Repealing Bad Laws Can Help Fix Arizona's Housing & Financial Problems (video)
Bad laws passed by the Legislature created the housing crisis and the projected $1 billion budget shortfall. Here's what should be repealed to fix the mess.
Arizona Legislature Created $1 Billion Budget Shortfall. They Should Fix It …
Monday, January 8, 2024 is Opening Day for the Second Session of the 56th Arizona Legislature. With a $1 billion budget short fall, the Legislature is facing tough choices.
On Inauguration Day in January 2023, the Legislature started the session with a $2 billion budget surplus, and they spent the whole dang thing last year.
On Substack, former Arizona Republic columnist Robert Robb calls this action “the irresponsible decision by the GOP legislative leaders to deplete all of a $2 billion surplus in a single year …”
After months of wrangling over the budget in 2023, newly elected Democratic Governor Katie Hobbs compromised with the entrenched Republican Leadership in the Legislature, Senate President Warren Petersen and House Speaker Ben Toma1 to get the budget passed. The deal allowed every legislator to request funding for a pet project or pool resources for a pet project.
“While it was the decision of the GOP legislative leaders to use up all of the surplus by giving each Legislator millions of dollars to spend on anything and everything, rather than manage the surplus prudently, [many, not all] Democratic legislators and Gov. Hobbs went along. Their hands are not entirely clean,” Robb writes. [Emphasis and clarification added.]
The state even got sued over the $15 million in taxpayer funds given to a rodeo in Prescott. Reps. Selina Bliss and Quang Nguyen pooled their funds and earmarked their money for the rodeo. The state was sued over the gift clause.2
The Legislature routinely passes laws that are written to get around the gift clause. I’m glad someone finally sued them for it. The Empowerment Scholarships are a prime example of a mechanism that was created to drain state funds from the budget and funnel taxpayer money to private and religious schools. ALL of the specialty license plate bills are written to get around the gift clause. Arizona’s more than 60 specialty license plate bills were crafted to funnel a steady stream of state funds from license plate fees — forever — to one, unvetted pet charity backed by a Legislator willing to sponsor a bill. It is fitting that Senator John Kavanagh and his bill to benefit an astronomy center in Paradise Valley are featured in the gift clause news story. Kavanagh is the king of pork barrel funding through specialty license plates. In 2022, Kavanagh’s seatmate “fiscal conservative” Rep. Joseph Chaplik got into the license plate game. Thanks to Chaplik, aging Phoenix rocker Alice Cooper has a specialty license plate now. Cathi Herrod’s anti-abortion lobbying group, the Center for Arizona Policy, also has a perpetual license plate funding stream. State Treasurer Kimberly Yee is reportedly looking into the astronomy center funding. I think she should supply taxpayers with an accounting of pork barrel projects through license plates.
Wild spending by the “drunken sailor” Legislature in 2023 + automated tax cuts3 for the rich built into the Flat Tax + runaway taxpayer-funded private school spending on the Empowerment Scholarship Awards (ESA) + pork barrel funding have left Arizona with a projected $400 million shortfall for the current fiscal year and another $450 million shortfall for the next fiscal year.
Thanks, Toma!
Speaker of the House Ben Toma is the primary architect of Arizona’s epic economic failure. Toma personally sponsored the three major initiatives that broke the bank. My Substack article Flat Tax Losses + School Voucher $$$!!! = Looming Budget Meltdown, Thanks, Toma details the economics of the Flat Tax + uncapped ESAs, a few months ago when these two programs were starting to break the budget.
The Flat Tax was designed to perpetually drain any “excess” revenue and return it to Arizona’s 1%, as evidenced by the bar graph above from the Center for Economic Progress. For future economic stability, the Legislature should repeal the Flat Tax … now.
Arizona’s Flat Tax is already tracking with The Kansas Experiment. The economic losses will only get worse, and budget cuts will get increasingly more devastating.
“The Kansas experience adds to the already compelling evidence that cutting taxes does not improve state economic performance, writes Michael Mazerov In Kansas Provides Compelling Evidence of Failure of “Supply Side” Tax Cuts.
Initially, Kansas is the only other state dumb enough to give back all “extra” revenue to the richest residents. It broke the state’s finances and stalled growth. A bipartisan group of Kansas Legislators finally repealed it. Now nine states including Arizona have a Flat Tax, and some short-sighted Kansas Legislators are trying to bring back the Flat Tax. Ugh.
In 2021, then Rep. Mitzi Epstein4 and I debated then Majority Leader Toma multiple times on the Flat Tax and other tax breaks he sponsored. During a floor debate, he got flustered with us and said he wished people would stop bringing up the Kansas experience. He said that Kansas “had the guts to pass the Flat Tax but didn’t have the guts to pass the subsequent budget cuts to make it work.” That sent a chill down my spine. In 2024, I predict that Toma will be ready to break government programs to make his economic ideas work.
Arizona Legislature Created the Housing Crisis. They Should Fix It …
During my six years in the Arizona Legislature, affordable housing was discussed … a lot … but not much was done about it. There is a bipartisan cadre of Legislators who believe the road to affordable housing … or pretty much anything … is paved with tax cuts for the rich and business incentives for corporations.
