My Two Cents on the Permanent One Cent Sales Tax Initiative

[John Gallagher]

I am opposed to making the one cent sales tax permanent as proposed by the Arizona Sales Tax Renewal Amendment, which will likely appear on November 6, 2012 ballot.  This may not make me popular in some quarters, but please hear me out. I voted for and supported the original temporary one cent sales tax in May 2010, but I have serious reservations about this latest initiative.

This initiative does far more than simply extend and make permanent the temporary one cent sales tax passed by voters in May 2010 as Prop. 100. In order to make it palatable to to a wide variety of special interest groups from educators to the construction industry, the authors of this initiative have thrown in everything but the kitchen sink. The resulting 14 page initiative has the potential to set into stone a variety of measures that may have unfortunate unintended consequences.  I urge you at least read the initiative before you make up your mind whether or not to support it.  You can find the full text of the initiative here.

Laws passed by initiative cannot be easily modified or fixed. Provisions of a initiative are pretty much set in stone and require yet another another voter initiative to change them, so we have to careful when we pass law by initiative.  

For example, read the section having to do with the evaluation of schools and teachers on page 2 of the initiative:

                B. THE STATEWIDE PERFORMANCE MEASUREMENTS ADOPTED PURSUENT TO THIS SECTION SHALL CONSIST OF THE FOLLOWING MEASURES:

                1. FIFTY PER CENT OF PERFORMANCE MEASUREMENTS SHALL CONSIST OF MEASURES OF ACADEMIC PROGRESS, INCLUDING THE STATEWIDE PERCENTAGE OF THIRD-GRADE STUDENTS MEETING STATE READING STANDARDS PRESCRIBED PURSUANT TO SECTION 15-701, STATEWIDE GRADUATION AND DROPOUT RATES AND STATEWIDE PERFORMANCE ON NATIONALLY ADMINISTERED NORM-REFERENCED ASSESSMENTS SUCH AS THE NATIONAL ASSESSMENT OF EDUCATIONAL PROGRESS AND NATIONALLY ADMINISTERED COLLEGE PLACEMENT AND ADMISSION EXAMINATIONS.

                2. TWENTY-FIVE PER CENT OF THE PERFORMANCE MEASUREMENTS SHALL BE BASED ON MEASURES OF PARENTAL SATISFACTION.

                3. TWENTY-FIVE PER CENT OF THE PERFORMANCE MEASUREMENTS SHALL BE BASED ON STUDENT ENGAGEMENT.

What in the hell is “student engagement”?  This term is not defined in the bill and seems sufficiently nebulous to create mischief.  How will “parental satisfaction” be measured?  Will this be left up to whoever is serving as the State Superintendent of Public Instruction at the time?  I believe these ill-defined terms can be misused for political purposes and to the detriment of our schools.  This is just an example of unintended consequences that might result from passing this initiative.

The temporary one cent sales tax passed by in May 2010 (Prop. 100) expires on May 31, 2013.  66% of the revenue from this measure was designated for primary and secondary education.  It should come as no surprise that the Arizona Legislature used this additional source of funding as an excuse to cut funding to education and human services from other sources.  That’s exactly what they did.

I am told by supporters of the current initiative that it contains non-supplantation language that will prevent this from happening again, but I remain skeptical. Exactly what sort of legal verbiage will prevent a legislature intent on providing an unending stream of tax cuts for corporation and wealthy individuals from cutting funding in other areas to be able to provide yet another tax cut?  At very least they will make cuts in areas not specified by the non-supplantation clauses and blame these cuts on the lack of flexibility that they now have because of the initiative language.

What is really needed is an initiative that both funds education and and makes sure that the wealthy pay their fair share. Arizona already has one of the most regressive tax systems in the county, largely because of its overdependence on sales taxes. According to a recent report published by Children’s Action Alliance, low-income Arizonans pay the highest percentage of their income in total taxes;   

The lowest income bracket pays 224% more in combined taxes as a share of their income than Arizonans in the top 1%.

80% of Arizonans pay a higher percentage of their income in general sales taxes than in income taxes.

Arizona cities have some of the highest sales tax rate in the nation with some cities having a sales tax rate as high as 10%.

