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What the Devil won't tell you

Raising taxes the Arizona way

How 1980 taxpayer protection act led to 2015 tax hike

Question: How does a taxpayer protection ratified by voters and made part of the state Constitution lead to a tax increase 35 years later — and how does the press miss it?

Welcome to Arizona politics, baby. This taxing episode has got a little bit of everything that makes our state's politics so bloody goofy, to the point of broaching the dangerous and even the sinister.

The quick and dirty version goes like this: Voters approved a constitutional amendment protecting themselves from property taxes in a screwy way. The Legislature fixed things up by agreeing to subsidize what homeowners paid school districts, cutting their bill. A later amendment forbids tax hikes unless they are approved by a two-thirds majority of state legislators. Republicans in Pima County managed to block any and all efforts to diversify the tax base, so the county exclusively paid its bills with property taxes.

This year a Tea Party-controlled Legislature that hates spending voted to bump responsibility for the school tax subsidy down to local jurisdictions — tapping a previously unknown state commission to do it, with middle-of-the-night legislation in language that must be read to be confused by. That commission, apparently late for bingo, took a quick and dirty way out that didn't reference the legislation. So because of a state taxpayer protection, Pima County must subsidize TUSD.

Congratulations, voters, you raised your taxes in an effort to protect yourself from tax increases. That's okay, most of you won't pay most of it. Businesses and renters will. Oh but, renters don't pay property taxes? Right. You are out of your mind. I would say "only in Arizona," but a lot of part-time legislatures driven by ideology are getting into the game.

Pima County Administrator Chuck Huckelberry has recommended the Board of Supervisors approve a $20 million dollar property tax hike, not to make up for lost revenues but because they are suddenly on the hook to subsidize TUSD — because the state doesn't want to anymore.

Understanding how it happened requires from the press a bit more political savvy than asking the question "what did you pass last night?" and "what's up with that?" It also requires a few more inches than modern newsholes afford. This is an online news site with plenty of room, and I covered the shit for years. So folks, just sit back and you'll hear a tale:

In 1978, the Reagan Revolution began in earnest with a California ballot initiative called Proposition 13. The measure capped property taxes on owner-occupied homes to 1 percent of the home's value. If Reagan's revolution had a Boston Tea Party presaging the victories to come, this was it. Prop. 13 easily won voter approval.

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Well now, Arizonans saw this and realized they could do it too. So on Nov. 4, 1980, the night Ronald Reagan was elected the 40th president of the United States, Arizona voters voted their own version of Prop. 13 on themselves.

Arizona's version of the measure had a huge flaw in that it had no controlling authority. A tax bill is an amalgam of different jurisdictions taxing property owners. The amendment is like telling your kids they get to spend 100 a week among them, but they each get to keep their debit cards. Billy can just spend with the expectation that Sofia will starve herself. A school district running like a Swiss watch could be punished for being in a county that swallowed tax dollars with the slobbering appetite of Jabba the Hut. Well-run districts could be crowded out of tax dollars by bloated governments. Also, it was a cap on what homeowners would pay, but it wasn't a cap on what could be taxed.

Now really put on your imagination goggles and picture a time when Arizona was more progressive than California. In a fit of responsibility, the Legislature tried to untangle the spaghetti and agreed to preempt what could be massive budget problems. The state said it would pay out of the Arizona treasury 40 percent of your school district property taxes, essentially cutting your tax bill, with additional direct assistance to school districts.

Now, let's rush forward in time through the NFC's dominance in Super Bowls, traveling past Seinfeld and shows about nothing, roll right through skinny Eminem, fat Eminem, buff Eminem to fat Lady Gaga. Stop when you get to the year when people are bored with Instagram.

It's 2015. Arizona is in financial trouble. The state Constitution requires a balanced budget. The state is hundreds of millions in the hole. The Legislature has been for years paying a portion of the taxpayers' bill to fund schools. In the mean time, the Legislature has figured out ways to balance previous budgets by shifting costs to local governments, which drove up local property taxes. In Pima County, all efforts to diversify revenues with a sales tax had failed. So, all taxpayers in TUSD are over the 1 percent limit set forth in the days when America asked, "Who shot J.R.?"

