To Be A “Best Value” State

Unknown-1Blue light special is a phrase Kmart used to use to draw attention to certain sales merchandise. It became synonymous with a discount or bargain, as in bargain basement.

“It’s difficult to remember…” writes Nikelle Murphy on CheatSheet.com, “that Kmart was once the envy of Walmart founder Sam Walton.” Experts say the problems with Kmart’s business model include a lack of focus on the core brand and that Kmart didn’t invest in updating its stores, giving a dated feel to the brand.  Sound like Arizona?

Governor Ducey’s and our GOP Legislators’ focus on tax cuts, corporate welfare, and privatization of our state resources, is attracting exactly that kind of company–low-tech and service industry jobs, that don’t provide stable, long term investments in updating our state’s infrastructure, and don’t look to participate in building thriving communities. They are offering Arizona as a “blue-light special”.

Take the recent $20M tax cut legislation championed by our Rep. Mark Finchem, to subsidize the failing business model for the Navajo Coal Plant. Governor Ducey allegedly approved it in hopes of finding a buyer for it. For his part, Finchem said “Solar and wind energy get tax breaks and compete with the coal plant. It’s kind of hard to compete when you aren’t being given the [same] taxpayer support.” He chooses to ignore that the Arizona Corporation Commission can regulate these utilities.  But, it makes sense Finchem doesn’t understand that tax breaks should be used to incentivize behavior beneficial to our communities and our state, because that hasn’t been standard practice in Arizona.  

Other examples of the “blue light special” mentality from our GOP state leadership are the obvious ones.

 1) Sweeping highway funds away for corporate tax giveaways instead of building turn-key modern infrastructure.

 2) Severely cutting funds to public universities, then threatening to put the Legislature in charge of overseeing them, as our Rep. Finchem tried to do this year.  (Just the hint has undoubtedly scared away potential partner researchers who see it as a formula for a nightmare bureaucracy.)

 3) Deep cuts in public education and JTED (technical and trades training). Quality companies need ready access to an educated workforce and good public schools for their employees’ children, not uncertified/amateur instructors, as approved by the Legislature in 2017, or buildings and busses that haven’t had reasonable maintenance in ten years and are literally falling apart around the students.

We must upgrade our brand!  Study after study has shown that companies don’t make location choices based on potential taxation levels, but on a host of other factors such as an educated/competitive workforce, modern infrastructure, and favorable climate.  That should be Arizona–a great quality of life at a reasonable price. 

That’s what Arizona will be when we change the leadership and take it out of the blue light special bin and put it front and center as a top-rated value. All it takes is lawmakers who are ready to lead into the future instead of being stuck in the past.

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Stop the Madness

Despite the fact that at least 75% of Arizona corporations pay only the minimum $50 in taxes each year, the Arizona Legislature recently worked to pass yet another tax credit to keep corporate tax revenue from reaching the state’s General Fund. SB 1392 would have given corporations, (who may, or may not be, physically located in our state), relief for the Transaction Privilege Tax (TPT), (which must be collected by the seller), for digital goods and services. I say “would have given” because after this article was originally submitted, the bill looked like it was headed for the junk pile, in the opinion of many experts, exactly where it belonged.

 The Joint Legislative Budget Committee (JLBC) estimated it would result in a General Fund loss, but stipulated it was difficult to quantify the amount, recommending more time be taken to fully understand the impact. The Arizona League of Cities and Towns estimated the revenue loss for state and local governments would be in excess of $100 million a year, with a $14M decrease to Prop. 301 alone, directly impacting teachers’ salaries.

 As if that weren’t bad enough, AZ Senate President Steven Yarbrough is also pushing through SB 1467 to further expand the School Tuition Organization (STO) tax credit program for private schools. This despite an already 20% annual increase to what many believe is an unsustainable program.

