A contentious fight is brewing in the Arizona legislature, the possible reauthorization of the Arizona Commerce Authority (ACA). Governor Hobbs has made the reauthorization a top priority of her administration this session, mentioning it in her State of the State address. But the debate has an ironic element considering the history of its inception.
In 2011, the state was crawling out of a crippling recession, having lost literally hundreds of thousands of jobs and even selling off the state Capitol buildings to dig out of a deficit. The legislature, in collaboration with the Brewer Administration, introduced an omnibus bill sold as a “jobs package” which refashioned the bureaucratic Department of Commerce into the Arizona Commerce Authority, and incorporated both new targeted tax credit programs and incentives, as well as phased in corporate income and commercial property tax cuts.
Democrats a Decade Ago Opposed the ACA
The bill at the time was uniformly opposed by Democrats, including then Representative Katie Hobbs. Republicans mostly coalesced around the bill, with a handful of key conservatives voting in opposition of the legislation, largely in protest of the corporate welfare and multi-million-dollar “deal closing” fund with no legislative oversight. For those unfamiliar with the deal closing fund, it is a large pot of money appropriated to the Director of the Commerce Authority to throw at corporations to convince them to relocate to Arizona.
After the ACA was passed and signed into law, it would seem that only a few conservative voices and the Club itself would prove prophetic at the lack of oversight and inevitable gift clause violations, which is a constitutional protection from the government subsidizing private industry.
Predictions of Initial Critics Come to Pass
In 2016, the ACA received its first independent evaluation by the state auditor general in anticipation of its first agency sunset review. Unsurprisingly, their report flagged multiple problems at the ACA, with a couple being major gaps in reporting and a gross exaggeration of “created” jobs.
Our organization and a few others highlighted these issues at the legislature, but our concerns fell on deaf ears as the ACA received a cushy 8-year extension. Now the ACA is up for review again, and low and behold like Groundhog Day, the latest 2023 auditor general report includes the same problems as before plus additional ones, including junkets that use taxpayer money to schmooze CEOs with Super Bowl tickets, bottles of wine, and a lavish food budget as blatant Gift Clause violations.
Politics Makes Strange Bedfellows
This year’s fight over the ACA is more complicated than before. Minutes before the director was to take the podium to advocate before the House Commerce committee, Democrat Attorney General Kris Mayes released her own legal opinion of the Authority’s CEO forums and unequivocally determined they are in fact unconstitutional and warned the agency to cease all such expenditures or face litigation.
Though the Commerce Authority was able to duck direct challenges of Gift Clause violations in the past, not least in part because the jurisprudence surrounding the interpretation of the Gift Clause circa 2011 or 2016 was less clear, they no longer enjoy that benefit. The Arizona Supreme Court has recently made very clear what expenses are and aren’t subsidies with a two-prong test. First, the expenditure must provide a public benefit. If it does, then the public expense must be far exceeded by the benefit provided. Importantly, the court reiterated that anticipated economic development, job growth, and expected increased tax revenue are indirect benefits that are irrelevant to the analysis. Considering all these programs are justified by expected future economic development—regardless of the public benefit—they are subsidies, as Attorney General Mayes concluded.
The unlikely allyship between AG Mayes and Senate President Warren Petersen (leading the effort in the legislature to reform and consolidate the ACA) means the process will not be an exercise in rubberstamping. The Authority will not be able to rely on the muscle of the business community alone, sailing through a perfunctory review of its defects. And that’s good news for taxpayers and advocates of transparent and accountable government.
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.
If any business owner saw 450% growth in one of the company’s products or programs during a 15-month period, they would be ecstatic. And it’s safe to say that whatever that program was doing must be working. But for Governor Katie Hobbs and her allies in the teachers’ unions, who have never been known for their math skills, it’s a completely different story when it comes to the ESA program.
Back in July 2022, when then-Governor Doug Ducey signed universal school choice expansion into Arizona law, 13,400 students were enrolled in the ESA program. That number has now grown—as of January 16, 2024—to an astounding 73,415 students—a near 450% growth. Clearly, the program is in high demand, and it is definitely working. But after signing the Republican budget bill last year, without any cap or restrictions on ESAs, Hobbs is now trying to push a barrage of regulations that would effectively dismantle the popular program.
Earlier this month, our current governor announced her plan for the ESA program. And despite the fact that Hobbs is a product of private schools herself, her proposed changes will turn private schools into de-facto public schools and cause children to lose their scholarships, forcing them out of their current school.