In this reality, every time Pima County's Board of Supervisors raised taxes by X, the state Legislature had to cut an X-sized check back to TUSD homeowners. So the state agreeing to take care of any and all additional expenses is as if, in your household budget, they were taking care of your groceries and every time a time a teenager bought another video game, the Legislature had to buy you a family pack of steak.

How much did the current Legislature bristle at that? A lot.

For years covering local politics, I couldn't figure how local jurisdictions got away with this or how the state let them. How was it, the county was just going to raise taxes and the state was on the hook? How did local governments have them over a barrel? Arizona has a Legislature that would confront a natural disaster such as an earthquake by zeroing out the state's emergency response budget (so taxes would be cut and business would move in). How were they at the mercy of Chuck Huckelberry?

Well, lawmakers had a huge problem. To stop writing the check to subsidize homeowners tax bills, they were, in effect, raising those homeowners' taxes. They couldn't do that because it would require a two-thirds vote among their numbers. Then in the middle of the night they came up with a cool idea (and how many times has such a statement ended with a call to the U.S. consulate from a Puerto Peñasco jail?). 

Read it and weep

Between bar closing time and sunrise on March 7, lawmakers wrote, in what looks like a sleep-deprivation fit, new legislative language that is so priceless, it simply must be read:


NOTWITHSTANDING SUBSECTION E OF THIS SECTION, BEGINNING IN FISCAL
YEAR 2015-2016, THE MAXIMUM AMOUNT OF ADDITIONAL STATE AID FOR EDUCATION THAT
WILL BE FUNDED BY THIS STATE PURSUANT TO SUBSECTION E OF THIS SECTION SHALL
BE ONE MILLION DOLLARS PER COUNTY. FOR ANY COUNTY WITH A SCHOOL DISTRICT OR
DISTRICTS THAT COLLECTIVELY WOULD OTHERWISE RECEIVE MORE THAN ONE MILLION IN
ADDITIONAL STATE AID FOR EDUCATION PURSUANT TO SUBSECTION E OF THIS SECTION,
THE PROPERTY TAX OVERSIGHT COMMISSION ESTABLISHED BY SECTION 42-17002 SHALL
DETERMINE THE PROPORTION OF THE VIOLATION OF ARTICLE IX, SECTION 18,
CONSTITUTION OF ARIZONA, THAT IS ATTRIBUTABLE TO EACH TAXING JURISDICTION
WITHIN THE AFFECTED SCHOOL DISTRICT OR DISTRICTS. BASED ON THOSE
PROPORTIONS, THE PROPERTY TAX OVERSIGHT COMMISSION SHALL DETERMINE AN AMOUNT
THAT EACH TAXING JURISDICTION WITHIN THE AFFECTED SCHOOL DISTRICT OR
DISTRICTS SHALL TRANSFER TO THE AFFECTED SCHOOL DISTRICT OR DISTRICTS DURING
THE FISCAL YEAR IN ORDER TO COMPENSATE THE AFFECTED SCHOOL DISTRICT OR
DISTRICTS FOR ITS PRO RATA SHARE OF THE REDUCTION IN ADDITIONAL STATE AID FOR
EDUCATION FUNDING REQUIRED BY THIS SUBSECTION. IN DETERMINING THE PROPORTION
OF THE VIOLATION OF ARTICLE IX, SECTION 18, CONSTITUTION OF ARIZONA, THAT IS
ATTRIBUTABLE TO EACH TAXING JURISDICTION WITHIN THE AFFECTED SCHOOL DISTRICT
OR DISTRICTS, THE PROPERTY TAX OVERSIGHT COMMISSION SHALL ASSUME A PROPORTION
OF ZERO FOR ANY TAXING JURISDICTION THAT HAS A TAX RATE FOR THE FISCAL YEAR
THAT IS EQUAL TO OR LESS THAN THE TAX RATE OF PEER JURISDICTIONS, AS
DETERMINED BY THE PROPERTY TAX OVERSIGHT COMMISSION.

See what they did? The fix was easy enough to make but had the Legislature declared "the county shall pay ..." that is a direct shift of the tax burden that could be easily construed as a tax hike ordered by the Legislature. However, what they did was say "we're just going to move the liability in that direction to this board who will do some voodoo and figure out who owes what but we're not saying ... "

They forced local jurisdictions to duke it out over who among them taxed less compared to their peers. The last one in picked up the whole bill. Pima County — the only county in Arizona without a sales tax — brings up the rear. However, nothing in this says that a community college couldn't be on the hook to subsidize the local school district, even if the local school district had a bigger budget. The Arizona Constitution, see, says nothing about the Property Tax Oversight Commission imposing a tax hike. So the state handed them the gun and said "you do it."

