The Farley Report from Phoenix #194: 12-17-13

This will be the last monthly Farley Report of the 2013 off-session. The next time I write to you will be January 14, the second day of the 2014 Legislature. From then till Sine Die you'll be hearing from me every Tuesday night with the latest news straight from the source. 

This Report is a little preview of some of the legislation I am developing for the upcoming session. But first, a Farley Pledge Break: 

If you'd like me to continue serving you in the Senate, I need to get re-elected. In order to get re-elected, I need to raise money and sign up volunteers. I won't be asking you to help me with your feet until next spring, but I could use your help now to contribute funds to my campaign. The more you can give now, the less I will have to bother you later! 

My opponents (whoever they may be) may get more deep pockets in their corner, but I feel confident I can match them stride for stride with your passion for good governance on my side. Please help me out in any way you can, starting today. Thank you!

You can securely give $20, $200, or even the maximum $440 online right now.

On to the preview of a few policies I'm developing…

--> Transportation finance: I have four different bills I am currently vetting through bipartisan public and private stakeholder groups that will address the impending crisis in transportation revenue that threatens to leave our roads and transit systems with no sustainable funding as soon as 2014. 

Regular Farley Report fans know that our gas tax is declining and dying as a revenue source, thanks to higher mileage cars (with electric cars not paying gas tax at all), fewer miles driven, and a flat tax per gallon that does not rise with the price of gas and hasn't been adjusted for inflation in nearly a quarter century. If our 18 cents per gallon state tax had been adjusted to collect the same effective amount we collected in 1990, we would be paying 42 cents a gallon right now. This doesn't just affect our state budget -- the Federal Highway Trust Fund is projected to be bankrupt later next year.  

Our transportation system was built through the sacrifice and sweat of our parents and grandparents, and we must not be the generation that allows their legacy to crumble. If it crumbles, our economy crumbles as well, taking hundreds of thousands of jobs along with it. That's why I am trying to solve the problem three different ways:

1) Stop the bleeding: We must stop all transfers out of the state Highway User Revenue Fund that are not directly related to transportation infrastructure, and we must restore the Local Transportation Assistance Funds (LTAF). This bad habit began during the 2003 budget downturn and got worse in the more recent recession -- Legislative majorities voted to divert up to $200 million a year to funding DPS and the General Fund, and divert lottery funds that were intended for local transit funding to the General Fund. I am working with a group of folks on both sides of the aisle who will refuse to allow these diversions henceforth, and I have a bill with bipartisan support to restore the LTAF funding, the loss of which was particularly devastating to Pima County and rural counties. 

2) Get an infusion #1: Another bill of mine will allow any Arizona county to institute a 3% tax on gasoline or diesel, with all those funds returned to the county in which they were collected to be spent on transportation projects. This amounts to around 10 cents a gallon at current prices -- still much less that we need to keep pace with inflation, but a huge help nonetheless. And since it is a percent, not a flat amount, it is automatically increased with the price of gas. Given that the price of gas routinely varies among gas stations on any given day by up to 15 cents a gallon, the tax shouldn't be too hard to handle, especially compared to the price to getting a wheel alignment from the potholes. And all that money will go to local job creation.

3) Get an infusion #2: I am seeking to set up a statewide Transportation Infrastructure Bank with a chunk of capital out of the current budget surplus that can then be lent to cities and counties to finance transportation projects that will help with mobility, congestion, and trade while creating jobs. The money would be lent at favorable interest rates then repaid, so the amount to be lent will steadily grow to be invested in other transportation projects in the future, steadily improving out infrastructure and economy as a job engine.

4) Find a permanent solution: I will be running my bill that passed Senate Transportation Committee last year (but was not allowed to proceed to the floor) to set up a Highway User Fee Replacement Task Force of 24 members representing a broad range of public and private interests (from all over the state), to develop a design for revenue collection for Arizona's transportation system that will replace the gas tax and diesel tax. Upon receipt of the task force recommendations, ADOT would develop a pilot program to test the proposed fuel tax alternatives. Other states are already coming up with gas tax replacements, and we need to come up with our own before we are left with nothing to pay for fixing our crumbling system. 

