State agencies consider hiking user fees to ease fiscal strains

 
 
Mike Sunnucks
The Business Journal
December, 19, 2003

 

Businesses applying for state environmental permits, business licenses and other government approvals and services could be facing increased user fees next year.

Gov. Janet Napolitano's office and executive branch agencies, including the state Department of Environmental Quality, are looking at hiking business, recreational, agricultural and environmental user fees in order to ease fiscal strains and pay for services and program administration.

The proposals could be part of the governor's budget for next year that will be announced in January and still is being formulated.

"I anticipate that agencies will be coming to the Legislature with a myriad of ideas of how to raise revenue outside of direct tax increases," said Kevin McCarthy, president of the Arizona Tax Research Association.

McCarthy said executive agencies routinely look at user fees and permit charges but expects even more of that next year, considering the state's political and fiscal situation. The state faces another significant budget shortfall. The Republican Legislature steadfastly opposes tax increases, many agencies already have incurred substantial budget cuts and Napolitano, a Democrat, wants to protect key education and health care programs. That leaves other avenues for revenue such as bonding and user fees.

However, businesses and GOP legislative leaders are skeptical of possible hikes, worrying they will be onerous on the private sector and hurt Arizona's economic image.

"I just think we have to be very careful on those," said GOP House Speaker Jake Flake, who is a cattle rancher from Snowflake.

Flake said there may be some isolated fees that need to be increased, but he wants to make sure they do not take away from economic growth.

"We've got to be pro business in this state," Flake told The Business Journal. "Fees are the same as taxes. It (sometimes) is just an unnecessary burden on business."

Flake and McCarthy expect to see DEQ at the top of the list of agencies looking for higher fees. DEQ Director Steve Owens has been meeting with interested groups on possible fee adjustments and increases in recent weeks.

Environmentalists welcome higher user fees on businesses to help administer state programs and have polluters pay more for remediation.

"We're likely to be supportive of increasing the fees to help with the cost of (environmental) monitoring and administering the programs," said Sandy Bahr, lobbyist for the Sierra Club's Arizona chapter.

Bahr said increasing user fees for pollution controls and environmental permits also could help further discourage businesses from harmful practices.

There is some question about how Arizona compares with other states when it comes to fees. Backers of increases say Arizona generally has lower user fees than other states. A skeptical Flake said the Legislature will have to look at the issue one fee at a time. McCarthy questions the reliability of fee data because there are so many state and local fees and taxes faced by businesses.

"I'd be surprised if we ranked low with user fees," said McCarthy.

There also is debate on how much executive agencies under the governor's control can adjust fees without legislative approval. McCarthy expects the Legislature to be hesitant to give the governor much flexibility on the issue.

One agency already is moving to put new user fees in place. The state Department of Commerce plans to charge companies for custom economic research and international matchmaking services that previously were free. The economic agency will not make a profit from the fees but hopes it will help recoup some of the costs of such business assistance.

The state government is facing yet another year of fiscal strains and budget shortfalls. Napolitano's office, however, hopes the improving national and state economic picture will put next year's deficit at $300 million to $400 million. Flake and other Republicans are a little less optimistic and see a shortfall of at least $700 million. With the Legislature not willing to raise taxes and the governor steadfast against major spending cuts, that sets up some battles over other fiscal moves such as the user fees and bonding.