Because as far as taxpayers are concerned, what does it matter which line of the bill it shows up on? It's still a tax that needs to be paid.

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Passing the ... bill

In March, the Oversight Commission took the quick and dirty way out and declared that any taxing jurisdiction with higher than average property taxes must pay the bill. Nice try. The Legislature could have specified "average" and didn't. They used the term "peers." Peers is something specific, meaning those two or more that are alike. Graham County with population of 34,000 wouldn't be a peer to Pima County with 1 million people. Pima County has three times the population of the third largest county in Arizona and one-fourth the population of the first. It is, therefore, unique. If something is one of a kind, any of its attributes is the average of all of its kind.

The peer thing is also important though, because Pima County is out of whack with other counties in property taxes because Pima is the only county without a sales tax able to offset primary property taxes for general expenses. Pima County's general expenses are almost exclusively paid with property taxes — not that they haven't tried. In Arizona, counties with less than 1 million residents can only impose a general-purpose sales tax with a unanimous vote of a board of supervisors.

In 1998, the county tried to ram one through to pay for criminal justice matters and pay down the property tax. They had four votes of the five needed and the lone hold out was a newly appointed young supervisor named Ray Carroll. Carroll was up for election, facing accusations that he was a Republican In Name Only. Exhibit A in this case was that he was chosen by Raul Grijalva (flip it around and imagine a Democrat chosen by Michele Bachmann). Carroll had to figure out a way to prove in a hurry that he was a Republican and there was the tax hike proposal shoved down his throat. Sugar Ray said no, and his voters thanked him by electing him to his first of five terms.

So Pima County is stuck without a general-purpose sales tax and as a Democratic county, again feeling the cross-hairs of the Legislature. The state, Huckelberry says, is picking on Pima County, telling me, "We are singled out because we are south of the Gila," but also because the county has no sales tax (for the purposes of daily operations) "when all the counties have one or more."

Huckelberry isn't even going that far. He's just saying that the state orchestrated a tax increase on local taxpayers without a two-thirds vote.

"It has a huge constitutional hole like ... the Legislature needs a two-thirds vote to increase state revenues,' Huckelberry said. "By shifting cost to the county they raised state revenues."

It gets better. One of the arguments state lawmakers use to differentiate between their good-horse-sense requirements of local governments and the jack boot of fascist federal mandates on them, is that the counties are subdivisions of the state and are state agents. So, it gets harder for them to tell their subordinates to raise taxes without saying they raised taxes.

Now, can Pima County simply cut $20 million from elsewhere in the budget? I put that to Huckelberry and he got defiant.

"No. And why should we? This is a state tax increase," he said with a degree of justification. "The governor and Legislature bragged about no tax increase to balance their budget. All they did was shift the tax increase to local government."

So the question is: How many state actions exposing the county to more and more financial obligation constitute a tax increase? Courts, it's up to you. Public, think of it this way: How many tax increases would it take for you to suddenly realize you needed a second job to met your own obligations?

Today, a state constitutional amendment written to protect homeowners from tax hikes has the net affect of making Pima County subsidize TUSD.

Can it get any better? Who's your state Legislature, Arizona? If you are in a school district or a spot on the county map where homeowners have kept themselves shy of the 1 percent tax limit, your taxes go up. If you are a homeowner in TUSD over the limit, yours don't. Truth be told your primary tax won't go up — but the county plan is to raise taxes for the Library District, which shows up on a separate tax bill. The typical Tucson family will see a $10 increase in their tax bill.

Renters will pay more because they aren't exempt. Like homeowners who drive pay the federal fuel excise tax, even though it doesn't show up on their receipt, renters pay the property tax even if they don't get a bill.

