated that the cost to municipalities would be upwards of $285 million. Boyer and Cook opposed the budget largely over concerns about revenue losses to both the state and cities, saying they wanted a smaller tax cut and for cities to be compensated.
Under the compromise unveiled on Tuesday, cities would see their share of state income tax revenue go from 15% to 18%. Legislative leadership had previously proposed 17%, which Boyer, Cook and the League all rejected.
And the single 2.5% flat tax rate would move to two rates of 2.55% for people who earn up to $27,272 annually and 2.98% for earnings above that. If state revenue numbers hit certain triggers — critics say the tax cut proposal is too dependent on rosy revenue forecasts and one-time federal dollars — the 2.5% rate would eventually phase in.
Those changes were enough to bring Boyer and Cook on board. The League of Arizona Cities and Towns is now neutral on the budget instead of opposed.
“As far as I know, we have the votes,” Toma told reporters on Tuesday.
But in the Senate, Townsend’s opposition threatens to derail the budget deal. The fiscal year ends on July 1, and if the legislature doesn’t pass a new budget by then, the state faces the unprecedented prospect of a government shutdown.
If no deal can be reached, lawmakers still have the option of passing a “skinny budget” that would simply continue the previous year’s spending. The legislature passed a skinny budget last year after the COVID-19 outbreak upended the legislative session.
Toma said there currently is no skinny budget plan and that it would take legislative staff several days to craft one.
“It’s an easy thing to say we’re going to do a skinny budget … but you need to actually have it drafted first before we can vote on it. And then you have to make sure we have the votes for that, which is a whole different discussion,” he said.
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