2007-08 Legislative Update
by DeMenna & Associates
There is no such thing as a flawless victory in politics. However, the achievements associated with the Arizona Society’s 2008 legislative agenda may come as close as humanly possible.
This year’s legislative session came to an abrupt but welcome conclusion on Thursday, June 30 just a few hours before midnight, ending with more of a whimper than a bang. At 166 days, this was the fourth longest sessions in Arizona history. The Society’s successes came as one development after another turned the 2008 legislature into a bitter experience. The tension and animosity surrounding issues such as illegal immigration and the Traditional Marriage Amendment vote were almost palpable. The Executive Branch and the Republican-controlled legislature exchanged heavy-handed criticisms at every turn as they worked to develop a state financial plan that would comply with the constitutional requirement for a balanced budget in the face of one of the worst state budget deficits in the Nation.
And, in the midst of all of these challenges came the death of Senator Jake Flake. Senator Flake, a former House Speaker died as a result of complications stemming from broken ribs after he fell from a horse. This cowboy senator was an acknowledged statesman, and was always a friend to the ASCPA.
In spite of all of this, the Society’s session was a terrific success, not simply as measured by the sheer volume of ASCPA supported bills that were signed into law, but more so because of the success of virtually every item on the Society’s legislative agenda. In the almost 20 years that DeMenna & Associates has worked with the Society at the State Capitol, we cannot recall a time when so many critical legislative priorities succeeded in a single session.
There were 1,380 bills introduced by the members of Arizona’s Legislature, and 315 of these were signed into law. While every one of these bills was important to someone, the Society legislative agenda focused primarily on three significant pieces of legislation: Senate Bill 1227 (reciprocal certification of CPAs, i.e. mobility), House Bill 2104 (income tax conformity), House Bill 2589 (tax credits; other states). The effective date for all legislation signed into law, unless otherwise specified, is Sept. 26, 2008.
2008 ASCPA Legislative Program
Despite the unprecedented levels of bitterness and the myriad of difficulties that emerged during the 2008 session, the ASCPA legislative agenda began strong and never slowed down.
From the outset, the ASCPA legislative team focused a significant amount of time and attention on the mobility legislation. Senate Bill 1127 (Reciprocal Certification of CPAs) was introduced by Senator Barbara Leff. Senator Leff’s willingness to take a personal interest in the legislation itself and to develop a working understanding of this complex piece of public policy gave us a significant advantage.
SB1227 makes several changes to various state accountancy laws, but most importantly it modifies the requirements for out-of-state certified public accountants to qualify and exercise the limited reciprocity privilege to practice accountancy in Arizona.
The work on Senate Bill 1227 began almost immediately following the close of the 2007 legislative session. The Society worked closely with the Board of Accountancy to develop language, and it was agreed that the Society should lead the effort on the legislation. After passing out of the Senate with little difficulty, the bill’s progress slowed in the House while House leadership focused their attention singularly on developing a state budget. Ultimately, the bill was heard in one of the final House Commerce meetings of the session, and then proceeded to the House Rules Committee. For reasons far too complex to explain within the space of this column, this is where things got interesting.
The short version: an error was made in a very minor and technical House Rules committee amendment, and that mistake later had to be resolved in a conference committee. This led to a further requirement that the bill be voted through both chambers once again, stretching the limit in terms of time remaining in the session. In fact, the final vote in the House took place a mere five days before the legislature shut down.
Senator Leff is to be commended for her valiant efforts in the final days of the session, ensuring that the bill didn’t fall by the wayside like so many other pieces of legislation in late June. And, of course, a great deal of credit goes to ASCPA President & CEO Cindie Hubiak for her leadership throughout the entire process. Arizona now joins 27 other states that have some form of mobility statutes on the books.
Federal Income Tax Conformity, which has become an annual legislative ritual, was the subject of dual introduction; bills were introduced in both the House and the Senate. The Senate version was offered by Senator Jim Waring (last year’s champion of conformity and the 2007 ASCPA Legislator of the Year), and the House version was proposed by House Ways & Means Chairman Steve Yarbrough. These measures were identical and, unlike the previous session, this issue did not become the subject of political power struggles.
Both bills moved through their respective committees rapidly. In fact, Senator Waring scheduled conformity as the first bill to be heard on the opening day of the 2008 Finance Committee. The House version (HB2104) was ultimately sent to the governor and signed into law on April 28, 2008.
