Arizona Legislature still stuck on budget terms after hiatus

The Arizona Legislature made a brief appearance June 10 and conducted virtually no business weeks into a budget stalemate that shows no sign of abating soon.

The Senate returned after a two-week hiatus but held only a pro-forma session before adjourning until Monday. The House did the same after a morning session on Monday ended with one Republican joining all Democrats in rejecting two key bills that are part of the budget package.

Senate Majority Leader Rick Gray said it should not be surprising that a closely divided Legislature swimming in a budget surplus can’t reach consensus.

"This is a historic year – I don’t when the last year was where we had a bare minimum in both chambers for a majority party, and then what we’re looking at for a tax cut is obviously historic," Gray said Wednesday afternoon. "So it shouldn’t be surprising that we have a certain amount of grappling on this year’s budget."

Republicans who hold just one-vote majorities in each chamber can’t agree on a $1.9 billion income tax cut their leaders negotiated with GOP Gov. Doug Ducey as part of the $12.8 billion spending plan. Holdout Republicans in each chamber say they can’t support that large a permanent tax cut and want to pay down more state debt and better fund universities, community colleges and other priorities.

Democrats are solidly opposed to the tax cut proposal at it stands.

Ducey told KTAR radio on Tuesday that he’s willing to talk with Democrats about a path forward. On Thursday, House and Senate Democratic leaders said that has not yet happened.

"No voice messages," House Minority Leader Reginald Bolding said in a text message. "No missed call pertaining to the budget. We’ve reached out to no engagement up until this point."

Senate Assistant Minority Leader Lupe Contreras said that so far Democrats had not been asked to negotiate.

Standing in the way of the Republican-negotiated budget are GOP Sen. Paul Boyer and Republican Rep. David Cook, who both oppose the size and permanence of the tax cuts. Cook voted with all House Democrats Monday to block the tax cuts.

House Speaker Rusty Bowers and Senate President Karen Fann now must choose how to revise the budget proposal to win support from those Republicans or make even more changes to win support from some Democrats. Any changes to the tax cut plan will likely lose some Republican support, so the negotiations are a tightrope walk.

Time is short, since a budget for the fiscal year that begins July 1 must be enacted by then.

The massive tax cut package, which proponents called the largest in state history, would cut more than 25% of state income tax revenue after being fully phased in over the next two years.

The biggest winners would be the wealthy, who would be mainly shielded from a 3.5% tax surcharge on high-earning Arizonans that was approved by voters in November. They would also get the biggest benefits from a flat-tax proposal that lowers rates to 2.5%. The current top tax rate is 4.5% for high-earning Arizonans, plus the new surcharge. Couples earning over $500,000 a year would pay a maximum of 4.5% under the proposal instead of 8% foreseen under Proposition 208.

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