Arizona being Arizona, we are no strangers to messed up, dead-of-night legislation. It happens a lot. The Legislature likes to rush to prove it's not a professional legislature but an amateur lawmaking body full of people just like you. They want to be done by the end of "as soon as possible" each session. Besides, voters never punish them, so why worry. We get classic screw ups like this:

Alt Fuels. A tax break written to give tax credit to those who converted their SUVs into bio-fuel vehicles, except the conversion cost not a lot and the tax credit was huge. The net effect was a half-off sale on all SUVs and trucks and taxpayers were picking up the dime. The best part is that the conversion to alt fuels allowed drivers to flip a switch and convert back to regular fuels. No, drivers never had to put a lick of bio fuel in their SUV, ever, to get the subsidy.

Employer Sanctions: A bill meant to punish — by revoking their licenses — businesses who knowingly hired illegal immigrants sailed through, but was written in crayon and does not include a carve out for "critical infrastructure." If Greenpeace wants to shut down the western power grid all it has to do is infiltrate the Palo Verde Nuclear Power Plant and hire two illegal immigrants to cut the grass. Done. Dark ages. The authors of the 1980 ballot measure carved out owners of "timber stands."

Incorporation: Remember the towns of Casas Adobes and Tortolita? They were incorporated because of a state law passed without a hearing, late at night, with what's known as a "strike all." Bills can't be introduced late in the session (maybe because state founders figured out this was a bad idea that could lead to weird things?) but procedure allows to strike all the language in a pre-existing bill and replace it with new shit no one has heard about. They can copy and replace. So a law was copied and replaced to bar cities from objecting to and blocking incorporations of communities within six miles of the existing city lines, but only in counties with populations between 500,000 and 1 million. It was a state law written to apply only to Pima County. It was therefore struck down. Tortolita and Casas Adobes incorporated and then had to disincorporate, costing residents there untold cash and anguish.

I swear to God given our Legislature's proclivities, it is a testament to the people of this state that we are not just roving herds of hunters and gatherers fleeing SUVs not converted to vegetable oil.

Blake Morlock covered Arizona government and politics for 15 years, including 11 in the Tucson Citizen. He also worked on Democratic Party campaigns in the field of political communications. Now he’s telling you things that the Devil won’t.


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Latest comments on this storyRead all 4 »

4
1 comments
May 15, 2015, 12:10 pm
-0 +1

Mr. Tater,
Thank you for pointing out a couple spots where finer points were needed.. Feel free to friend me on facebook and let me know. Always appreciate it. However a couple of your corrections are just wrong and may mislead people. Ray Carroll won a special election in 1998 after being appointed, beating Brenda Even and another guy, lesser known. I counted that as a term, using the state constitutions definition under term limits. 1998, 2000, 2004, 2008, 2012. Five.Also the number I used specifically carved out the library tax. The star used the $27 figure, which would include $10 for library tax and $17 to cover new expenses. It’s the $17 tax increase that the homeowners won’t (but everyone else will) pay in most cases.
While you are correct that the county has a road program approved by voters in 2005, paid with a half cent sale tax. That money is non-existent as far as new expenses on the general fund and the county can not raise taxes to offset PRIMMARY property taxes without a unanimous board vote. Pima does not have one of those.However, that did require a brighter line, thank you. It leads to “not even near true” about all the pots of money. Correct, most revenues the county takes in are in the form of enterprise funds, grants and even sec property taxes. None of this is available for general purposes of new state mandates without cost allocation. Cost allocation itself, is a form of restricted use.
The assessment commission should have been changed to match the term oversight board. They averaged the county tax rate as a definition of peers.
I take it that you too would agree to the convoluted nature of the tax increase.
Again, thanks for reading and pointing stuff out.
Blake

3
152 comments
May 10, 2015, 6:06 pm
-1 +1

My head is about to explode.

2
3 comments
May 8, 2015, 7:05 pm
-0 +3

One additional historical fact re:  1978 and Prop. 13.  AZ voters had a choice between 2 competing amendments.  The one that became law, while bad, was marginally better than the Heisler Amendment which was proposed by a character named Bill Heisler (sp?) who flamed out a few years later.  He got his proposal on the ballot by getting it funded out of California.  It was terrible.  I appeared on a local talk show with then State Senator Jim Kolbe in which we discussed the way to vote.  I distinctly remember saying we were being given a choice between a rock and a hard place.  The Legislature came up with its amendment to stop the Heisler proposal but still appear to be riding the tax blocking bronco.  What we predicted would be bad for our state has certainly been true.

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A panorama of the Arizona State Capitol complex.