The Farley Report from Phoenix #180: 4-23-13

Excerpt from the Senate Rules: 

RULE 27
Length of Session 
A. Except as provided herein, regular sessions shall be adjourned sine die no later than Saturday of the week in which the one hundredth day from the beginning of each regular session falls. The President may by declaration authorize the extension of the session for a period of not to exceed seven additional days. Thereafter the session can be extended only by the Senate by a majority vote of the members present. 

Today marks the 100th day of this year's legislative session. 

Sadly, there is no sign of us returning home any time soon. Medicaid restoration progress is stalled, budget talks are in very early stages exclusively within the Republican caucuses, and there is even talk in leadership of shrinking the workweek from four to three days a week to adapt to the slowdown. I and many other members of both parties would like to speed things up and get out of here sooner, but we do not currently hold the levers of power.  

The longer we stay, the more bad stuff comes out of the woodwork.  

That legal tender bill, SB1439, is still awaiting a final reading in the Senate, and could come to the floor at any time. I'm hoping, as this excellent article on the bill in the Arizona Republic and USA Today points out, the recent nearly 10% one-day decline in the price of gold cools the Tea Party ardor for buying groceries with a stash of gold & silver. 

Another example of this too-much-time-on-our-hands trend was fended off yesterday on a strong and welcome bipartisan show of force in Committee of the Whole.  

Senator Rick Murphy (R-Glendale), a longtime proponent of the privatization of our public school system, offered an amendment to HB2458 that would eliminate all academic standards and curriculum from Arizona public schools in August of this year, to be replaced with some other unspecified standards and curriculum in the unspecified future, and that these standards and curriculum will require approval of the Legislature.  

This was Murphy's attempt to defeat the Common Core standards and the new national PARRC assessments that emphasize analytical ability rather than rote memorization and encourage creativity among both students and teachers. The state education board has been developing this curriculum for years, and has already rolled it out in many districts. Even Superintendent of Public Instruction John Huppenthal serves on the governing board of the PARRC.  

Common Core as a way of improving student performance and educational outcomes was not controversial until this year when Tea Party members starting carrying it in their basket of conspiracies that they believe is evidence that the UN/Communist Agenda 21 is undermining America. Because multi-state standards are clearly intended to bring about the dictatorship of the proletariat... 

While this logical stretch may at first seem amusing, it is in fact dangerous. Teachers and students must not be jerked around by the whims of a legislature that as a body knows next to nothing about how to develop curriculum and assess educational progress. There is no way this power should be taken out of the hands of the state board of education. Politicizing education can put at risk a generation of Arizona students, and consequently endanger the entire state economy. 

After strenuous debate on the floor in which I took part, COW Chair Gail Griffin (R-Hereford) announced the amendment's passage, but a division was called before the gavel, forcing members to stand up and be counted for and against the amendment. The result was an 11-17 failure -- heartening success for the bipartisan forces of reason.  

Another bill from yesterday passed unanimously, but was nonetheless instructive as to how we have ended up with more than $10 billion in sales tax loopholes in our sales tax code, which in turn explains in part why our sales tax rate is so high. Bear with me as I give you some background on HB2535, "independent functional utility".   

Currently, our sales tax code exempts the purchase of equipment used in manufacturing, mining, or utilities. This transaction is clearly not wholesale for the purpose of resale -- it's the end user of the equipment getting out of paying sales taxes for a retail product. Alternately, when my business buys a computer for the production of graphic design I still have to pay sales tax on that computer. While I think we should have a discussion about whether the manufacturing, mining, and utility exemption is fair, or has benefits to our economy that are greater than the revenues we are foregoing, this is not my key point here.  

The issue at hand in 2535 is that manufacturing, mining, and utility equipment that is exempt from RETAIL sales tax is still subject to CONSTRUCTION CONTRACTING sales tax under current code if it is bolted to a wall or floor, but exempt if it is not. This is clearly a weird bureaucratic distortion in the law, and should be fixed.  

While this loophole is reasonable, we do not know how much it will cost the general fund because the fiscal note tells us that there is not enough information to know whether anyone is currently paying this tax. That reasonableness -- together with lack of an organized opposition, and the general sense among members that we should support other members' bills unless there is a serious problem with the bill -- is what has caused virtually every other reasonable tax loophole, taken individually, to become enshrined in law.  

Once you get hundreds of these similarly enshrined, then you are looking at a big collective hit to our general fund. A few million here, a few million there, and soon you are talking about real money. In order to pay for our schools, public safety, transportation, and all the other core functions of government, we consequently have to increase sales tax rates to make up for all those "reasonable" exemptions. That hurts the overall economy along with our household economies. 

We will never solve this problem one bill at a time. But we must increase awareness of the problem so the public can demand true fiscal reform -- that holy grail of good public finance policy that we keep talking about on both sides but never do. We must bring rational comprehensive guidance to the entire revenue system so we can get rid of the loopholes that are simply special interest giveaways, keeping exemptions that actually help grow the economy. That takes guts and leadership. I hope we are up to the task someday. 

Thanks for your faith in me as your Senator.  

Steve

Steve Farley

Senator, District 9, Tucson

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Arizona State Senator Steve Farley
Arizona State Senator Steve Farley