by admin | Jul 2, 2024 | Corporate Welfare, News and Updates
After months of debate surrounding the controversial reauthorization of the Arizona Commerce Authority (ACA), the tension finally broke on the last day of session when HB2210 was raced through the House and Senate and signed by Governor Hobbs.
Everyone at the capitol was aware of the problems surrounding the Commerce Authority. Our elected officials were briefed on the innumerable deficiencies, questionable activities, and likely illegal behavior of the agency. Yet when it came time to act, the legislature capitulated to the special interest benefactors of the agency, passing a reauthorization with no real reforms. The included changes were so inconsequential that an agency dealing with months of negative press about illegal CEO junkets had nothing but accolades for legislative leadership.
What did the final ACA package look like? In exchange for a five-year reauthorization (one of the longest reauthorizations ever granted to the ACA), the agency agreed to add to their board an attorney practiced in litigating Gift Clause violations, a requirement that their board meetings be videoed and hosted online for public review, a cap of “only” 100 state-paid full-time employees, and some reporting requirements for permitting and approval times by local cities and towns.
So, what started out as a hopeful and robust opportunity for reform quickly disintegrated into window dressing changes. No meaningful legislative oversight of the agency was included. It continues to exempt the ACA from having to use the Attorney General for legal counsel, instead allowing it to be one of the only departments to expend funds hiring silk stocking law firms on the taxpayer’s dime. And it still enjoys its exclusion from the prohibition on competing with private businesses, ironically, considering it claims to exist to promote the thriving of private businesses.
However, the most tragic concession was the jettisoning of the statutory gift clause test, which would have ensured the ACA conducts a constitutional analysis of every grant award and subsidy administered by the agency. The proposed gift clause language was taken straight from the landmark Arizona Supreme Court Schires decision, and given the agency’s track record of violating the Gift Clause, this was the most needed and defensible reform of them all.
Opponents to ACA reform absurdly argued that the “Schires Test” does not apply to the agency, so without its inclusion, it is quite obvious the ACA intends to continue handing out unconstitutional gifts to private business.
Litigation is likely to ensue, but the ACA doesn’t care. It has an unlimited taxpayer-backed war chest to defend these subsidy schemes. It knows it costs a fortune for private actors to sue, and if one of its deals is found to be unconstitutional, it will just modify the next deal, declare it “different,” then dare someone to sue it again. It’s a great scheme if you can figure out how to be part of the 1% that benefits from this racket.
The bottom line is that the absence of substantive reforms to the Arizona Commerce Authority was a missed opportunity for taxpayers. Following a dismal auditor general report and scrutiny by the Attorney General for constitutional violations, there was enough momentum to address many of the problems plaguing the ACA. Sadly, that momentum was squandered, and another government agency was allowed to continue with no oversight or accountability.
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by admin | Jun 26, 2024 | Misc, News and Updates
PHOENIX, ARIZONA – This week, the Arizona Free Enterprise Club, through its attorney, sent a letter to Maricopa County Attorney Rachel Mitchell, requesting that she investigate Governor Katie Hobbs and her so-called Inaugural Fund, and that she prevent Hobbs and her Fund from engaging in illegal electioneering with funds held by the Inaugural Fund.
The communication from the Arizona Free Enterprise Club follows earlier attempts to hold the Governor and her Inaugural Fund accountable. Previously, a member of the State Legislature filed a complaint with the Arizona Attorney General, alleging that any use by the Inaugural Fund monies for the purpose of influencing an election would be a violation of Arizona state statutes. Additionally, House Speaker Ben Toma and Senate President Warren Petersen have warned the governor that state law prevents her from using public resources, including “web pages, personnel, and any other thing of value to influence an election.”
“While everyone is focused on the alleged pay-to-play scheme by the Governor’s Office, Katie Hobbs continues to evade accountability for her illegal advertisement and collection of funds for her political endeavors in the State of Arizona,” said Scot Mussi, President of the Arizona Free Enterprise Club. “As we make clear to County Attorney Mitchell, Hobbs must be stopped or else she – and future governors – will misuse taxpayer resources and ignore laws meant to protect the state’s interests. The Arizona Free Enterprise Club will not allow this blatant disregard for the rule of law to proceed.”
