The Capitol Roundup

The Arc of Arizona's regular recap of State & Federal legislative happenings

March 2, 2018

Budgets and Taxes and Recess -- Oh, My!
At the Statehouse...

This week brought the first of four major Arizona elections in 2018. Voters in Congressional District 8 selected two candidates from a crowded field: former state senator Debbie Lesko (R) and physician Hiral Tipirneni (D) will move forward to the April general election to replace former U.S. Representative Trent Franks. The campaigning will continue past April, however, since that Congressional seat and many legislative, statewide, and federal races across the state will go before voters in primary and general elections later this year.​


At the state Capitol this week, legislators continued to advance bills while Republican leaders proceed with budget discussions behind the scenes. House Appropriations Subcommittees finalized their hearings on state agencies and issued recommendations for health, education, and infrastructure priorities they believe should be considered in the new state budget. Legislative staff briefed both Republicans and Democrats in the House on the differences between the legislative baseline budget (essentially last year’s enacted budget with one-time spending items removed) and Governor Ducey’s budget. The briefing focused on information that has been available since early in the year but gave House members a chance to ask more questions from budget experts.
Policy committees in both the House and Senate began the second phase of hearings on bills. Legislators voted to require at least two recess periods for students in grades K-5, enhance penalties for wrong-way drivers, and expand law enforcement’s ability to use the state’s Silver Alert to find missing people with developmental disabilities regardless of their age.

The House failed to pass an income tax credit for each child of an Arizona taxpayer but agreed to hold another vote on the proposal within the next two weeks. After failing to pass a bill to create five-year minimum prison sentences for first-time offenders convicted of selling heroin and fentanyl, the House held a second vote and narrowly approved it. Opposition to the proposal is due in part to concerns that the change undermined the approach enacted in the legislature’s recent special session on opioids, but supporters of the bill – including county prosecutors – believe the mandatory penalty is needed.

House members also voted to reconsider a bill that prohibits medical marijuana dispensaries from marketing their products to minors, if the bill’s supporters can obtain the necessary support within two weeks.

The Senate advanced a proposal to modify access to corporate tax credits for school contributions, with amendments to remove reductions to those credits. The original proposal would have required bipartisan support since reduced tax credits would mean increased state revenues. (Arizona law requires a supermajority vote for any bill that raises taxes.) Senate Democrats said they could not support the bill without additional reductions to corporate tax credits.

Senators did come together across party lines, however, to support a higher level of criminal penalty for individuals who kill or cruelly mistreat a domestic animal. The Senate also voted to allow Arizonans to pay income taxes with cryptocurrencies like Bitcoin. Arizona is one of the first states in the U.S. to propose laws that elevate cryptocurrencies to the same status as the U.S. dollar for tax payments – a fact that has drawn national attention.

Next week marks the ninth week of the 2018 legislative session, and the long days at the Capitol will continue. Most policy committees have three more weeks to vote on bills in committee, and approximately 500 bills are still eligible for consideration.
Priority Bills 
  • SB 1162 (silver alert notification; developmental disability) expands the state’s Silver Alert notification system to include missing individuals of any age who have a developmental disability. The bill unanimously passed the House Government Committee on Thursday and awaits a hearing in the House Rules Committee.
  • SB 1218 (developmental homes; licensure; investigations) provides statutory protections for vulnerable children and adults who receive services through the Department of Economic Security’s Division of Developmental Disabilities in developmental home residential settings. The bill unanimously passed the Senate and awaits a hearing in the House Health Committee.
In the News

Two important committees were announced this week. Governor Ducey created a new Arizona Cybersecurity Team that will bring together government, university, and business experts to enhance what the state is already doing to prevent a cyber attack in Arizona, and the House Speaker and Senate President formed a bipartisan panel charged with designing a clearer code of conduct for state legislators.  
Senate Panels Recommend Confirmation of State Board of Education Members

The Senate Education Committee unanimously approved Governor Ducey’s two new nominees to serve on the State Board of Education. If confirmed by the full Senate, Jill Broussard, the Pinal County School Superintendent, will replace Yavapai County Superintendent Tim Carter in a term that expires in 2022; Mary “Christine” Burton, administrator of the Burton Family Foundation, would replace Charles Schmidt in a term that ends next January.

Senate committees also voted to confirm:
For a full list of the nominees Governor Ducey has sent to the Senate for confirmation this year, click here.
Legislature Debates Tax on Netflix and Other Digital Services

Governor Ducey and other state leaders have pledged to put Arizona at the cutting edge of emerging technology with self-driving cars, “sandbox” policies that provide reduced regulations for some financial tech companies, and robot deliveries.

Most new technologies are simpler, though, and more likely to already impact the daily lives of Arizonans. Cloud-based software, digital books and streaming videos, and online storage are all easily accessible – at times even unavoidable in today’s world. For almost a year, state legislators have been debating what growth in those services means for state tax policy.

Throughout last summer, the Ad Hoc Joint Committee on the Tax Treatment of Digital Goods and Services heard from technology leaders, state agency officials, and local government budget experts to better understand how Arizona taxes digital services. Though committee members disagreed on what policies should exist, all agreed that Arizona’s existing system for taxing digital products was unclear and inconsistent.
This session, the co-chairs of the ad hoc committee introduced proposals to establish a clearer standard. Their bills would exempt most digital services from sales taxes – a policy that is supported by many business and technology groups but opposed by city governments that could lose as much as $78 million a year from the change. The financial impact to the state cannot be predicted, due to incomplete information on which entities are currently paying sales taxes for digital services.

The tax exemption could reach Governor Ducey’s desk soon. The House approved their version of the bill this week with support and opposition from both sides of the aisle, and the Senate is expected to fast-track the discussion by adopting the House version of the bill.

On the Bright Side…

University of Arizona researchers may have found a better understanding of what causes brain injuries that continue after a stroke – a discovery that could help brains recover more quickly.


On the Federal Front...

Major Recent Events
Due to the Congressional recess, the regular Federal Update will not be published this week. The next report will be provided in our March 9 edition of The Capitol Roundup.

In the meantime, visit The Arc Blog for updates.

​Prepared by:
Peters, Cannata & Moody, PLC

The Arc of Arizona


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