Rather than address the unfairness of Arizona''s tax system, the proposed initiative makes us permanently dependent on a regressive sales tax to fund education.  To me, this is unacceptable. 

ASU’s Morrison Institute for Public Policy warned us after the passage of Prop. 100:

Proposition 100 was critical, but is not the long-term solution. We cannot continue to ask voters to pass sales taxes to bring the budget into balance.

The one cent sales tax was a necessary stop-gap measure called for in desperate times; but it should not become a permanent solution.  Better and more equitable solutions exist.  Sadly they are not being considered.

Some tell me that we have no other viable choice.  I say they are wrong.  This initiative is the only alternative because the big money players have decided that they don’t want us to have other options

Polling was never conducted by the organizations promoting the permanent sales tax regarding less regressive solutions such as an income tax on high incomes. One must ask why this is so.  Keep in mind that some of those helping to finance this initiative would be adversely affected by an increase in taxes on upper incomes.

The Arizona Hospital Association back in 2010 proposed a voter initiative to fund health-care by increasing taxes on upper wage earners. I'm told they had polling that showing it could win at the ballot box.  Unfortunately, Republicans in our State Legislature strong-armed them into dropping this idea with the threat they would do bad things to the hospital industry if they even thought about supporting such an initiative.  This initiative proposed raising the tax rate on incomes above $150,000 from 4.5% to 5.5%. It was never filed with the Arizona Secretary of State's Office.

Now that the Arizona Legislature has dramatically cut funding to hospitals anyway, one wonders if the hospitals might have the stomach for such a fight now. Perhaps they would be willing to help fund a ballot initiative of this sort.

In California, the teacher’s unions are supporting an initiative that combines an income tax on upper wage earners with a sales tax.  Originally they supported an increase in the income tax on upper wage earners alone, but they reached a compromise with Governor Jerry Brown who favored a sales tax.

I am told by some that we must not let the perfect be the enemy of the good and that this initiative, flawed as it might be, is our only option if we are to obtain adequate financing for Arizona schools in the immediate future. My response is this; Don’t just accept any old solution without asking some hard questions first. "Do something even if it's wrong" is not a good way to make policy, particularly when the measures put into place by this initiative will be difficult to undo in the future. Take the time to actually read the initiative and you’ll realize that not only is it not a good solution, it may have results that are positively harmful.

Moreover, passing this initiative will remove the pressure from voters and lobbyists that will be required to achieve a decent solution, one that doesn't perpetuate a tax system that puts the greatest burden on low-income Arizonans.

Arizonans will simply not let their schools crumble or hospitals close if this measure fails at the ballot box, as I believe it should. They will insist that their elected representatives do something about it.  Hospitals and teachers unions won’t let this happen either. If this initiative goes down in flames, they’ll simply try something else. Perhaps they'll even give progressive taxation a try.

[Dave Wells]

John,

You're off target on this one.  Let me address a few of your concerns.

Measures like parent satisfaction and student engagement will be measured based on a metric approved by the State Board of Education if you read above the section you highlighted.  This makes good sense, as it's a public body chaired by the Superintendent of Public Instruction and it gives them the ability to adapt the measures over time.  It would foolish to put into the measure a specific measure and then have it turn out to be flawed.  If we disagree with the State Board's decisions, we can voice them. Also, this portion of the funding is a modest share of the initiative.

The legislature can't backtrack on education funding.  While the initiative doesn't deal with building repair funds or the funding formula, it does deal with the general per student funding quite well.  It establishes a clear floor on funding and a mandate that it be increased modestly each year.  The legislature has not been doing this (even though they've found money to build prisons and provide tax credits for jobs that will be created anyway).  The initaitive forces them to do so.  The legislature never likes these kinds of mandates, but they've failed voters on this issue--so this is what they have to deal with, loss of control.  It also enables the 15 percent budget overrides that districts can currently ask to stay in place in the latter part.  (relevant part below)

