Education the big winner in state budget

Glenn Hamer

May 4, 2016

The Arizona state Legislature has passed a $9.6 billion budget for fiscal year 2017. The spending package is an excellent one for education. This budget and passage of Proposition 123 will result in $300 million more for K-12 than we expected to have at this time last year. Combined with the recent good news that Arizona is among the nation’s leaders in closing the achievement gap, we are changing the education narrative in Arizona.

The budget’s investments in K-12 and higher education, the earlier restoration of Career and Technical Education (CTE) funding, and the passage of Proposition 123 will send a strong message that we are taking the right steps to ensure an excellent education for all of Arizona’s students regardless of zip code.

During the final negotiations over the budget, Gov. Doug Ducey made clear that he did not want to see any cuts to K-12 spending. The Chamber agreed strongly with the governor and successfully worked with lawmakers to ensure that our high-performing and growing public schools aren’t harmed by reductions in the small school weight formula; that our districts are held harmless by the transition to a current year funding model; and that schools receive bonuses for their students who pass exams that lead to college credit. The budget also reflects the $30 million restored to CTE earlier this session and the formation of the Public School Credit Enhancement Fund, which will help expanding quality schools reduce the cost of capital.

On the higher education front, the budget funds our state universities at an additional $32 million in FY 17 over last year’s budget, which moves the state closer to realizing the Arizona Board of Regents’ model of evenly splitting the cost of educating an in-state student.

A budget that encourages job creation

This is a budget that job creators will like.

Good news stories like Caterpillar’s announcement that it’s bringing a regional headquarters to Tucson are an indicator that Arizona’s making the right policy moves, from economic development to education.

The budget continues the implementation of the 2011 competitiveness package that will bring Arizona’s corporate income tax rate to under 5 percent by next year, making the state increasingly attractive for business growth and investment.

The budget strengthens our manufacturing environment. The Chamber and Arizona Manufacturers Council in 2014 together earned passage of legislation that would exempt our manufacturers from paying sales tax on their electricity and natural gas consumption, something manufacturers in the vast majority of other states enjoy. Some important clarifications to the 2014 law were needed this year to ensure manufactures receive the tax treatment intended by the original law. This budget contains those necessary changes and makes clear that manufacturers who use natural gas are eligible for the exemptions regardless of how natural gas is delivered to the manufacturing facility.

The budget also encourages business investments in new machinery and equipment by allowing for increased depreciation in the first year the machinery is put into service, aligning with federal tax policy.

The Chamber last year achieved its longstanding goal of phasing down the insurance premium tax from 2 percent to 1.7 percent. That was a major win that extended to the insurance industry some measure of the tax relief extended to other corporate taxpayers. This year’s budget accelerates the phase-down from 10 years to six years. 

Turning the corner on transportation

The Chamber’s Accelerate Arizona project over the last year has stressed to policymakers that our state must have a transportation infrastructure system equipped for an export-based economy. This budget allocates $25 million for badly needed upgrades to SR 189, also known as Mariposa Rd., which commercial trucks going in and out of the Mariposa port of entry in Nogales must travel. The investment kick-starts the entire $64 million project and the federal government reimbursement process. The budget also allocates funding for Interstate 10 widening between Phoenix and Tucson, a major freight thoroughfare. Our trade volumes with Mexico are growing. This budget ensures we can keep pace.

This is a budget Arizona can be proud of. But if we’re going to realize its full benefits we must pass Proposition 123 on May 17. The proposition will inject $3.5 billion into K-12 education over the next decade, boosting teacher pay and bringing an expensive lawsuit to a close. Without Proposition 123, we’re back to paying lawyers and fighting the negative perception about Arizona’s education priorities.

A job well done to the Legislature and Gov. Ducey on this budget. Now let’s take the next step and pass Proposition 123. 

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry