Upcoming Budget discussion could pit university budgets against college towns

The State of Arizona needs to tread carefully to avoid producing unnecessary animosity between towns and universities

ASU is becoming another political football in the fight between the State of Arizona and its cities during this year’s budget negotiations. What was conceived as a common-sense measure during an Arizona Board of Regents meeting could hit university town budgets in Tempe and Flagstaff hard due to state mismanagement.

The decidedly dull area of state tax policy has been implicated in various education fights in Arizona over the past twelve months. Cases like Proposition 123, which capped K-12 education spending at one-half the state budget while implementing a small raise to Arizona teachers, serves as a harbinger of what could be a manufactured fight between the state universities and the towns we live in.

The idea is simple: state funding for universities can be used without paying state sales taxes. But simple ideas are difficult in an era of tight budgets for Arizona.

Cities are concerned about falling revenue, and, in particular, falling state support. Cuts to state funds for cities can only be expected with the reduction in tax revenue from universities.

This matters because funding from the state has already dropped massively. Governing Magazine released data last month indicating that Arizona cut its funding to cities by 24 percent since the 2007 recession.

While austerity might have made sense then, a reticence by the GOP-controlled state to raise taxes and generate more money has kept Arizona cities particularly constrained ever since. That means dropping the state budget by eliminating taxes on universities threatens city-university relationships.

Governor Ducey’s budget proposal does not include plans to increase state revenues to make up for lost funds from universities. If cities are hit, they may need to raise local taxes, possibly increasing cost of living for students.

This could be particularly aggravating in cities like Tempe, where an effort to introduce tuition-free preschool for the city was already leading to discussions of a small tax increase. City priorities would then be unevenly split between student-centric northern Tempe and more family-based southern Tempe.

State Senator Juan Mendez said he wasn’t certain how he would vote on this proposal specifically due to concerns over how it would affect city-university relations. Nonetheless, beyond this problem, he feels the measure should receive strong bipartisan support.

“Most states actually don’t tax state university spending,” Mendez said.

The difficulty is that when one source of income is lost, Arizona won’t want to find another.

Similar plans to strengthen revenue sharing in Maine were met with deep distrust by the business community. Tax increases on the general population are largely unpopular and harder to pass, while the general outlook is that increasing corporate and business taxes fits within populist narratives on either side of the aisle.

The Arizona business lobby was rebuked this week when the Arizona Supreme Court dismissed the Chamber of Commerce's complaints about the minimum wage increase approved by Arizona voters under Proposition 206 last fall.

Even so, they remain a formidable opponent to tax increases at all levels of government, with strong support from the Republican Party.

Governor Ducey’s budget proposal is nationally reasonable and ASU has a lot to gain. That money can easily be used to work on building upkeep that would obviously benefit students. Nonetheless, a decade of municipal neglect in the state budget means that reasonable policy would lead to unreasonable fighting.

Revenue sharing is a popular means of gaining support for taxes. Multiple organizations use revenue sharing as an excuse for expanded programming, giving Governor Ducey a good method of selling the state on a tax increase.

It’s important to push for a state revenue balance to keep college towns like Tempe afloat alongside their universities.


Reach the columnist at benjamin.steele@asu.edu or follow @blsteele17 on Twitter.

Editor’s note: The opinions presented in this column are the author’s and do not imply any endorsement from The State Press or its editors.

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