Prop. 100: Voters have lots of questions, concerns

Arizona Daily Star
April 25, 2010
Rhonda Bodfield

Arizona voters will decide on May 18 whether they'll help backfill state coffers with a temporary sales-tax increase.

The proposal, which would raise an estimated $1 billion, will raise the sales tax by a penny per dollar - to 6.6 percent from 5.6 percent.

With local taxes added on, the sales tax in Tucson is now 8.1 cents per dollar. If it passes, Tucsonans buying an item for $1 will pay a tax of 9.1 cents.

The Yes on 100 folks don't have a per-capita number of what it will cost the average family, saying it's too contingent on personal consumption decisions. But a study conducted for the Goldwater Institute estimated the tax would cost an average of $400 per household.

That may be high. The IRS has a handy tool that, while not perfect science, allows a rough calculation of how much an average person might pay on sales taxes. It estimates that in 2009, a Tucson family with two children making between $50,000 and $60,000 paid roughly $955 in sales taxes a year at current levels. Using a 9.1 percent rate would raise that amount to roughly $1,160 - a difference of roughly $205.

Supporters of education are behind it, as are many business people - with even the fiscally conservative Arizona Tax Research Association signed on with state and local chambers. The main exception is the National Federation of Independent Business, which contends it will hurt small business and points out that the state has already dropped 300,000 jobs since 2007.

Studies on both sides agree there will be some losses for small business.

The University of Arizona determined the sales- tax increase could cost 7,400 private sector jobs - a figure that the Goldwater Institute think tank pegs at twice that.

But after UA economists plugged back in the jobs that would be saved by the additional resources - from government jobs to what the government spends directly on contracts with private business - they estimated the net effect would be to save 13,000 jobs and preserve more than $442 million in federal matching funds.

In random interviews last week, many people didn't even know the measure was on the ballot, several had some trust issues with state leadership and still more had lingering questions.

Here are answers to some common queries:

"Where will the money go?" - Amanda Dutton, 20, lifeguard.

About two-thirds of the extra sales tax collected would go to primary and secondary education. The remaining third would go to public safety and health and human services.

"What kinds of checks and balances do we have to ensure that the money will actually go to education?" - Matthew Noli, 35, motorcycle technician and father of a 19-month-old son, Scout

The ballot measure is a constitutional change - and since those must be approved by voters, lawmakers won't be able to tinker with the language, which says the divvying up "shall" happen.

"That's one of the reasons it was drafted that way," said Gov. Jan Brewer's spokes-man, Paul Senseman, "so that people would have confidence in what they were voting on and where the money was intended to go."

However, some fear the state could put the new revenue where the law demands while taking away an equal amount and spending it elsewhere, essentially creating a wash.

Unlike the federal government, which set a floor for spending when it handed out stimulus dollars to the states, there is nothing in the state's ballot language that forbids supplanting existing revenues or establishes some "maintenance of effort" threshold.

Ann-Eve Pedersen, president of the Arizona Education Network, said activists will be vigilant to make sure the money goes where it should, but added there's a practical reason the money will go to the right place: If it doesn't, education spending will dip below 2006 levels, which will likely mean the state would have to return millions in federal dollars.

It can ask for a waiver, but Pedersen asked, "Why would they get a waiver if they willfully had the money there and then willfully disregarded the will of the voters?"

Senseman said adding the language would have been "pointless." Education consumes 60 percent of the budget already, so, "If you add a billion, it can't help but impact the area of biggest spending in the state."

So what checks and balances are there to make sure the money goes to the right place? "The most important check is who is in this chair as governor," Senseman said. "She has said as long as she's governor, that's where the money is going to be spent."

The governor faces a GOP primary in August and a general election in November.

"What guarantee do we have that the sales tax will only be in place for three years?" - Craig Kaufman, 53, attorney

Critics of the tax increase say that once government gets used to those extra revenues, it won't give them up easily.

And the state has some history of making permanent a tax that was originally billed as temporary. Holes in the 1983 budget were plugged with

a temporary sales-tax increase that took the rate from 4 cents per dollar to 5 - only to have lawmakers make that permanent in 1984. It was raised again in 1990 when voters agreed to another 0.6 cent to fund education.

