In a distinct echo of last year, the 2022 legislative session passed 120 days with no end in sight. While some of the session’s major issues have been resolved — Prop 208 was declared unconstitutional, the Aggregate Expenditure Limit was increased, and the 2.5% flat tax was reaffirmed by the Arizona Supreme Court — the enormous budget surplus remains and so do the disagreements on how to spend it.
Since January, the state’s budget surplus has only gotten more immense. What started as a projected $3.2 billion ending balance has grown to closer to $5 billion, with
$1.3 billion in ongoing spending ability. While this may seem like a good problem to have, the divided nature of the majority caucuses coupled with their razor-thin margins has made budget negotiations difficult. Many Capitol observers believe that the only path to an agreement will include engaging with Democratic legislators and building a truly bipartisan budget.
So far, the 2022 legislative session has been a challenging one for the business community and particularly the financial services industry. While the Arizona Bankers Association has been able to get some important legislation passed and signed, much of this session has been dedicated to playing defense against bills attempting to regulate the activities of private businesses.
In the proactive column, the Legislature passed, and the Governor signed SB 1363, AzBA’s bill to bring additional certainty to Arizona’s Foreign-Country Money Judgments Recognition Act. By ensuring the Act includes a savings clause, SB 1363 maintains Arizona’s position as a great place for companies from around the world to do business. AzBA also continues to advocate for action to address the state taxation of FDIC premiums that resulted from conforming to the Tax Cuts and Jobs Act. The request is for this fix to be included in the enacted fiscal year 2023 budget.
On the defensive side, the Arizona Bankers Association has been actively opposed to efforts to regulate bank activities relating to firearms and ESG policies. HB 2473 is Representative Frank Carroll’s legislation that prohibits the state from doing business with any bank that “discriminates” against firearms-related business, while Representative Jake Hoffman has run HB 2637 to prohibit Arizona banks from “discriminating” based on environmental, social or similar values-based criteria. Despite violating basic small-government, free-market principles, both measures have seen significant Republican support due to concerns about cancel culture and a perceived bias from financial institutions towards conservative causes. AzBA has worked closely with pro-business legislators of both parties to keep the bills from moving forward. At the time of this writing, both measures are being held and do not have the votes to pass.
The Legislature must pass a budget by the end of the fiscal year on June 30th. Right now, it feels like this year will mirror 2021 and the session will run right up until that deadline. But this is an election year, and many legislators have primary elections to worry about; early ballots are mailed on July 6th, after all. Perhaps this pressure will be enough to keep folks at the negotiating table and adjourn sine die a little more quickly than last year.
