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Arizona Gov. Doug Ducey’s plan for $1B in university bonds in trouble

(Facebook/Arizona State University)

PHOENIX (AP) — Gov. Doug Ducey’s plan to allow universities to keep $37 million a year in sales tax revenue and use it to help pay for a $1 billion construction bond package faces major opposition in the Legislature.

The proposal included in Ducey’s executive budget is opposed by majority Republican lawmakers on a variety of fronts. Many are against the idea of allowing a specific group to keep sales tax money because they worry it will open the door to other raids on the state’s biggest source of general fund revenue. Others believe universities already have too much money or are too focused on research at the expense of education.

Senate President Steve Yarbrough said Monday there’s little appetite in his chamber for the current proposal.

“I can tell you there’s very little support for the TPT mechanism,” said Yarbrough, using the formal acronym for the state’s transaction privilege tax, which taxes sales and other transactions. “Only a few think that’s a swell idea.”

Republican Rep. Michelle Ugenti-Rita said the same is true in the House, with more focus on an overall vision for the universities.

“I think before we even get there the real thing the Legislature needs to be asking is: ‘What are we getting?'” Ugenti-Rita said. “This is a massive bonding request, and in order to really get on board or justify it I think your first questions are, What does this mean for the trajectory of (the universities?) What’s it going to do for Arizona?”

Asked about the growing opposition Friday, Ducey said “We’ll see about that.”

The proposal would allow the University of Arizona, Arizona State University and Northern Arizona University to keep the TPT money their operations generate for the state and cities where they are located. They would match the state share, allowing them to float about $1 billion in 30-year bonds to pay for deferred maintenance on buildings and a major research and development building campaign. The Board of Regents that oversees the universities is strongly backing the plan.

House Republicans have agreed to a budget outline that does not include the university bonding proposal. The Senate’s plan is purported to closely align with the House plan, although fewer details are known.

Sen. Debbie Lesko, the Republican chair of her chamber’s Appropriations Committee, said she has major concerns about the governor’s proposal for university bonding.

“I’m totally opposed to the diversion of the TPT money,” Lesko said Monday. “It sets a bad precedent because then everyone will want to do it.”

Sale and transactions taxes together bring in $4.5 billion a year to the general fund, more than income taxes. Lesko and other worry that allowing the universities to keep the taxes their facilities generate will open the door for other entities to claim similar deals.

Keeping the sales tax as a dedicated stream to pay off bonds will make them cheaper overall because they are not dependent on the whims of the Legislature’s annual budget negotiations. A straight appropriation is one possible way around the opposition.

The three university presidents and Regents President Eileen Klein are pushing for the new money, saying previous R&D infrastructure investments have paid off handsomely for the state.

In an interview Monday, Klein noted that the money the universities want to keep is what they pay on their own purchases. She also said only six states use a similar tax scheme, and with cuts to state funding over the past decade student tuition is making up a much larger part of overall funding.

Klein also said there is no backup plan in place in case the sales tax proposal falls flat.

“We believe it’s a real sound proposal and a great reform,” Klein aid. “We continue to believe there are tremendous benefits that far outweigh a straight appropriation. So we are continuing to encourage lawmakers to take a look at this proposal.”

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