 So why does the Legislature continue to work additional tax credits that shrink our General Fund and pull money directly from our public schools? I believe they view our K-12 education funding as the “gift that keeps on giving”. They know there is probably no other line item that enjoys more support from voters. If push comes to shove they think, we will agree to replace the funding they siphoned off, because we refuse to deny our schools the support they need. The funding they hope we’ll agree to of course, will be in the form of locally-supported bonds and overrides, increased sales tax, or some other less desirable solution (such as the Prop. 123 settlement).

 Far from supporting free market capitalism, the Legislature’s granting of all these tax credits plays favorites and hurts small local businesses. And since they are not regularly reviewed for return on investment, and once approved, have no sundown clauses to prevent them from continuing into perpetuity, they hurt our state’s future as well.

 These two bills are only the most recent examples of the fiscal irresponsibility of our current lawmakers. The only way we will turn things around, is to flip enough seats to bring parity and fiscal sanity to the Legislature. To do that, we absolutely need you. To vote. To volunteer. To donate. To do everything you can to ensure this madness ends.

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Size of the Pie

Anyone who has been to my website, seen my campaign materials, or heard me speak, knows that quality public education is a priority for me. Truth is, being a good teacher is hard work, and it isn’t getting any easier in Arizona.

It doesn’t have to be this way. As the Arizona Funding Pre-K-12 Education Town Hall just concluded, it isn’t about the percentage of the State’s budget “pie” that goes to public education, but the “size of the pie.” The K-12 education budget Gov. Ducey proposed is almost $1B short of the funding our districts received in 2008! It would take just 1/12th of the sales tax relief state lawmakers have granted corporations annually to bring us back to that 2008 level.

Coincidentally, $1B is what we need to bring our teacher salaries up to the U.S. median. With almost 4,000 classrooms without a certified teacher, 24 percent of our teachers eligible to retire this year, and our colleges of education not graduating enough teachers into our pipeline, this crisis is about to reach tsunami proportions. All self-inflicted damage, as our legislators fight the repeatedly demonstrated will of the people to provide accessible, quality public education.

Besides reevaluating each corporate sales tax giveaway, we should examine the education tax credit program that allows individuals and corporations to contribute to School Tuition Organizations (STOs), rather than putting their tax dollars into Arizona’s General Fund, another $94M districts schools miss out on each year.

This year’s bill, SB 1467, continues the acceleration of growth in public funding for private schools. It increases the maximum scholarship amount faster every year and expands the number of students eligible.

These STOs are “non-profit” organizations (If they pay their owners/directors enough salary, like AZ Senate President Yarbrough, they can’t make a “profit”) that keep 10 percent of the scholarship contributions. Individual tax payers, currently, can contribute up to $1,107 (versus $200 for a district school). Corporations have no limit on what they can contribute to STOs as long as the state-wide caps have not been met. For the Low-Income Corporate Income Tax Credit, the state-wide cap is over $89 million. It is important to note that the “low-income” designation for this credit means a family of four can earn as much as almost $83,000. The other type of tax credit is the Disabled/Displaced Corporate Income Tax Credit. This year, the state-wide cap is $5 million. Not surprisingly, both of these caps have increased each year.

With all the loopholes available to big corporations, at least 74 percent of them pay the minimum $50 in state income tax each year. When individuals and corporations get to pick and choose where their tax dollars go, the general fund “pie” is smaller, and our infrastructure, district schools, and other public needs suffer.

Learn more at www.LyonforAZ.com.

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Look beyond next election to the children

As published in the Arizona Republic on 12/28/17.

Too many Arizona lawmakers are focused on their next election, not the next generation. Arizonans have been clear about their support for public education. Unfortunately, many lawmakers prefer to cater to powerful, out-of-state donors instead of the citizens of Arizona.

We know good teachers are the most critical in-school factor to student success and yet, our elementary teachers are the lowest paid in the nation. What business would expect to attract the best employees by paying them the least of any competitor?