Backers say this is different. The law will automatically expire in May 2013, with the goal of buying time for the economy to stabilize.

Since the expiration date is embedded in the constitution, it would take a vote of the people to change it.

Of course, lawmakers could pass a higher tax themselves, although it would require a two-thirds vote. It took lawmakers a year just to refer the issue to the ballot, even though that took only a simple majority. That's in part because more than a third of the legislative body signed a pledge to taxpayer watchdog Grover Norquist that they won't raise taxes.

"How did the Legislature decide on the sales tax, rather than property taxes or income taxes?" - Will Whitaker, 65, retired engineer

Even many of the supporters are unhappy with the choice of the sales tax.

Unlike more progressive taxes on property and income, the wealthy and the poor all pay the same sales-tax rate. The state also is already heavily reliant on the sales tax, which creates a more volatile tax situation.

Brewer wanted the sales-tax increase - instead of adding to the list of items already subject to a sales tax, for example - because there's already a process in place to collect it right away.

It also tends to be a more politically palatable tax, since it's the rare voter who collects all cash register receipts and adds them up to see the total at the end of the year.

Proponents note that unlike other taxes, which hit residents exclusively, as much as 10 percent of the tax burden will be paid by out-of-state visitors.

"How close will it get us to filling the budget gap?" - Nancy Sauder, office worker

Even if the measure passes, there remains a structural deficit between how much the state takes in and how much it spends.

To close that gap in the 2011 annual budget, in a thumbnail sketch, lawmakers would rely on the $1 billion in new sales taxes, $1 billion in cuts and $1 billion in various accounting measures, such as fund sweeps.

Even if the tax is approved, then, that means the state is still going to see further reductions in core services.

Education, for example, will still see $160 million in cuts in next year's budget. That doesn't include the $218 million the state saved by lopping off the state subsidy for full-day kindergarten.

And the budget may be out of whack again in November, since it is contingent on getting voters to agree to raid two funds and divert those resources to other uses. That includes $300 million from an early-childhood-education program and another $123 million from a land-conservation fund.

"How much more will we lose if it doesn't pass?" - Roberto Bedoya, 58, administrator

If the measure fails, the governor has proposed $867.5 million in spending cuts, not counting any loss of federal dollars.

The largest would come from K-12 education, with state aid and other support shrinking by nearly $428.6 million.

The Arizona Health Care Cost Containment System would lose $114 million, in the form of lower reimbursements to doctors and hospitals.

The other big loser if the ballot measure fails would be the state's university system, which would be hit by a 12 percent drop in its funding, the equivalent of more than $107 million, or $33 million for the University of Arizona.

No money was cut from universities for the upcoming year in the just-enacted budget because current funding already is at 2006 levels.

Going below that would put Arizona in violation of the agreement it made with the U.S. government when it took $832 million in federal stimulus funds for education.

If the measure doesn't pass, Senseman said, the Legislature will seek a waiver for spending less on education than 2006 levels.

Public safety would lose $93 million, with the Department of Corrections shifting costs to the counties.

Pima County Administrator Chuck Huckelberry said if the state makes the county house prisoners with less than a year on their sentences, it would mean the equivalent of another 1,800 inmates.

It already costs $44 million a year to operate the jail with a like number of inmates, so Huckelberry said he needs another $50 million just in operating costs. Building a new facility would cost $150 million. He said the county would almost certainly have to raise property taxes to shoulder those costs.

John Wright, president of the Arizona Education Association, predicted the education cuts would mean swelling class sizes and the loss of interscholastic and music and band programs. It will also mean fewer staff, schoolwide.

"That means children won't see hallways and classrooms as clean as we'd like them," Wright said. "A cut in cafeteria staff means longer times in lunch lines. Fewer bus drivers means longer bus routes. Parents expect that when they call a principal, they'll get a live person, but there will be more machines picking up messages."

Opponent and former Republican Pima County Supervisor Paul Marsh called that a doomsday scenario, saying there is administrative waste that can be cut.