Senate OKs sending sales tax to voters

PHOENIX  With bipartisan support, the state Senate voted Tuesday to ask voters for a three-year hike in the state sales tax.

The 1612 vote came over the objections of several lawmakers from both parties who said that even asking voters for more money is a bad idea.

Sen. Amanda Aguirre, DYuma, said residents of her county can't afford to pay the additional penny on the current 5.6 percent sales tax.

"We have a lot of folks out there that have no way to buy goods,'' she said,

"They are unemployed, they are working part time,'' Aguirre continued. "The business community is not hiring.''

On the other side of the political aisle, Sen. Ron Gould, RLake Havasu City cited a study performed for the Goldwater Institute which said a onecent hike in sales taxes will result in the loss of 14,400 jobs.

"We're going to be moving money out of the private sector into the public sector,'' he said.

Tuesday's vote sends the proposal  along with five other measures designed to balance the current year's budget  to the House where they face an uncertain future.

And even if the sales tax plan survives that hurdle, it still needs voter approval in May.

Sen. Ken Cheuvront, DPhoenix, said higher taxes are preferable to the alternative of having to cut spending by more than $900 million a year for the next three years, the amount the levy would raise.

But Sen. Paula Aboud, D-Tucson, said there is nothing to guarantee that even if voters approve the higher taxes -- and the state raises more than $900 million a year for the next three years -- the Republican-controlled Legislature still won't cut programs.

That possibility appears almost impossible to avoid: The deficit for next year is projected by Gov. Jan Brewer at $3.4 billion. And the governor herself has said further spending reductions are going to be necessary.

While agreeing to put the question of higher sales taxes on the ballot, lawmakers rejected an effort by Sen. Rebecca Rios, DApache Junction, to extend that one percentage point hike to the taxes paid by the mining and the sand and gravel industry.

Rios pointed out that both industries already have a special tax break: The mines have a 2.5 percent levy on the value of minerals extracted; the tax on the value of sand and gravel is 3.2 percent. She said these firms should be "good corporate neighbors'' and contribute their share.

Even if the sales tax is approved, though, the levy won't begin generating additional cash before the end of this fiscal year on June 30. So the plan approved Tuesday includes various other measures designed to deal with the $1.4 billion gap between revenues and expenses for the balance of this budget year.

Most of that involves borrowing -- a lot of it. That raised objections from Gould who said some of that is not only illadvised but also illegal.

One provision would borrow $450 million, paying it back over 20 years with future proceeds from the Arizona Lottery; the other sells off $300 million of buildings, with the state leasing them -- and essentially buying them back -- over the next 20 years. Gould said both run afoul of a constitutional provision limiting state debt to just $350,000.

But Sen. Barbara Leff, R-Paradise Valley, said that provision only bars lawmakers from obligating the state treasury itself.

The provision to borrow against future Lottery proceeds pledges only those funds, with no obligation of Arizona taxpayers to make up the payments if people stop wagering and the profits from staterun gaming dry up.

And the sale of the buildings involves leasing them back for 20 years, at which time the state would again own them. But the deal is structured so the state can walk away from the leases at any time. While that would mean losing the buildings, it also means there is no obligation of the state to keep paying.

Gould, however, wasn't buying it.

"We just seem to want to play Jedi mind tricks around here and just call things other things to confuse people,'' he said.

Senate President Bob Burns conceded that much of what is in the package involves borrowing.

Aside from borrowing against the Lottery and the sale-leaseback of state buildings, the plan also calls for delaying $350 million that is supposed to be paid in aid to public schools this fiscal year until August. And state universities will not get $100 million they are due until September.

"I wouldn't put it in the 'good, fiscally responsible plan' category,'' he said of all the borrowing.

"There are things we should do, things we want to do,'' Burns continued. "But it all comes down to what we can do.''

Burns said this was the only package that could get the necessary votes for Senate approval.

Even with all that, Burns said what was approved Tuesday still does not balance the budget for the current fiscal year. Lawmakers still need to find another $250 million between now and June 30 to actually bring this year's books into balance.

Gubernatorial press aide Paul Senseman said Brewer she was pleased that a bipartisan group of senators approved sending the tax hike to the ballot. That's what Brewer had sought nearly a year ago but could not get the votes.

When that plan stalled, Brewer asked lawmakers last month to enact the temporary levy themselves, a move that would have allowed the tax to take effect March 1. That would have provided more than $200 million to deal with this year's deficit. But that plan could not gather the necessary two-thirds vote of both the House and Senate; referring the issue to the ballot requires a simple majority.