In the letter to County Attorney Mitchell, the Arizona Free Enterprise Club raises two points for the prosecutor’s consideration. First, the Inaugural Fund raises funds that utilize state resources. Before Hobbs was sworn into office, her Inaugural Fund used an official, taxpayer-funded state website to drum up donations to the fund by directing individuals and entities to a staffer on her campaign. Second, Governor Hobbs and members of her team will not commit to foregoing any use of the remaining funds in the Inaugural Fund for the purpose of influencing elections.
As the Club notes, if the governor is not stopped, there will be nothing to prevent her, or any other elected official who lacks scruples, from turning state websites into free advertising for political aims and utilizing other state resources to drum up money that will be spent politically.
Read the letter here.
by admin | Jun 21, 2024 | News and Updates, Tax
Last weekend, the Arizona legislature completed its constitutional duty and finally passed a state budget, concluding its business for the year. Looming over the entire process was a budget deficit that needed to be filled—fluctuating from around $1.6 billion to just over $2 billion over the 3-year budgeting period.
Though the left and the media wanted to blame historic tax cuts and landmark school choice expansion for the shortfall, the real problem was record spending that resulted in Arizona’s budget growing by over 50% in the last five years. So, when lawmakers gaveled into session in January, the solution was to right-size state spending. Our organization even provided a roadmap for a successful budget process:
- Cut spending to align with current and future funding projections
- Don’t raid the rainy-day fund
- Don’t use budget gimmicks to balance the sheets
- Don’t roll back our school choice programs
- Don’t raise taxes
So how did the legislature do? Here is a breakdown of the good and the not so good results from the budget:
The Good
Big picture, the package resolves the expected deficit and balances the budget. It did so largely with an across the board cut of roughly 3.5% in ongoing spending for state agencies, removing some prior one-time spending items, and largely sweeping surpluses in various funds to the tune of $714 million (more on that later).
Slush Fund Swept at Arizona Commerce Authority
Of those, the budget swept $57 million from the Arizona Competes Fund, which exists as a slush fund for the Arizona Commerce Authority (ACA) to hand out grants to corporations. Of all the problematic programs administered by the ACA, the Competes Fund is the most apparent violation of the Arizona gift clause, which we have written about extensively.
Protecting School Choice
Hobbs came into this session (just as the last) with her top priority being regulating the wildly popular ESA program out of existence. Despite the noise from Hobbs, legislative Democrats, and their pals in the media, the budget does not place any limitations on how many students can obtain an ESA, even though Hobbs wanted to force thousands of students back into government-run schools.
The budget did include minor changes to the program, such as requiring fingerprinting for teachers and staff with unsupervised access to students at qualified schools (mirroring existing requirements for schools who accept STOs), limiting audits on families to no more than once every five years, and allowing for reimbursements of expenses instead of requiring only the use of Class Wallet. This leaves the program largely untouched, despite the fuss and strong posturing since its passage in 2022—from a failed referendum attempt, to a failure to place any limitations last session, and now a failure to restrict it this year.
Several Measures Referred to the Ballot
Further, as part of passing the budget, legislative Republicans also sent four more measures to the November ballot. Among those is SCR 1041 which protects our ballot from unconstitutional measures by allowing for legal challenges before the election, SCR 1040 to protect tipped wage earners, and SCR 1012 which requires legislative authorization before any agency regulation that will cost $500,000 is implemented.
The Not So Good
Fund Sweeps
However, as mentioned earlier, the largest mechanism used to balance the budget was sweeping funds, including many that are funded from fees charged for occupational licenses. These fees are paid by regulated professionals, and surpluses in the fund imply that they are being overcharged. Those surpluses should be returned to the professionals who paid excessive fees, not swept to balance the budget. That said, the budget prevents fee increases from these boards for the next two years, which is a solid protection to ensure they do not turn around and further burden regulated professionals to refill their coffers.
Lack of Executive Oversight
There were also some missed opportunities this session, specifically in holding the executive branch accountable. Last session, the Arizona Senate held firm in doing thorough investigations of Hobbs’ agency nominations, to the point that she rescinded them all and resorted to breaking the law to avoid the Senate confirmation process. Similar to nominating the directors who run her agencies, this session brought many of those agencies that were set to automatically terminate without a legislative continuation, providing an opportunity to continue that track record and ensure accountability. Among those were the ACA and the Arizona Department of Transportation.
No Agency Reforms
While it was good to sweep the large stockpile of cash at the ACA in the Competes Fund, the Authority was continued for five years without any substantive reforms. Most critically, there was no statutory test to protect taxpayer dollars from unconstitutional expenditures. Similarly, ADOT received an 8-year continuation, excluding the reforms included in a bill that passed the Senate earlier in session that would have prohibited them from conducting DEI trainings, developing “Climate Action Plans,” and building electric vehicle charging stations.