No surprisingly, with this narrow mindset, housing has become much less affordable, and homelessness is growing. When you’re in a whole, stop digging. I contend that preemption has created a statewide “business friendly” climate that has strangled any innovation on the local level, increased instability among renters and churned the market, thus increasing prices.
Instead of further stifling local governments and perpetuating poverty, Legislators should consider tackling housing problems by: 1) repealing preemption laws to allow for local innovation, 2) revising tenant/landlord laws to increase transparency and reduce evictions and 3) increasing cash assistance to the poor (TANF) to bring it into the twenty-first century.
The solution to homelessness: keep people housed!
Repeal Preemption Laws … 5
Repeal Worst Preemption Bill in the Country. SB1487, a Kavanagh bill from 2015, is the worst preemption bill in the US. This is the law that gives any Legislator with a grudge the ability to complain about any local law and start an Attorney General investigation of that law. This law stopped Bisbee’s plastic bag ban and Tucson’s gun buy-back program. Let’s challenge municipalities innovate. (HB21936)
Repeal the Preemption of Inclusionary Zoning. Inclusionary zoning allows municipalities to designate a certain percentage of a new housing project be affordable or low income. Inclusionary zoning is something the Tucson City Council used to talk about all the time; I didn’t realize the Legislature had outlawed it. (HB2446)
Repeal the Preemption of Rent Control. Rent control has been used to keep people housed. Keeping people housed is cheaper and more humanitarian than forcing people to live on the streets. (HB2401)
Repeal the Preemption of Local Regulation of Short-term/Vacation Rentals. Arizona is tourist designation. Thanks to full deregulation of short-term rentals in Arizona, cities and towns are being overrun by corporate-owned, short-term rentals. Taking affordable rentals off the market and converting them to vacation rentals squeezes local residents who are renters and increases their costs. Everyday, bungalows in my neighborhood are being converted to cookie-cutter short-term rentals. At least 10 homes on my morning walk are housing visitors and no longer housing neighbors. This is a bad trend for neighborhoods. (HCR2006)
Innovate & Keep People Housed …
Make Leases More Transparent. Each year I was in the Legislature, I had to rent a Phoenix apartment, which was an awful experience. In the process of apartment shopping and moving in or out every every six months, I learned a lot about leases. For example, there are hidden fees and “gotcha” clauses that can be used to boot people out of their apartments. My experiences as a renter in Phoenix prompted me to propose a Truth in Renting bill twice in the Legislature. The purpose of Truth in Renting was to bring transparency to leases; protect tenants from unnecessary fees and traps in leases; and help prevent some evictions. It sailed through the House Commerce Committee in 2021 and through the House but was stopped by politics in the Senate and never heard in 2022. Helping people stay in their homes and apartments is more cost effective and humane than throwing people out on the street, breaking up families … and then trying to put some of those people and families back together again later. (HB2794)
Leases Should Permit Tenants’ Cannabis Use. Any substance that is legal to use in the state of Arizona is should be legal to use in apartments in Arizona. Corporate apartment complexes, owned by massive nationwide chains, often have leases that prohibit cannabis use in the apartments, even in states like Arizona where cannabis is legal. The anti-cannabis page in the lease is an entrapment policy with no exclusions. Even medical marijuana patients with cancer can be evicted in Arizona for any cannabis use in these corporate apartment complexes. That’s not fair. Arizona law should prevail in Arizona — not Puritanical corporate rules. (HB2792)
Cap Annual Rent Increases to 10%. Arizona is a deregulation state. Consequently, there are no restrictions regarding raising rent. When I was in office, I heard far too many stories from renters who were forced to move because of 50-100% rent increases. Capping year-to-year rent increase at 10%, like California did, would help many renters stay in their apartments. Now, major apartment complexes are routinely bought and sold, which results in the rent going up. Multiple years, the Phoenix apartment complexes I lived in were sold at the end of the fiscal year, when I usually moved. My crappy but pricy 2021 studio apartment was 50% more per month in December 2021 than it was when I moved out in June 2021.
Churning the rental market by buying and selling giant apartment complexes, raising the rent, and charging fees makes big bucks for corporate landlords. One of my corporate landlords owned 17 apartment complexes in Metro Phoenix and ~500 nationwide. Think of the billions of dollars in fees that corporate landlords are raking in by charging non-refundable application fees, cleaning fees, pet fees, amenity fees, location7 fees, late, service fees, etc. Corporate landlords are making obscene amounts of money on fees and high rents. A 10% cap on rent increases won’t break them, but it will slow down the predatory rental market, help hold prices down, and help keep people housed. (HB2793) (For more about the corporate fee game, read: Big Banks, Big Insurance, Big Pharma & Big Housing: Corporate America Is Burying Us in Fees.)
