June 29 , 2009

Every year the budget talks get more discouraging.  We knew this was going to be a difficult time because of the recession and our falling revenues.  But, as usual, it is members of our own party who are causing the most grief.

We all knew the Governor is adamant on asking for a sales tax increase.  There was no way the legislature would vote for that, so the only other option is a referral to the voters in a November election.  I'm told this is the one point she would not concede in the negotiations with House and Senate leadership.

But other concessions they got from her are major:

       Spending cuts remain at about $630 million (with some tweaking with how they are distributed) for a total of $1.1 billion between the '09 fix and this year.
       Permanent repeal of the "County Equalization Tax," which is really just a state property tax.
       Additional property tax reforms to benefit business -- the folks who create jobs.
      
       And, the introduction of a flat tax for personal income tax payers, initially set at 2.8%, with a maximum of 3%, to be effective for tax year 2012.  A         commission will conduct studies to determine the actual rate, which may be     as low as 2.6%.  $10,000 will be exempt from taxation for single filers and         $20,000 for married.  This will insure that almost everyone pays some         income tax.  Just as at the federal level, we have so many people that pay         no income tax at all -- and subsequently have no interest in how much the         government spends because they don't contribute.

After the tortuous negotiations, which resulted in some major gains for conservatives, are we united in support of our Republican leadership?  Of course not.

Some are upset that the flat tax doesn't kick in next year.  Others are not happy that we didn't do more for corporate income taxes "while we had the chance."  And then there are those who absolutely refuse to refer a tax increase to the ballot because "voting to refer is the same as voting for a tax increase," which they have pledged not to do. 

I'm convinced that the sales tax increase would not pass, and this is the perfect opportunity to convince the Governor that she had a very bad idea.  If it fails, and I'm not the only one who believes it will, we will have an absolute mandate from the voters to continue decreasing the size of government.

We worked Friday and Saturday last week in an effort to get the revised budget done.  The plan was to finish the budget bills on Saturday, then have Monday and Tuesday to finish up as many other bills as possible and adjourn for the year.  Because of the holdouts, that did not happen; so we start again on Monday to see if we can actually get the budget done in two days time.  Some members, especially in the Senate, are still saying send her the original budget passed on June 4th and let her veto it.  And then what?  Shut the State down or pass emergency spending measures to keep us limping along?  I think we all remember what happened in 1994 -- Congress got the blame and was never as effective as they could have been.

I, along with other members, have talked with several of the holdouts, trying to persuade them that we really made major gains and to concentrate on what we achieved, not what we didn't get.  I got no firm commitments.  I'm sure there were many phone calls and meetings on Sunday, trying to round up support and convince members to vote for the negotiated changes.  I'll be waiting just as anxiously as anyone to see the results.

Until next week (or possibly sooner),

Nancy

Rep. Nancy McLain
602-926-5051
nmclain@azleg.gov

Nancy McLain, District 3, Arizona House of Representatives
nmclain@azleg.gov or
nmclainbhc@aol.com