--> Education funding: I have been extremely frustrated with the short-term thinking embodied in the more than $2 billion in cuts to our education system during the recession. There is no way we can assure our future vibrancy as an economy and as a state if we refuse to invest in our children -- those who will rise into leadership and drive our economy in the coming decades. Instead of improving our schools, the legislative majority has been cutting corporate taxes -- even those that have no ties to job creation. 

In fact, while we have a nearly $1 billion surplus this year, the majority leadership in both houses has been warning that we need to cut further to avoid another deficit as soon as fiscal year 2016. What they are not saying is that deficit is only going to be there because of massive corporate tax giveaways that they enacted two years ago, tax cuts that aren't even important to the business community that they supposedly serve. We have eliminated more than $3 billion annually from the general fund in tax cuts alone since 1990. Our problem is not a revenue problem, it is a priorities problem.

In fact, the voices I have heard recently from the business community are saying that our business tax climate is really good right now -- the real crisis is in education and workforce development. They want future entrepreneurs to power our economy and future workers who are well-qualified to keep those businesses here. At the Southern Arizona Leadership Council's retreat in November, the respected economist Dan Hunting demonstrated just how far our workforce qualifications are falling behind the rest of the country, not to mention the rest of the world. You can read his powerful presentation downloadable as a 2.9MB PowerPoint here. Turn on the notes for his speech, and make sure you pay close attention to Slide 10, which shows our downward trajectory compared to Colorado (a competing state) which has invested in education and reaps the benefits. We have to act now to assure a future that works for all of us.

To address this problem, I will be introducing a bill that suspends two recently-approved major corporate tax cuts (which are not specifically tied to job creation) in order to pay for improving our schools. Once our public schools reach certain achievement goals, those tax cuts can go back into place. This bill only requires a simple majority to pass and suspend these cuts, restoring hundreds of millions in education funding, because the cuts have not yet gone into effect. If they were in effect, it would need a 2/3 majority.

Specifically, the suspended cuts are the corporate income tax cut and a further reduction in corporate property taxes. None of these directly create any jobs -- my bill maintains the tax cuts that do directly create jobs (like the research and development credit). In order for the suspended cuts to go back into place, these are the three goals that must be met: 

1) 94% or more of third-graders read at third-grade level. Currently only 75% are there.

2) The high school graduation rate is 93%. Currently only 79% graduate. 

3) General fund expenditures for K-12 education are at or above the national median. 

It is important to note that goals 1 and 2 are straight from the Governor's Arizona Ready Education Council goals for the state -- they are not plucked out of thin air. If we do not act to improve our schools now, our kids' and our economy's future will not be able to compete in the global economy. Period. And most of our business leaders agree on this point.  

I am hoping my colleagues on both sides of the aisle agree.  

--> Transparency in the political process: I will be introducing a couple of important bills once again to restore some accountability to lobbying and dark money. One is my ALEC Accountability Act to force public disclosure of gifts from organizations like ALEC who fly legislators to conferences to sell them on model legislation, and forces these organizations to register as lobbyists and submit to the requisite regulations. I won't repeat my explanation of the provisions here, since I have talked about it often -- you can view Bill Moyers' PBS piece here for background.

The other is a way to go after the Citizens United decision that unleashed billions of dollars in "dark money" onto the political scene -- anonymous donations funding PACs, SuperPACs, and independent expenditure (IE) committees on all sides of the political spectrum. I strongly believe that the future of our democracy depends on the full disclosure of exactly who is seeking to manipulate our vote, whether they be right-leaning corporations or left-leaning unions. And several of my colleagues in the Senate on the other side of the aisle agree with me on this.