Create Property Tax/Rental Assistance Fund for Seniors. For years, Maricopa County had a modest property tax assistance fund for seniors. The original bill was sponsored and championed by Senate Minority Caucus Chair Lela Alston. The purpose was to help very low-income seniors pay their property taxes and stay in their homes8. In my opinion, this would be particularly helpful to seniors who live in areas that have been gentrified. I thought Alston’s bill was such a great idea that I proposed expanding the program statewide a few times. In 2022, a Republican a sponsored a similar bill that was similar to my HB2522. Thinking about this now, why not have a property tax and rental assistance fund to help seniors stay housed? This project could easily be funded by the Housing Trust Fund, if Arizona fully funded it. (See below). (HB2522)
Fully Fund the Housing Trust Fund. Historically, the Housing Trust Fund was allocated at $40 million per year to finance housing related projects around the state. The renovation of the old Holidome Holiday Inn into the Center of Opportunity, a shelter with services for the homeless, was funded, at least in part, by the Housing Trust Fund. Funding the Housing Trust Fund was routinely appropriated — until the dark days of Governor Jan “Beheadings in the Desert” Brewer and Senate President Russell “SB1070” Pearce. Housing funds have been routinely zeroed out to pay for tax cuts and other ideological nonsense. I’d venture to guess that this myopic move — repeated multiple times by Republican Legislators since 2010 — did a lot to create our state’s current housing and homelessness problems. (HB2195)
Link Cash Assistance to the Poor (TANF) to Current Poverty Rate. For years — perhaps every year I was in office — I proposed increasing Arizona’s Temporary Assistance to Needy Families (TANF). Under Governor Doug Ducey, Arizona’s TANF became stingier than it already was by cutting it from two years to one with tricks and requirements to make it difficult to get a second year. I proposed increasing TANF to the five years allowed by federal law and bringing the monthly benefit into the twenty-first century. (TANF is a federal matching funds program. We pay a fraction.) Currently, Arizona’s TANF benefit is based upon 36% of the 1992 poverty rate. In 2021, it was estimated that increasing TANF to 40% of the 2020 poverty rate would cost roughly $13 million per year, but the increased benefit per month + five years of benefits would be life-changing for TANF recipients, who are mostly single mothers and their children. Don’t forget, in January 2023, the Arizona Legislature had a $2 billion surplus. Compared to that, $13 million is a drop in the bucket — less than the Prescott rodeo got! The current TANF is capped at less than $300 per month for a family of any size. That doesn’t go very far to pay the rent. Bringing TANF benefits into the present and tying them to inflation would go a long way to keeping people housed.
The Arizona Legislature created the current financial problems and the housing crisis with 10+ years of bad legislation. Let’s repeal short-sighted economic practices like the Flat Tax and bad preemption laws and focus on passing a fair and balanced bipartisan budget and keeping people housed.
Related Links
To Fix Housing Crisis: Focus on Ending Preemption & Keeping People Housed (video)
Flat Tax Losses + School Voucher $$$ !! = Looming Budget Meltdown. Thanks, Toma! (video)
Flat Tax Will Slash Arizona’s Revenue by 10%, New Analysis Finds
Flat Tax, School Vouchers and Slowing Sales Taxes Driving $400 Million Budget Shortfall
AZ Treasurer Seeks More Information on Astronomy Center Payouts after Rodeo Money Lawsuit
Specialty License Plates: The Ultimate in Picking Winners & Losers (video)
Hoffman, Freedom Caucus, Expand Arizona’s Welfare State
AZ Legislature Passes Budget, Dems Disparage Hobbs’ Work on It
#AZLeg Should Focus on Food & Housing Security, Not Gambling & Tax Breaks (video)
Big Banks, Big Insurance, Big Pharma & Big Housing: Corporate America Is Burying Us in Fees
Bills Tackling Homelessness & Addiction Ignore Poverty Link
Gentrification, GPLETs, & Poverty in Tucson
As Majority Leader, Rep. Ben Toma was the primary cheerleader and sponsor of the Flat Tax. He knew at the time that the Flat Tax would cause massive program cuts. As former chair of the Ways and Means Committee, Toma shepherded dozens of tax cut — many with unknown cost to the taxpayer — through the Legislature.
The Arizona Legislature routinely passed laws that are written to get around Arizona’s gift clause. Student Tuition Organizations were created to allow people to get tax credits for supporting private schools. The ESAs funnel tax money to private and religious schools. ALL of the specialty license plate bills are mechanisms to funnel state money to private, unvetted charities and pet projects.
Governors Brewer and Ducey infamously cut taxes every year — regardless of the economic conditions. Many of those tax giveaways were ongoing and had ongoing, built-in increases. Hundreds of millions of dollars in taxpayer funds are given away every year, often on a bipartisan vote.
Epstein is now Senate Minority Leader.
These are bill numbers provided here are for the 55th Legislature, 2nd Session (2022). With the bill number and the Legislative session, anyone can look up the text of the bills at azleg.gov and see the bill’s progress, even the video debates. When you do the search, make sure you use the pulldown menu to choose the correct session.
Bill numbers in this section are from the Second Session of the 55th Arizona Legislature, 2022. You can read the bill text online.
One year, I was charged an extra monthly fee for a first floor apartment. I think the people on the second floor should have gotten a deep discount instead!
The funding for Alston’s valiant housing endeavors ebbed and flowed while I was in office, and I’m not sure where this is now. This is a good idea that could be funded by the Housing Trust Fund.