Republican-Sponsored Education Sales-Tax Hike Moves Forward in Legislature

A proposal that would hike Arizona’s sales tax and bankroll education spending is moving forward with the support of Republican legislators.

Two bills that make up the proposed sales-tax increase passed the Senate Education Committee on Tuesday during 5-3 votes along party lines. The three Democrats on the committee voted against the plan, arguing the sales-tax increase doesn’t go far enough in addressing Arizona’s school-funding deficit.

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Republican Senator Sylvia Allen, the conservative chair of the Senate Education Committee who hails from Snowflake, sponsored SCR 1001 and SB 1080. Together, the bills would increase Arizona’s current 0.6 education sales tax to a penny and send the tax increase to voters for their approval during the 2020 election.

Allen explained she would never want to propose a measure that would be “a damper” to the strong economy. “I believe this is fair,” Allen said. “It’s a fair proposal, because all of our citizens share in this.”

She has been thinking about this bill for three years, she said.

The existing education sales tax is a product of Proposition 301, an initiative voters passed in 2000. Prop 301 was set to expire in 2021, but last year legislators passed a 20-year extension of the tax that Governor Ducey signed into law.

At the moment, the Prop 301 sales tax raises $667 million annually. According to the Joint Legislative Budget Committee, Allen’s tax hike would increase state revenue by $472 million per year. Her proposal would also simplify the current 10 pools of education funding under Prop 301 to just three: K-12 schools, universities, and community college programs.

K-12 schools would get 73 percent of the sales-tax revenue through the Classroom Site Fund, to be used for teacher pay or other initiatives; 22 percent of the money would go to the universities to make in-state tuition more affordable; the remaining 5 percent would fund community college trade and workforce development programs.  

The proposal from Allen would make a penny sales tax permanent, enshrining the core of Prop 301 in the Arizona Constitution.

However, Allen’s sales-tax increase faces significant hurdles. The measure must win the support of Senate and House Republicans, some of whom are anti-tax. And Ducey has signaled that he opposes the measure. He promised to hold the line on new taxes in his 2019 State of the State address. Even if lawmakers approve Allen’s proposal, the tax would have to survive a constitutional referendum in 2020.

Then, there’s the problem of allocation of university research dollars.

Because her plan simplifies the way Prop 301 funds schools, Allen’s proposal eliminates a nearly $80 million stream for university science and technology research, plus facility development. This portion of Prop 301 money goes into a pool called the Technology and Research Initiative Fund, or TRIF.

Republican Senator Kate Brophy McGee, a moderate member of the committee, voted for Allen’s plan, but not before she voiced her opposition to any proposal that does not allocate those research dollars for universities.

Brophy McGee said that because she has watched the research funding incubate projects in the bioscience community, maintaining the funding is “a die-on-the-hill for me.”

Nevertheless, Brophy McGee praised Allen’s sales-tax effort as part of a larger solution.

“It’s a new day in the Republican caucus, in my view, when we can stand together and say, ‘This is something we must do and we must get this done for all the right reasons for our kids,'” Brophy McGee told the committee.

Standing in their way: the teachers’ union.

The Arizona Education Association officially opposes the sales-tax increase. Its members are among the educators who opposed Ducey’s 20×2020 teacher pay raise plan last year. They viewed Ducey’s idea as a Band-Aid instead of a comprehensive way to rescue chronically underfunded schools.

At a press conference earlier this month, AEA President Joe Thomas said educators can’t afford to wait until 2020 for increased school funding. He suggested that teachers will again try to raise income taxes via the Invest in Ed initiative, which the Arizona Supreme Court knocked off the ballot in August for potentially confusing language.

In a January 6 op-ed for the Arizona Republic announcing her sales-tax proposal, Allen registered her strong disapproval of Invest in Ed. She described the initiative as “a dangerous ballot measure that would have doubled income tax on small businesses only, potentially destroying Arizona’s economy.”

During the committee meeting, Brophy McGee pressed an AEA lobbyist on the union’s opposition to the sales-tax proposal.

Stephanie Parra, the government relations director for the Arizona Education Association, testified in opposition to the sales-tax increase, but thanked Allen and said the union welcomes the dialogue on her proposal.

“We don’t believe that $400 million is enough revenue to resolve the big problems that we have in our schools,” Parra said. The AEA would not oppose the sales-tax increase in combination with other funding proposals that include other revenue streams, Parra said.

Brophy McGee asked her for some clarification of that position.

“Is it a yes or is it a no?” she said. “That’s what I don’t understand. ‘We would not oppose.’ What does that mean?” she added.

Parra said, “Well, we would not oppose the 0.4 sales-tax increase. We know that we need funding in our schools, and so we’re open to all revenue options.”

So, Brophy McGee said, doesn’t that mean AEA would support the sales-tax increase, if it were combined with other revenue options?

“Yes,” Parra replied.

The opposition from Democratic members of the committee suggests that other Democrats might oppose Allen’s measure on the floor, especially in the narrowly divided House.

Senator Andrea Dalessandro, who represents Tucson’s District 2, said Arizona is too dependent on sales taxes. The economy may yet experience a bust that could hurt revenue from sales taxes, making Allen’s proposal unsustainable in the long term, or perhaps even the short term, she said.

Dalessandro also criticized the sales-tax proposal for its regressiveness. In her district, Dalessandro said, 30 percent of people live in poverty.

“People on the lower rungs of the economic situation spend all of their money just to survive,” she said.