Leading under divided government is hard, but it does not excuse a governor from actually governing. Republican legislative leadership has held a clear and defensible line when it comes to the state’s budget: spend only the revenues the state actually has, provide full tax relief by implementing full conformity and don’t force Arizonans to file their taxes twice and pay more in the process. When Hobbs couldn’t move them off that position last week, she didn’t really explain why their position was unreasonable or come back with a new proposal. Instead, she walked away from the table.
Recently, a rumor was circulating around the Capitol that the Governor and legislative leadership were discussing a deal to deliver conformity tax cuts and build the contours of the budget around a speculative state land trust ballot referral. Referring a Prop 123 extension would dump hundreds of millions of new dollars into district K-12 schools without any strings attached. By the end of last week, that balloon had popped, along with any credibility that Katie Hobbs knows how to lead.
As governor, it is Katie Hobbs’ job to bring people together and solve difficult problems. Yet before the calendar has even turned to April (very early for budget season at the capitol), Governor Hobbs has already admitted that she is out of ideas.
The Prop 123 Gimmick Was Never Going to Work
Now that the budget breakdown has gone public, details of the Hobbs proposal have been released, and it was far worse than anyone had even thought. Under the Hobbs plan, Arizona’s entire budget would somehow hinge on the passage of a new Proposition 123 referral at the ballot in November.
Currently, the annual distribution from the trust to the beneficiaries is 2.5% of the corpus. What did Hobbs want? 10.9% over 20 years!
According to legislative budget analysts, ratcheting up outlays to 10.9% would cut the trust nearly in half – from $9.7 billion to $4.7 billion – over two decades. This is not a budget solution; it is a structural raid on an endowment built to support K-12 education for generations.
When then Governor Ducey pushed for an increase in trust land distributions in 2015 from 2.5% to 6.9%, he did so with the explicit understanding that it was temporary. Even that modest increase was seen at the time as aggressive, with voters approving it by a razor thin margin of 50.9 percent. And when the larger distribution was set to expire last year, the legislature appropriated additional ongoing funds from the general fund to avoid any “funding cliff” for K-12.
Katie Hobbs, however, sees this as a way to add hundreds of millions to the state budget to pay for additional spending. Only one problem: she can’t actually attach Prop 123 to the budget. Perhaps no one explained this to Hobbs, but funds from the trust cannot be appropriated by the legislature or Governor. It’s a separate pot of money owned by the beneficiaries of the trust. So even if she does have a crystal ball and knows that voters would approve her reckless distribution plan, it has no bearing on what a final FY2027 budget would even look like.
In short, this is a reckless, unworkable gimmick being pushed by a desperate politician looking for leverage in budget negotiations.
Full Conformity Has Occurred. Hobbs Just Refuses to Admit It.
The $440 million in conformity tax relief for Arizona filers this year alone is not the negotiating chip Hobbs wishes it were. It is a foregone conclusion. Her own Department of Revenue has already published tax forms assuming full conformity with the federal tax code.
Arizonans are filing their taxes with those forms right now, because the alternative – rolling back full conformity and forcing millions of taxpayers to file their taxes twice and pay more when they do it – is not a position any elected official can defend. Hobbs is trying though, refusing to publicly state whether she has abandoned her conformity plan from January that would lead to tax season chaos.
She has already vetoed two conformity bills. She blocked a special session that would have resolved the question cleanly. She built this mess. Whatever leverage she imagines she has with conformity is a bluff, and Republicans should call it. There is nothing to trade here.
That leaves Hobbs with the problem she has been dodging since day one: how to pay for it. She has no answer, and she doesn’t want one. Instead, she has invited Republicans to simply send her a budget that she will “evaluate,” which is code for waiting around doing nothing and then saying no. That is her playbook. Hobbs manufactures the crisis, Republicans put solution after solution on her desk, and she vetoes them all without offering anything workable in return.
Republicans Just Have to Hold the Line
Republicans don’t need to trade away permanent tax relief for a budget gimmick that will never materialize, tied to a trust fund that doesn’t belong to state appropriators to begin with, to solve a problem Hobbs created and her own agency has already been forced to work around.
The path forward is already on the table: full conformity paired with responsible offsets that require neither a ballot box nor a land trust raid. And since Hobbs has now thrown up her hands and demanded that Republicans produce a budget for her to “evaluate,” (with no ideas of her own) they can and should take their time and do it right.
Chaos Katie can storm off all she wants. The legislature should keep the lights on and keep working for an Affordable Arizona.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
Arizona needs to have a unified voice promoting economic freedom and prosperity, and the Free Enterprise Club is committed to making that happen. But we can’t do it alone. We need YOU!
Join our FREE Grassroots Action List to stay up to date on the latest battles against big government and how YOU can help influence crucial bills at the Arizona State Legislature.
Recent Comments