Arizona Chamber of Commerce and Industry

With legislative session headed down the stretch, state needs to act in three big areas

Glenn Hamer

State legislative leaders are aiming to sine die by the end of April, but there remain three critical areas where the Legislature still needs to act to set Arizona on the road to economic recovery before legislators call it a day.   

Pass a job-creation bill

Our state must address the jobs deficit.  The Arizona Job Recovery Act, HB 2250, passed the House back in January and it passed the Senate Finance Committee on April 12. 

The version of the bill that passed the Senate committee puts in place business property and corporate income tax reductions that are vital to attracting and retaining good jobs in Arizona and, as a result, address two areas where Arizona is uncompetitive with its regional neighbors.

The reforms proposed by the bill are designed to have as minimal an impact as possible on the state's general fund in the early years of its implementation while still putting in place these necessary reforms.

It is important to remember that businesses will pay about 45 percent of the proposed sales tax increase that will go before voters next month.  Even when this legislation is fully implemented in fiscal year 2018, its impact on the general fund will be around five percent when using a static fiscal analysis.  It is far more likely that the job creation this bill will spur will result in a net revenue gain to state coffers.

By taking the state sales factor to 100 percent, Arizona would jump to the top of the list when it comes to the tax environment for export-oriented industries.

As I've stressed before, when it comes to a business property tax, Arizona ranks as the worst or nearly the worst across all categories in a nine-state western region.  A high business property tax creates a disincentive for companies to expand their operations in the state and it hamstrings additional hiring.
 
Among states with a corporate income tax, Arizona ranks in the middle of the pack.  HB 2250, however, would put the state in a far more competitive position to attract employers and corporate headquarters and would move us into the top ten most competitive states.

The reforms contained in the bill are good for businesses of all sizes, from new startups to established blue chip companies. 

And the bill is also consistent with the governor's Building a Better Arizona five-point plan that she released last year when she began her term in office.  As that document accurately states, Arizona must grow its way out of this crisis, and the state should provide tax reductions to encourage current employers, new job creation, economic development and revenue stability.

For a state that has lost over 300,000 jobs since the Great Recession began, it would be irresponsible to simply sit on our hands and not at least try to improve our economy.

Pass legislation on debt reform

Senate President Bob Burns has put forth SCR 1060  to handle state debt in a much more honest way than Arizona has been.

According to the state constitution, Arizona can only carry up to $350,000 in state debt.  But as anyone who has watched the last few budget negotiations knows, our state has been engaged in smoke and mirrors accounting in an attempt to meet the letter of the law, while not coming close to meeting the spirit of the law.

Arizona has used budget rollovers, securitization of the lottery and has sold off state buildings to balance the budget, but while increasing our debt. 

The measure proposed by President Burns would eliminate the current constitutional debt limit and instead allow the state to incur debt as long as the amount never exceeds 5% of net assessed value of property and would require that the Legislature provide for a revenue source - other than the state general fund - to pay for all costs of the debt in the state.

The legislation allows for better financing terms through the use of General Obligation bonds and permits the state to refinance existing debt while creating a far more transparent process by subjecting all forms of debt to the overall limit of 5% NAV and requiring voter approval for any new GO bonds.

Simply put, SCR 1060 - which has already passed the full Senate and the House Appropriations Committee - would allow the voters to decide whether we want a rationale debt policy or whether we should continue the practice of accounting gimmicks to get around the constitutional debt limit.

Turn the Commerce Department into a true economic development authority

The Arizona Department of Commerce has had seven directors in 10 years.  It, like many state agencies, is a reflection of the political climate and administration at a particular time.  But that's not a scenario that lends itself to a consistent economic development strategy for the state.

In an effort to remove the politics from the business of attracting good jobs to Arizona, Gov. Brewer and current Commerce Director Don Cardon have proposed shuttering the department and establishing the Arizona Commerce Authority, which would be solely focused on attracting jobs and convincing companies to expand their operations here.

This is the kind of big thinking that Arizona needs in order to put forth a real economic development effort. 

The Greater Phoenix Economic Council has established the best practice for economic development in Arizona.  Under the leadership of Barry Broome, GPEC has set the standard for how to attract jobs to Arizona by offering site selection services, market analysis and company relocation services.

By following the GPEC model, the new Commerce Authority has the potential to be a true catalyst for consistent economic growth in this state while avoiding the politics that have bogged down previous state efforts.

This new Authority coupled with a vastly improved tax code would help us reverse our economic slide and would probably represent the most aggressive job creation package enacted in the country this year.  It would be nice for Arizona to make national headlines for something positive for a change.

Legislators and the governor have put in a lot of hard work this session, but they won't be able to call the session a success unless they take decisive action to institute much-needed economic reforms.