Among the regulations promoted by Hobbs and the teachers’ unions is a requirement to attend public school for at least 100 days in order to qualify for the ESA program. So, let’s get this straight. Parents who already know that they do not want to send their children to public school—or that the public school won’t be able to meet their child’s needs—will have to send their kids to a public school for an arbitrary number of days in order to participate in the ESA program. That’s interesting, given the fact that there is no such requirement for families who want to switch school districts or move to a public charter school. Why should students who want to attend private school, just like our governor did, be treated any differently? Maybe it’s because Hobbs and the teachers’ unions are desperate to do anything they can to boost the declining enrollment in our state’s public schools?
Another of Hobbs’ proposals requires manual reviews of purchases over $500. This likely came from a false expenditure claim by Save Our Schools Arizona, who lied in a viral post on X that the Arizona Department of Education approved a reimbursement for a $500 Lego set. The fact is that under the current Superintendent of Public Instruction Tom Horne, every single ESA purchase is already reviewed. If Hobbs wants to look at anyone for frivolous spending, perhaps she should start with her friend and former Democrat Superintendent of Public Instruction Kathy Hoffman whose tenure was ripe with approving odd expenses.
But perhaps the most absurd change Hobbs and the teachers’ unions want to make is to prohibit so-called “price gouging” by implementing price controls on private schools. This is absolutely hilarious considering the fact that for decades, teachers’ unions have pushed for billions more to be poured into public schools, which they got, and Arizona taxpayers are now giving district schools more money than ever before, at nearly $15,000 per student—more than double the cost of ESAs. Not once did Hobbs or any teachers’ union raise the concerns of price inflation associated with dumping more money into the system even though Arizona always seems to be another billion dollars away from “fully funding” education. And yet now that Arizona has universal ESAs, they decide we need price controls, but only for private schools. It’s hard to tell which is worse, their greed or their hypocrisy.
The reality is that ESAs strengthen ALL schools because competition delivers the best product—leading to better students, families, and communities. That’s why the program has become so popular—and why Hobbs knows she has to hide behind a flood of regulations rather than pushing for a repeal or cap on it. Now, it’s up to Arizona lawmakers to make sure her plan for ESAs is dead on arrival.
Please SUPPORT and DEFEND School Choice in Arizona
Arizona is the battleground for school choice in our country, and Katie Hobbs—together with the teachers’ unions—would like nothing more than to undo all the progress that has been made.
Will you reach out to your legislator and let them know you support ESAs and school choice, and consider it a top voting issue?
When you’re hired to do a job, it stands to reason that you should actually do the job you’ve been hired to do. Think about it. If a company hired you to be a writer, and you never did any writing for the company, you probably wouldn’t keep your job too long. That is, of course, unless you work for the government.
For quite some time now, federal, state, and local governments across the country—including right here in Arizona—have been engaging in the practice of “release time.” If you’re unfamiliar with this term, it means that certain people are hired to do a specific job for the government, but instead of doing that job, they are “released” to work full-time for their union. This could be someone like a teacher, for example, who instead of teaching students, spends all his or her time doing work for the teachers’ union. But here’s the thing, even though these employees don’t actually work for the government, they still get a paycheck from the government—all funded by your tax dollars.
Is this practice unfair? Yes. Is it unconstitutional? Absolutely.
That’s why the Goldwater Institute has been challenging this practice in our state in a case that has made its way to the Arizona Supreme Court called Gilmore v. Gallego. In this case, the City of Phoenix entered into a Memorandum of Understanding (MOU) with a union called the American Federation of State, County, and Municipal Employees, Local 2384, Field Unit II (AFSCME). Under the agreement, the City must provide AFSCME with the following to the tune of $499,000 annually:
Four full-time release positions for union members where they can engage exclusively in union activities.
An annual bank of up to 3,183 release time hours permitted to be used for union purposes.
150 release time hours provided for union members to attend seminars, lectures, and conventions.
Up to $14,000 the City will reimburse the union so union members can attend employee-relations skill training.
This is outrageous! So, in support of Goldwater’s lawsuit, the Free Enterprise Club and the Grand Canyon Legal Center filed an amicus brief for two distinct reasons.