My bill is a relatively simple solution to the problem that became clear last year when the California Fair Political Practices Commission forced an Arizona IE to reveal its funders, and they simply revealed that their major funder was another shadowy IE. My language proposes that a political entity that receives a donation and spends the money in Arizona political campaigns will be guilty of a class 6 felony if the entity does not disclose the original person who gave the money and every other person in the chain. A political group that receives a contribution from another group will therefore face a choice to avoid criminal charges: 1) demand full disclosure of the original sources of the money, or 2) refuse the contribution in the first place.  

If choice 1 is made, the public gets to know who is behind the spending and draw our own conclusions. If choice 2 is made, the power of dark money will dramatically dwindle as fewer political organizations accept such untraceable donations. Either outcome is a victory for voters. 

The difference this year is that Senator Michele Reagan (R-Scottsdale), who is now running for Secretary of State, is now interested in helping me with some version of this bill, so there is a chance it may get some traction this time around. 

--> Elder financial abuse: I will be reintroducing my bill to allow financial institutions who gain through financial records (or other means) suspicions of abuse of vulnerable elders by fraudsters to report those suspicions to the Attorney General's office for further investigation. The AG has shown interest in helping pass the bill this year.

--> Animal abuse: I will also reintroduce my bills to curb animal abuse in Arizona, which is important to protect both animals and humans, since the link between animal abusers and future human violence is strong. One will add animal fighting to the list of criminal offenses prosecutable under the RICO statutes. That means that dogfighting rings who have had a leader busted can no longer just move the ring down the road to raise money and bail him out of jail. All their property would be subject to immediate seizure under RICO. This has the support of the prosecuting attorneys. The other will be my Animal Abuser Registry, like a sex offender registry for convicted animal abusers. The public, especially animal shelters and pet stores, have the right to know if the person seeking to adopt an animal has a record that should preclude him from adopting any animals, and pet owners have the right to know of any dangers from abusers in their neighborhoods. The Maricopa County Sheriff's Office, among others. continues to support this legislation.

--> Arizona mortgage lending standards: I will write more about this very large issue later, since I am not succeeding at trying to keep this Report at a manageable size, but for now I will tell you that I am extremely concerned with the potentially damaging effect on the real estate market and our economy of the impending full phase-in of the federal Dodd-Frank act, which was intended to stop the recent real-estate recession from happening again, but appears to have been an effort on the part of the big banks who caused the recession through greedy lending practices to instead deflect blame onto small business owners, sole proprietors, and middle-class homeowners.

The provisions of the federal act are already making it harder to people to qualify to buy a home, or to refinance their existing homes to free up capital for building their small business or paying off debt. This means there will be less people able to obtain financing, which means less demand in the real estate market, which means a downward pressure on home values and even more of an economic crunch for the middle class. Folks with an 800 credit rating, a 20-year track record of on-time payment of a monthly mortgage, and lots of equity are being turned down for loans because of unreasonable requirements in the new underwriting standards. 

So my solution is to stand up for small businesses, sole proprietors, and the middle class and force a national showdown against the big banks and the federal government -- the bill writes our own reasonable Arizona underwriting standards for mortgage lending. We will see where the process takes us after that -- it may go to the US Supreme Court. I expect I may get strong support from both Republicans and Democrats for this one, and it should be a very interesting process to follow.

--> And finally tonight, I do want to encourage you to try out the healthcare.gov website once again if you had trouble with it in November. In Washington DC on December 5, I had a meeting in the President's conference room outside the Oval Office in which I was briefed on the latest developments regarding the implementation of the Affordable Care Act and the status of the Exchanges. Administration officials detailed the steps taken to improve the user experience on the website and the growing numbers of people successfully obtaining coverage.  

Since then, I have heard much better stories from constituents who have signed up for better plans at better premiums. While you have until March 31 of next year to enroll, December 23 is your deadline if you want your coverage to begin on January 1, which is particularly important for those who are currently on Healthcare Group -- that ends on December 31.  

Thanks for your continuing faith in me as your Senator. 

Steve

Steve Farley

Senator, District 9, Tucson

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