Arizona Chamber of Commerce and Industry

State Agency Fees on the Rise

Now, in the midst of the budget crisis, the state is moving to a model where fewer and fewer state regulatory agencies will receive any general fund monies, relying instead on a "user pays" concept.  This could prove to be penny wise and pound foolish.  Less than 1% of general fund revenues are directed to ADEQ, DWR and Land, but significant increases in permit fees for the regulated community could have a devastating effect on a business's budget.

The Arizona Chamber of Commerce and Industry recognizes that this is a unique economic time.  The state is struggling.  The governor and Legislature have made large cuts to the state budget and voters recently approved a one cent per dollar state sales tax increase to stave off even larger cuts.

But for many in business sectors required to secure permits from agencies like ADEQ, alarm bells went off earlier this month when a representative from that agency appeared at our environmental breakfast series and announced that permit-seekers could be facing fee increases for some permits as much as sevenfold.

The Chamber has long advocated for a regulatory environment that is business friendly. In the 2010 regular legislative session, we strongly supported passage of H.B. 2260, which made major reforms to the rulemaking process, making it more transparent and cutting red tape.  If this new fee structure is to take hold, it needs to be structured in a way that is consistent with the new regulatory law.

No industry likes increased fees.  But some agencies risk their permitting functions being taken over by the federal government.  So while increased ADEQ fees come with some frustration, it's a less problematic option than permit seekers having to navigate the federal Environmental Protection Agency bureaucracy.  The trick is to implement the new structure in such a way that it doesn't cripple a business's bottom line, something that small businesses are especially sensitive to.  Given the tough economic times, the ability of the business community to absorb new costs is extremely limited, regardless of whether they're in the form of new fees or new taxes.

There needs to be a fee-payer bill of rights that outlines in statute accountability mechanisms for state agencies.  If an agency is funded entirely on fees, then the Legislature stands to lose oversight and budgeting leverage over that agency.

What should comprise this fee payer bill of rights?  Here are few suggestions:

--Transparency in Costs:  Business should have a detailed accounting of how their fees are being spent, including what percentage of the fee is being directed to agency overhead costs.  Changes in fees should be properly noticed and the regulated community should have input through a rulemaking process when the fees are developed.

--The fees should be used only for their intended purpose and not be swept to other funds, including the state's general fund.

--Outsourcing or privatization of permitting should be allowed so the regulated community can receive their permits in a timely manner.  In lieu of hiring full time staff to administer permits, the state should seek out qualified independent contractors.  This recommendation is consistent with Governor Brewer's formation of the Commission on Privatization and Efficiency.

--State agencies should be required to comprehensively review all of their operations and regulatory systems and streamline these processes to the maximum extent possible.  If the regulatory community is going to entirely finance state agency costs, then the regulatory system should be minimized to the greatest extent possible.

--More accountability needs to be provided when agencies fail to process permits in a timely manner.

--Before any new regulatory requirement is developed, the specific fee for processing the affected permit should be determined and considered as part of the rulemaking procedure.  

We look forward to being part of a robust stakeholder process that arrives at a permit fee system that works for both the public sector and private sector, including businesses of all sizes. But change is coming fast.  If your business is going to be hit with these higher fees, now is the time to speak up.