All it would take to get our teacher salaries up to the U.S. median is $1B of the over $12B in sales tax giveaways lawmakers currently allow corporations. Surely a look at return on investment is in order?

It’s time for real fiscal responsibility. It’s time for taxpayers to get what they are paying for. It’s time to invest in Arizona and Arizonans. It’s time to elect lawmakers that will do that.

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The Will to Get it Done

Hooray for our pubic schools! Election Day 2017 saw 84% of bond and override questions approved on the ballot statewide. Voters obviously have a high level of trust in their neighborhood school districts and locally-elected governing boards.

Maricopa County ballot measures were especially well-received, with voters approving all 22. Unfortunately, seven statewide, including two in LD 11, were rejected. In Marana, voters rejected (by a margin of 38% to 62%) an additional $2 million, while in Stanfield, voters rejected (by 4 votes) the $356,000 sought. Each of these measures would have added an average cost to homeowners of around $55 per year primarily funding both teacher salary increases and technology upgrades.

These districts must now continue to do more with even less, which is nothing new for Arizona’s public schools. The AZ Legislature has cut $4.56 billion from district budgets since 2009 and our teacher shortage has reached a crisis level. Our Governor’s answer, is to rotate untrained “teachers” through classrooms where districts can’t find certified professionals willing to work for too little. Our lawmakers tout fiscal responsibility while shortchanging our kids with higher class sizes, substitute teachers, sub-par facilities, and out-of-date technology. The 45 override and bond issues on the ballot this week were a clear sign of the Legislature’s failure to fulfill one of its primary responsibilities under the state constitution, “to provide for the establishment and *maintenance* of a general and uniform public school system….”

To those who say additional funding for our schools is not the answer, I say that it’s a large part of it, especially after the deep cuts of the last eight years. After all, what does a business do when they are serious about hiring quality employees? Do they hold down salaries, increase hours, add more responsibilities to the job description, and offer poor working conditions? No. They offer competitive salaries and benefits, a good work environment, and other appealing incentives.

Arizonans have repeatedly shown we support public education and want more of our money dedicated to support our children. Our lawmakers however, aren’t listening. They continue to funnel our tax dollars into corporate tax breaks and other sweetheart deals. In fact, despite an annual state budget of only $9 billion, our Legislature approves some $13 billion each year in the form of corporate giveaways without expiration dates or periodic review to determine return on investment.

It is way past time for real fiscal responsibility that is focused on investing in the future. We have the money to do right by the future’s leaders, our children. We have the professional educators who could be recruited back to our classrooms if only they were paid enough to provide for their families. We know what quality companies want when they look to relocate to our great state—a well-educated workforce and modern infrastructure. We can do better by our children and thereby our state, but first, we must elect lawmakers with the will to get it done!

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AZ Needs Real Fiscal Responsibility

The AZ Republic recently reportedly on the reduction in state revenue caused by the Legislature cutting the budget of the AZ Department of Revenue (DOR). I’ve previously talked and written about this penny wise, pound foolish move, and this article just reinforced my assessment.

In spite of warnings from experts, state budget cuts forced layoffs of AZ DOR auditors responsible for corporate auditing resulting in a $75 million fall in revenue from 2016 to 2017.

In October of 2016, the DCourier reported AZ DOR’s reduction of auditors from 30 to 4. “There basically is no longer any corporate activity at the Department of Revenue,” said Georganna Meyer, the agency’s former chief economist, “That’s going to have a significant impact on any enforcement revenues we’ve seen in the past.” Governor Ducey’s spokesman brushed aside the sharp drop in the number of corporate auditors saying state revenues and tax collections were up. An AZ DOR spokesman backed up the claim, but said the impact of the 50-employee layoff had not yet been felt.

This isn’t nearly enough said Meyer. “Corporate auditing is hard and companies will cheat if they can get away with it.” With more than 50,000 corporations in the state, the oversight job is huge, but just the threat of an audit helps honest companies stay that way.