Be it enacted by the People of the State of Arizona:
17 Section 1. Section 15-901.01, Arizona Revised Statutes, is amended to read:
18 15-901.01. Inflation adjustments; prohibited funding reductions
. For fiscal year  2013-2014 and each fiscal year thereafter,
22 the legislature shall increase the base level or AND other components of the revenue control limit by a
23 minimum growth rate of either two per cent or the change in the GDP price deflator, as defined in section
24 41-563, from the second preceding calendar year to the calendar year immediately preceding the budget
25 year, whichever is less, except that NEITHER the base level NOR THE AMOUNT APPROPRIATED FOR
26 EQUALIZATION ASSISTANCE PURSUANT TO SECTION 15-971 shall never EVER be reduced below
27 the base level established OR THE AMOUNT APPROPRIATED FOR EQUALIZATION ASSISTANCE for
28 fiscal year 2001-2002 2011-2012 OR FISCAL YEAR 2012-2013, WHICHEVER IS GREATER.
29 B. IF APPROVED BY THE QUALIFIED ELECTORS VOTING AT A STATEWIDE GENERAL
30 ELECTION, FOR FISCAL YEAR 2012-2013 AND EACH FISCAL YEAR THEREAFTER, THE BASE
31 SUPPORT LEVEL PRESCRIBED IN SECTION 15-943, THE MAXIMUM INDEBTEDNESS ALLOWED
32 FOR SCHOOL DISTRICT BONDS AND THE MAXIMUM ALLOWED FOR SCHOOL DISTRICT
33 BUDGET OVERRIDES SHALL NOT BE REDUCED BELOW THAT AMOUNT ALLOWED BY LAW
34 ON JANUARY 1, 2012

I hear you on the sales tax.  We are relying too much on sales taxes and not enough on income taxes.  However, the sales tax funding is simply political reality in Arizona.  It's far easier to use an existing tax rather than request a new tax.  The legislature and governor do have panels looking at the sales tax structure, and perhaps some reforms to broaden the base may come out of it.  If the legislature (or a citizens group) would like to change the funding mechanism they can always refer it to voters.

In the meantime, we need to deal with what the legislature has failed to do, and has failed to put in place any mechanism that we can with any confidence expect to happen...fund education sufficiently.  There are small funds for other entities in the initiative, but these are all worthy endeavors.

This initiative is a down payment on Arizona's future and it deserves our support.

Dave

[John Gallagher]

I don't trust the current Supt. of Public Instruction, nor should you.

[John Gallagher]

A boy’s parents take him to the doctor because he’s three year old and hasn’t started to talk yet.  He’s never said a word.  The doctor examines the boy and can find nothing physically wrong with him.  The next morning at breakfast, the child goes into a tirade.  “This oatmeal is lousy.  It’s cold, it’s full of lumps and I don’t like raisins in it.” 

Astonished the boy’s father says, “Forget the oatmeal.  You can talk!  Why haven’t you said anything up to now?”

“Because,” the boy replies, “Everything was just fine before this.”

Arizona voters are an apathetic lot who don’t pay much attention to politics until it has a direct impact on their lives.  Many of them don’t bother to vote and many of the ones who do, just vote for the “R” out of habit without having a clue who they are voting for or what they stand for.  So long as we continue to enable their apathy by saving them from the policies of those they send to the State Legislature, they continue to elect individuals who refuse to adequately address the funding of schools and health-care.

[Dave Wells]

The Superintendent is but one member of the Board of Education--and despite what you think of John Huppenthal--on issues like metrics for parent satisfaction and student engagement, he's pretty skilled, and he's been a long advocate on the parent satisfaction part.  The point though is it will be an open process...and the next Superintendent of Public Instruction can always run on a platform to adjusting measurements.

On your first response post--I see no reason to punish the children of this state, because our legislature is out of touch with voter priorities.  I'm past presuming inadequate policy making by the legislature will lead to voters changing whom they select, which is why this initiative is important.

[Brandon Dwyer]

John as always makes some good points. I'm inclined to agree with him.  I think this is a half a loaf bill. I hate holding my nose but at least some funding will be restored. 

[zacharybrubaker]

I am for higher taxes even though I don't trust the state not to waste most of the money. Education is something especially in this state that needs better funding and of course to be run by more intelligent people but one thing at a time. refreshinglyrational.blogspot.com