The Farley Report: 3-19-13

Posted by AzBlueMeanie:

Time once again for The Farley Report from Sen. Steve Farley (D-LD 9):

Remember a couple of weeks ago my Farley Report that March at the Legislature was coming in like a lamb? Well, the end of March is approaching, and I hear that inevitable lion roaring already. 

This is the last week that committees will meet, so our pace is quickening dramatically. My Government and Environment Committee already met once yesterday where we heard 16 bills, and I just found out that we will meet again on Thursday afternoon and evening (when I would normally be heading back home to Tucson) to hear another 26 bills.  

Nine of those bills will be "strikers" — brain-eating zombie bills that have died somewhere else in the process which amend themselves onto totally unrelated bills that are still moving, and completely replace the content therein. I'll be watching carefully to see what terror is lurking within and be ready to strike with whatever it takes to stop the carnage. 

Meanwhile, my two live bills are moving along nicely — the standard special license plate design bill SB1206 unanimously cleared the House Transportation Committee last Thursday, and my bill SB1162 to reduce paperwork and increase cash-flow for small businesses unanimously cleared the House Ways & Means Committee yesterday. No zombies necessary for this senator! 

The main action this week, besides the packed committee agendas, is happening tomorrow. The Governor's Medicaid restoration bill will be heard in the House Appropriations Committee at the same time that the Governor's TPT (sales tax) simplification bill will be heard in my Senate Finance Committee meeting. These are the two top items on the Executive agenda, so they will draw a whole lot of attention and testimony on both sides. 

The TPT bill is in constant flux, and no one is yet sure in what form it will arrive tomorrow. You will recall that the main purpose of this bill is twofold: 1) to allow businesses that operate in multiple municipalities to pay their taxes to one location instead of many, and make it easier to pay the right taxes to the right places; and 2) to simplify our system according to the requirements of a bill currently scheduled for a vote in Congress this week, allowing us to collect the more than $700 million a year in Arizona online sales taxes that currently slide by uncollected.  

This additional revenue is particularly important to collect NOW, given that we will lose $1 billion a year when the education sales tax expires in May, and we cannot afford more cuts to our schools. This policy also provides equity for our local brick-and-mortar retailers who are currently at almost a 10% price disadvantage when competing against out-of-state online retailers. So whatever our differences over how to get there, the Governor is right: We need to get to a solution and pass a bill this year.  

The main point of contention is the provision that would eliminate the current system of collecting sales tax on 65% of the final cost of all construction contracting sales — from plumbing to air conditioning to new homes and offices — and replace it with a tax on 100% of the price of raw materials. Whether this works or not depends on what we think is the current level of noncompliance. If it is high like some studies say (up to 43%), then the new system would bring in more money; but if it is low like other studies say (down to 21%), then the system will bring in less money. Cities that have high growth but no building supply stores worry they will lose money, while cities with lots of building supply stores but low growth may gain.  

The bottom line is, we can find a way to hold cities and counties harmless by increasing their percentage of state shared revenues, and guarantee that they be held harmless to the level of money they received the year before this goes into place. Over and above that, there will be another $700 million in online taxes to spread around, improving everyone's budget picture.  

The Governor has offered a compromise that would leave the current system in place for some contractors, put in the new system for others, and offer a hybrid system for still others. The cities are showing interest, but from the emails I am receiving this week, some of the contractors this is meant to help don't like the plan at all.  

What it comes down to for me is this: This bill needs to pass, and I praise the Governor for her leadership. If the construction contracting reform threatens to kill the bill, we should eliminate that portion for now and allow the rest of the bill to proceed in order to qualify us for the online sales tax revenues. This is just too important for us to miss. The contracting issue can be studied during the off-session and we can work on that next year on its own.  

There is so much more that is happening and will be happening at the Capitol. Given that we will likely have a lot of down time after next week as we wait for the budget to be worked out among Republican leaders, I'll stop here and leave the description of those happenings for later reports.  

Thanks for your faith in me as your Senator.  

Steve Farley