Even without cheating, corporations are making out like bandits in Arizona. In 2013, they were “paying” a tax rate of close to 7 percent, in 2017 it was 4.9 percent.

Arizona’s entire annual budget is just over $9B, but our Legislature gives away over $13B in corporate tax breaks each year while our K–12 schools lag the national average for funding by almost $4B. The dogmatic determination to pursue repeatedly wrong-proven trickle-down tax breaks is a race to the bottom that will not end well (ask Kansas).

Republicans know tax cuts sell, so they tout State tax reductions to get voters on their side.  But it’s a bait-and-switch strategy.  Counties, cities, and school districts get stuck asking for local tax increases (sales and property) to protect investments in education and infrastructure.  For residents and small businesses, it’s still a tax increase, but poorer, rural areas will be less and less able to shoulder them, and we’ll continue to segregate our communities into the “have’s” and “have nots.”  That’s not a winning State strategy.

We’re on a downward spiral that can be fixed with some simple, well-placed policy changes.  We need legislators who are serious about building a positive future where both business and our citizens can thrive. We need legislators willing to exercise real fiscal responsibility by saying “NO” to those corporate giveaways that don’t produce a return on investment for our state and its citizens.

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We Need Fiscal Responsibility Now

While I applaud Jim Swanson’s call to the business community “to lead” in securing additional funding for Arizona’s K–12 educational system, I believe his solution of a 1.5 cent per dollar sales tax is a less than ideal way to raise those funds.

In Arizona, one in four children lives in poverty and there is vast evidence that poverty is the number one out-of-school determinant in predicting student success. Increasing the sales tax, the most regressive of all taxes, will hurt these students and their families most, just adding to the problem. Also, sales tax is not the most stable of funding sources, because families that can’t afford the increase stop purchasing taxed goods.  Still, I’m in total agreement with Mr. Swanson that stable funding is something our schools desperately need.

Yes, with our teachers the lowest paid in the Nation, and per pupil funding at 48th, additional revenue is needed for K–12 education. But, ensuring everyone, including corporations, pay their fair share can go a long way toward meeting the need. Currently, our state tax laws do not promote that ideal. In fact, two-thirds to three-fourths of Arizona Corporations that file state income tax pay almost no state income tax (the $50 minimum) each year. The result is that corporate income tax collections in Arizona, once $986 million in 2007, were $663 million in 2015, and are projected, with additional scheduled cuts, to be only $298 million by 2019. As for the promise that lower corporate taxes create jobs, that’s a race to the bottom, pitting state against state when we need to be thinking as globally as those corporations are. Kansas anyone?

Truth is, corporate tax cuts may sound good, but tend to be only a short-term fix to creating a business-friendly climate. We don’t need more low-paying jobs that keep hard-working people in poverty. We need quality companies that are good neighbors and provide well-paying jobs. These companies know that chasing after the lowest corporate taxes doesn’t support their long-term growth. What they want and need, to truly thrive over the long haul, is a modern, well-maintained infrastructure and a well-educated workforce.

Arizona lawmakers need to quit talking about fiscal responsibility and actually do something about it. Cutting Arizona’s Department of Revenue budget by $7 million in 2016, resulting in a decrease in corporate auditors from 30 to 4 is not an example of fiscal responsibility. A former DOR official puts the potential lost revenue at $100 million per year. Instead, our lawmakers should be stepping up enforcement efforts of the laws we have on the books and reviewing them to ensure they provide a return on investment. Some people are calling for a bipartisan committee to review hundreds of corporate tax loopholes currently on the books. Estimates are that a scrub of those could generate up to $2 billion in revenue per year.

Arizonans can have our cake and eat it too, but we must work together to find the best solutions that work for all of us. That requires an understanding that compromise is key and that we can achieve amazing results if we don’t care who gets the credit. Ultimately, it requires real leadership.

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