No Action on Kris Mayes Report
There was also no real action in response to a thorough report from the House Executive Oversight Committee finding “that Attorney General Kris Mayes has abused power, neglected legal duties, and committed malfeasance in office.”
An Acceptable Budget with Divided Government
Given the dynamics that were at play—a budget deficit, divided government, and the specter of election year politics looming over the process—this was an acceptable package that won’t give anyone buyers’ remorse in a few years. It did cut spending, it did protect school choice, it didn’t touch the rainy-day fund, and it didn’t raise taxes.
So all-in-all, enough was accomplished to continue to feel good about the future prosperity of our state.
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.
by admin | Jun 13, 2024 | Misc, News and Updates
June has been off to a brutal start for Arizona Governor Katie Hobbs. She kicked off the month by breaking her own hiring freeze to bring in a new press secretary. Then, a few days later, a Maricopa County Superior Court judge ruled that Hobbs violated the law when she sidestepped the Senate’s confirmation process for agency directors. And to top it all off, an eye-opening report was released uncovering an alleged pay-to-play scheme between Hobbs and an Arizona group home.
This shouldn’t come as much of a surprise. After all, this is the same Katie Hobbs who broke the law to take credit for the Republican tax rebate. And it’s the same Katie Hobbs who required the nonprofit behind her $30 million medical debt relief program to give her credit. But this latest scandal shows that Hobbs’ corruption has reached a new level.
According to the report, Sunshine Residential Homes has donated approximately $400,000 toward the Arizona Democratic Party, Hobbs’ gubernatorial campaign, and her inaugural fund. And what did the group home receive in return? A nearly 60 percent rate increase! And this was at a time when the Arizona Department of Child Safety (DCS) cut loose 16 providers, and no other standard group home provider received a rate increase.
That’s convenient.
Sunshine Residential Homes could potentially receive millions of dollars more at the taxpayers’ expense from their investment (sorry…donation). And that must have their CEO—who also happened to serve on Hobbs’ inaugural committee—excited.
Hmmm…Hobbs’ inauguration fund. Do you remember that?
This entire saga began when Hobbs set up a shady inaugural slush fund to provide donors with a conduit to buy political favor from her administration. While setting up and managing the fund, Hobbs illegally used public resources—like the state’s website—to solicit money for her inauguration. And she also tried to stop the disclosure of the names of those who donated to her inaugural fund.
But after immense political pressure and public records requests filed by groups like the Arizona Freedom Foundation (who operates AZ Free News), Hobbs finally released the names of the donors. And lo and behold, guess which group was among those listed? Sunshine Residential Homes Inc., which at the time made a donation of $100,000. But this is just one part of the story.
After raising huge sums of money for her inauguration, Hobbs and her administration only spent a small fraction of it for that purpose. At the time, it was reported that Hobbs brought in $1.5 million from approximately 120 donors for an inaugural event that cost less than $210,000.
So, what happened to the rest of the money? It’s clear that Hobbs and the Democrats plan to spend it on legislative races this November all while using the fund as nothing more than a quid pro quo factory on the Ninth Floor.
This must be stopped, and a criminal investigation into this matter is absolutely necessary. So far, Arizona Attorney General Kris Mayes and Maricopa County Attorney Rachel Mitchell have announced that they will investigate. But Mayes should be nowhere near this investigation. She has proven time and time again that she will do whatever it takes to protect Hobbs and the Democratic party from any real accountability—which is probably why she’s pushing so hard for Mitchell to stand down. And it’s also probably why Hobbs refuses to answer questions about whether she would comply with both a Mayes and Mitchell investigation.
Hobbs knows she’s in trouble, and she’s big mad that this scandal has been exposed. But her good buddy Mayes can’t be allowed to bail her out this time.
Rachel Mitchell should not only be the one to conduct the investigation, she should step in immediately to freeze the assets.
Hobbs’ inaugural slush fund is still in existence and sitting on a mountain of cash. She’s planning on spending contributions from this fund—which is under criminal investigation—on political campaigns in the coming months. This can’t be allowed.
From its inception to today, Hobbs’ inaugural fund has been a monument to corruption and abuse. And while the funds should probably just be refunded to the initial donors, that’s impossible now that it’s all under criminal probe.