First, under the MOU, all employees are being charged the cost of the release time, whether they are members of the labor union or not. This is a direct violation of the First Amendment and the Arizona Constitution. Freedom of speech not only includes the right to speak freely, but also includes the right to choose not to speak. And in this circumstance, the City of Phoenix is forcing non-union members to pay for a union to engage in speech that they may not necessarily agree with.
Second, if the release time is being funded by the City of Phoenix, then it violates the Arizona Constitution’s Gift Clause, which prohibits the government from giving money to private organizations without getting something in return. Clearly, release time does not serve a public purpose. In fact, the unions actually bargain on behalf of the private financial interests of government employees against the public. As a result, the government employees may receive a benefit in the form of a higher salary, but taxpayers receive no such benefit. Instead, taxpayers only receive higher taxes.
For both these reasons, the Arizona Supreme Court should strike down this illegal practice in our state. No government employee should be getting paid to conduct union work. Instead, the state’s highest court should restore some common sense and ensure that government employees are only paid to perform the duties of the jobs they were hired to do.
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.
PHOENIX, ARIZONA – Today, Arizona Governor Katie Hobbs delivered her State of the State Address to the Second Regular Session of the 56th Legislature. Scot Mussi, president of the Arizona Free Enterprise Club, issued the following comments in reaction to the speech from the second-year governor:
“Governor Hobbs’ second State of the State was much like her first: a telegraphed playbook to transform Arizona into a clone of California. From her desires to grow the size of state government, to support the continuation of an agency with a multi-million dollar slush fund picking winners and losers, and to persist in lying about Arizona’s historic school choice opportunities, Hobbs would reverse many of the policies and reforms that have positioned our state as the envy of much of the nation.
“Thankfully, for Arizonans, we have a majority in the House and Senate that are committed to preventing Hobbs from implementing those failed ideas. The Arizona Free Enterprise Club and conservative lawmakers will be on offense this legislative session, right-sizing government spending, putting good policy on the ballot in 2024 that Hobbs can’t veto, and holding bureaucratic agencies accountable.”
Read our recent piece about the truth of Arizona’s modest funding gap.
Read Senator Jake Hoffman’s statement on his efforts to repeal the Arizona Commerce Authority.
Read the Goldwater Institute’s recent article on Hobbs’ bizarre attack on ESA families.
After several years of inflated budgets propped up by trillions in unsustainable COVID cash flowing to the states from the federal government, Arizona lawmakers will be coming into the new year and the new legislative session facing a potential shortfall for the budget year in excess of $400 million. Naturally, the left and their sycophants in the media have for months been decrying this to be the result of 1) historic tax cuts enacted by Republicans in 2021 and 2) the successful universal expansion of school choice in 2022. This couldn’t be further from the truth, and there are three key facts that need to be remembered when discussing the state budget and a potential funding gap.
1. The Shortfall Is a Fraction of the Arizona Budget, Nothing Like California’s Crisis
The projected $400 million shortfall represents less than 5% of the total state budget, which spends $17.8 billion this year. Far from catastrophic. Compare this to our neighbor California, facing a $68 billion dollar deficit (nearly four times the size of our entire budget), which represents 22% of their $308 billion bloated budget – up from less than $200 billion only four years ago.
Opposite to our approach, California has continuously increased taxes, having one of the highest income tax burdens in the country. They also don’t provide choice to parents and families to make educational decisions themselves. Surely, if Arizona taking less of the people’s hard-earned money and providing ESAs to all families is the cause of our small funding gap, California, doing the exact opposite, should place them in tip top shape, right?
2. State Revenues Continue to Rise, but Spending Does Too
Contrary to the wishes of the tax happy left, this small budget shortfall is not due to the historic tax cuts passed in 2021 that benefit every Arizonan either. The state is collecting more from taxpayers than it did in 2019, yet the income tax rate has effectively been cut in half. Part of that is due to the taxation of online sales. Initially sold to be an $85 million hit on taxpayers, it continues to bring in hundreds of millions more. The other more inconvenient reason for the left is the thousands fleeing high tax states like California to relocate themselves, their families, and their businesses here.
Source: JLBC FY2020 Appropriations Report & JLBC October Budget Forecast
This “lack of money in the state coffers” argument is laughable with one quick look at the Ongoing Revenue chart. In summary, lawmakers enacted a budget in 2019 that expected just shy of $11 billion in ongoing revenue. In their best assessment, they expected that to grow to nearly $12 billion by FY22 (blue). But what we have experienced since then (orange) is exponential revenue growth – growth that is still continuing today. In fact, the most recent estimate from the nonpartisan Joint Legislative Budget Committee (JLBC) staff is still close to $18 billion in state revenue by 2026. We do not have a revenue problem, and we never did. Rather, we have had a spending problem for years.
