Republican lawmakers are urging the Arizona Supreme Court to immediately rule that a voter-approved tax on the wealthy can’t be enforced, saying the high court already found a key provision unconstitutional and a trial court judge is needlessly delaying issuing a ruling that would effectively kill the measure aimed at funding schools.
The request in the case filed by House Speaker Rusty Bowers and Senate President Karen Fann and other opponents of the tax says that the high court in August left Superior Court Judge John Hannah with just one job — determining if the new money from the voter initiative puts the state’s schools above a constitutional spending cap.
Both sides in the suit last month stipulated that it likely would, and Hannah’s “task changed from the discretionary work of administering a trial to the ministerial duty of entering judgment in Plaintiffs’ favor,” according to lawyers for the GOP lawmakers.
The spending cap — passed by voters in 1980 — is a looming issue right now.
Schools are expected to hit their limit by early next month, and minority Democrats have been railing for weeks that schools could be forced to close because they can’t legally spend more than the $1 billion the Legislature has already appropriated for the current school year. Lawmakers can vote to raise the constitutional spending cap year to year.
Republicans worry if they vote to raise the cap before a court ruling that says Proposition 208 is dead, it could provide a lifeline to the tax on the wealthy.
Roopali Desai, an attorney representing the group that backed Proposition 208, Invest in Education, did not immediately comment on Wednesday. But Desai said before the court filing on Tuesday that any delay will not affect this year’s spending cap.
Bowers said he’s worried that it will, and he’s not willing to run the risk.
“We’re going to take care of it, but we need to make sure that the judges have every opportunity to solve this now and decouple those two because they are decoupled,” he said.
The Arizona Supreme Court in August ruled that a part of the voter initiative that created a workaround for the spending cap was unconstitutional. The initiative was expected to raise about $800 million a year for K-12 education, and got around the cap by calling the money “grants.”
Proposition 208 imposes a 3.5% tax surcharge on income above $250,000 for individuals or above $500,000 for couples.
The Invest in Education Act was backed by education advocates across Arizona and was an outgrowth of a 2018 teacher strike that resulted in educators getting a 20% pay raise but fell short of other major school funding boosts. Major funding for the campaign came from an Oregon group that advocates for public education.
Despite the teacher raises and more than $1 billion in new education spending pumped into education in recent years, Arizona schools remain among the lowest-funded in the nation and teacher pay is also ranked near the bottom.
That has led to an exodus of teachers, as has happened in other states as well. But many Republican-led states are acting to raise teacher pay even more, leaving Arizona still at 49th or 50th nationally.
Republican lawmakers and GOP Gov. Doug Ducey argue the new tax with make the state less appealing to small business. They reacted last year by enacting a new tax category that would exempt small business income now taxed on personal returns from the Proposition 208 tax, cutting about $292 million from the tax revenue schools would get under the initiative.
Lawmakers also created a way for those taxpayers hit by the surtax not to pay it directly, instead backfilling most of the promised Proposition 208 money with general fund cash.