It’s time for Rachel Mitchell to freeze these funds pending the outcome of the investigation. Giving taxpayer dollars to political donors is a severe misuse of public funds. And it should not be taken lightly. Mitchell should stop donors from cashing in on the Hobbs gravy train and give Arizona taxpayers the accountability they deserve from their government leaders.
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.
by admin | Jun 11, 2024 | Corporate Welfare, News and Updates
There are plenty of problems with the Arizona Commerce Authority. Since its inception in 2011, criticisms were raised concerning its freewheeling powers to dole out taxpayer money with practically no legislative oversight and broad exemptions from important guardrails such as the prohibition of using outside counsel (rather than the Attorney General’s office.) These issues have resurfaced over the years in critical Auditor General reports that have highlighted the insufficient reporting and record keeping for the administration of grants and awards provided by the agency to private businesses. This led to a mere 2-year extension of the agency in 2016, and a controversial reauthorization in 2018 when Republicans and Democrats alike banged the table for reforms. And most recently, the agency has come under fire by the Attorney General herself, for unconstitutional gifts in the way of wining and dining and Super Bowl tickets for CEOs.
Despite consistent criticism across the aisle and over the years, the ACA has evaded any real substantial reforms. That could very well change this year.
There now seems to be bipartisan interest in reining in an unaccountable agency with a $226M budget and a multi-million-dollar slush fund. Additionally, Republicans are unhappy that the ACA has been utilized by Governor Hobbs to pursue radical goals on abortion, water, and social equity…(digital equity plan). Democrats, on the other hand, must straddle support for a Hobbs-regime that is at cross purposes with purported opposition to corporatism and degradation of tax revenues that could be used elsewhere.
So, the question isn’t whether the ACA will be reformed this session, but which reforms will ultimately be adopted.
Among the reforms being considered, by far the most important and inarguable is a statutory “test” on the Gift Clause. Arizona’s constitution includes a protection for taxpayers from the “depletion of the public treasury or inflation of public debt by engag[ing] in non-public enterprises or by giving advantages to special interests.” This critical protection called the Gift Clause has been litigated over the years, yet arguably, the most important ruling occurred in 2021, well after the ACA was formed. The Schires Decision put forth a two-part test to clarify when an expenditure tripped the line into a Gift Clause violation. First, an expenditure must serve a public purpose, admittedly a low and subjective bar, according to the court. And secondly, the “the value to be received by the public is far exceeded by the consideration being paid by the public.” Schires clarified that, “relevant ‘consideration’ consists of direct benefits that are ‘bargained for as part of the contracting party’s promised performance’ and does not include ‘anticipated indirect benefits.’”
In other words, the customary “economic impact” metrics used by the Commerce Authority are not relevant factors to satisfy consideration, including tax revenues generated by the private business, as the court argued calculating such factors would “eviscerate the Gift Clause” altogether. Instead, the ACA must receive a “bargained-for benefit as part of the private party’s performance, and the payment of public funds must not be grossly disproportionate to the fair market value of that benefit.”
The Arizona Commerce Authority is in blatant violation of the Gift Clause and most urgently needs reform to ensure its compliance going forward. The bill that passed out of Senate Government on March 21 includes just that, codifying the Schires test in statute and obligating the ACA to analyze all grants and loans accordingly. A failure to adopt this obvious reform this session would be total neglect by the legislature, it would invite litigation of nearly all the Authority’s programs and leave the decimation of the Authority to the courts.
Additionally, the bill reformed all current refundable tax credits (Qualified Facilities, Research and Development, and Film tax credits) administered by the Authority by making them non-refundable. This would ensure these programs comply with the Gift Clause as the refundable portion of the credit is, strictly speaking, a subsidy, for which statute currently does not require bargained-for benefits to receive.
Aside from these two most critical reforms to simply ensure the agency is constitutional, the legislature should prioritize making the agency more transparent in its reporting by defining its terms of performance, give small businesses and taxpayers a voice in its administration by diversifying the board of directors, and eliminate exemptions that make the agency less accountable, including allowing them to have their own in house counsel and permitting them to compete with the private industries. Moreover, the Authority could provide invaluable information to policymakers and businesses alike if they were required to focus their resources on monitoring the tax and regulatory environment, especially locally, as often those are the most important factors considered by businesses for location and relocation.
With no shortage of legal and functional problems at the Arizona Commerce Authority, lawmakers should seize on the opportunity to pass long-overdue reforms this year.
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.
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