3. School Choice Not to Blame, and Government Schools Are at Record Levels of Funding
Unsurprisingly, the teachers’ unions, Democrats, and media continue their scare tactics, arguing that the massive increase in families taking advantage of their right to send their kids to the schools of their choice, is bankrupting the state and government schools. It’s no surprise that neither are true.
As the Goldwater Institute has made clear, increased use of ESAs does not take from district schools. In fact, district schools are receiving $14,673 per student, an amount never reached before, which has required the legislature to override the constitutional spending limit not once, not twice, but three times, allowing schools to spend billions in excess of the cap.
That ESAs are to blame for the shortfall is also easily debunked by simply looking at JLBC’s presentation to the Finance Advisory Committee in October. In the budget approved by the legislature and the Governor, ESA expenditures were projected to be $625 million. The actual amount is $665 million, not very far off at all. In other words, the projections made by lawmakers in July were accurate and fully budgeted for.
Budgeting Guidelines to Avoid Fiscal Failures
The big picture is that states across the country are seeing slowdowns in revenue growth and potential shortfalls, especially in personal income tax collections. That includes states that have reduced rates (like us), and those that have hiked theirs (like California). But unlike many of those high tax states, Arizona is in a good position.
As long as the legislature: 1) doesn’t allow Hobbs to use any budget gimmicks like rollovers, 2) doesn’t touch the rainy-day fund, and 3) uses this as an opportunity to right size government spending, we will be just fine.
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.
If someone wants to own an electric vehicle (EV), it is perfectly within their right to do so. That’s what it means to have freedom. But EV owners should be the ones to bear the burden of any costs associated with the necessary infrastructure improvements. And they should absolutely be responsible for paying for any excessive demand placed on the grid.
But that’s not the way the left sees it.
As part of its Green New Deal dream, the left has been pushing an agenda that significantly increases the amount of EVs on the road despite slowing demand from consumers and companies like Ford losing billions on them just this year. And Arizona utilities have fallen right in line, planning for 1 million EVs by 2030 while APS alone plans to have a 100% “carbon free” vehicle fleet as part of its commitment to go “Net Zero” by 2050.
So, how exactly was APS planning to do this? According to the Transportation Electrification Plan it submitted to the Arizona Corporation Commission, APS wants to force all ratepayers—including non-EV owners—to subsidize the costs associated with such an absurd goal. In the plan itself, APS asked for a budget of $5 million for its “Take Charge AZ” initiative that funds new EV chargers for private businesses along with an additional $4 million in subsidies for EV owners on the backs of other ratepayers.
This is not only unreasonable, but it’s unjust.
EVs are already highly subsidized. A recent study from the Texas Public Policy Foundation (TPPF) conservatively estimates that EVs receive nearly $50,000 in subsidies over 10 years from direct tax credits from federal and state governments, avoided gas taxes, and regulatory mandates. This unfairly socializes the costs of the demand EVs place on the grid to all ratepayers. On top of that, TPPF estimates that the costs associated with upgrading the grid to serve the EV electricity demand add up to $11,883 per EV over 10 years! And once again, this cost is incurred by all ratepayers. The last thing EV owners should be getting is more ratepayer subsidies!
That’s why the Arizona Free Enterprise Club helped lead the charge to ask the Arizona Corporation Commission to oppose these unfair EV subsidies with around 340 comments submitted against APS’s plan. And Commissioners Kevin Thompson and Jim O’Connor heard us loud and clear. Thompson authored an amendment that rejected APS’s request to use up to $5 million in ratepayer funds to develop and install EV charging infrastructure as part of its “Take Charge AZ” program. And O’Connor amended the plan to ensure that any EV rebates offered by APS are done so at the expense of shareholders not ratepayers.
This is a big win for ratepayers, the overwhelming majority of whom do not own an EV or use EV charging stations and therefore shouldn’t be faced with such a financial burden. But while it is an important win, it once again highlights the need to rid ourselves of radical ESG commitments entirely. This program would have cost ratepayers $5 million, but their ESG Net Zero commitments would cost ratepayers $6 billion. Now, it’s time for the Corporation Commission to finish the job by putting an end to radical ESG plans for Arizona’s utilities once and for all.
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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