Provisions in this year’s conformity legislation include modifying the Internal Revenue Code to adopt changes adopted by Congress in the Small Business and Work Opportunity Tax Act of 2007; the Energy Independence and Security Act of 2007; Prevent Taxation of Payment to Virginia Tech Victims and Families of 2007; Mortgage Forgiveness Debt Relief Act of 2007 and the Tax Technical Corrections Act of 2007.
Another significant priority for the ASCPA in 2008 was House Bill 2589: income tax credits; other states; otherwise known as the “Stearns Bill.” Introduced by Representative Rich Crandall (who also happens to be the only CPA in the Arizona Legislature), HB2589 received the support of the Arizona Department of Revenue early in the legislative process. HB2589 was introduced as a result of Stearns v. Arizona Department of Revenue (2006), whereby the plaintiffs held that the calculation for the credit for taxes paid to another state must be based on taxable income rather than adjusted gross income. The lawsuit was filed after an audit by DOR calculated the Stearns’ credit using adjusted gross income in the denominator of the formula. Following a Court of Appeals decision affirming the Stearns’ position, the Society requested the introduction of HB2589 in an attempt to clarify that “entire income” is defined as the taxpayer’s adjusted gross income for both Arizona and the other state(s). A complex piece of legislation, the Legislature relied heavily upon the leadership of Representative Crandall and the legislative advocacy of DeMenna & Associates to help shepherd this bill through the process. House Bill 2589 received no opposition and was ultimately signed into law by the Governor on May 20.
What is coming next?
The November 2008 election promises to be an exciting time for the State of Arizona. Legislative turnover is expected to be unusually high, and many new members are expected to be elected in the upcoming legislative races. And, of course, there are also huge implications if John McCain wins the Presidency. If his U.S. Senate seat opens, Governor Janet Napolitano must appoint a Republican to fill the remainder of McCain’s six-year term. In that scenario, the 2010 election for the McCain Senate seat (a seat Governor Napolitano has made no secret that she is interested in) will be one of the most heavily contested races in Arizona history.
Should Barack Obama win the presidency, the obvious question is whether or not Janet Napolitano will be a member of the Obama Administration. If Napolitano leaves before the completion of her term ending in 2010, Republican Secretary of State Jan Brewer will fill the remainder of the Governor’s term. Regardless of the results of the November elections, 2008 is the staging ground for a 2010 watershed year in Arizona politics. At this point, another 27 state legislators will face the end of their term limits, one U.S. Senate seat will potentially become available, and the offices of the Governor, Superintendent of Public Instruction, Attorney General, Secretary of State, and the Mayor of the City of Phoenix will all be open.
As is the case every two years, all nine of Arizona’s Congressional Districts are up for election this year, including one seat with no incumbent running for reelection. Of the nine races, three are considered to be competitive. District 3 Republican Congressman John Shadegg created quite a stir in early February when he announced that he would be swapping an eighth congressional term for a career in the private sector. Shadegg quickly retracted his decision to retire after 140 Republicans in Congress signed a letter asking him to keep his seat, however, that brief period of “limbo” while Shadegg’s future remained in doubt sent a wildfire through Arizona’s political forest, with a long list of legislators briefly considering throwing their hats into the congressional ring.
In the Southern portion of the state, Senate President Tim Bee is taking on Democrat incumbent Gabrielle Giffords for the Tucson area District 8 seat. In Northern Arizona, the field is wide open and the Democrats hope to pick up a seat formerly occupied by Republican Rick Renzi, who stepped down from office pending Federal criminal charges against him for his involvement in a land-swap deal. Former state legislator Ann Kirkpatrick, who resigned from her House seat in February, is considered the early favorite to secure the Democratic primary nomination. For Republicans, the list of candidates who flirted with a run for the open seat is a revolving door of heavy hitters, including former Senate President Ken Bennett, late Senator Jake Flake and current House legislator Bill Konopnicki. To date, no real leader has emerged from the Republican pack, and it is likely that either Sydney Hay or even Kris Mayes will win the Republican nomination. If Democrats can pick up this seat and retain control of the seats they currently hold, Republicans will lose control of the Arizona Congressional Delegation for the first time in nearly 40 years.
Finally, the last competitive race is Congressional District 5, the seat Democrat Harry Mitchell wrestled from former Republican Congressman J.D. Hayworth back in 2006. Unlike the District 1 race, District 5 is a crowded field of Republicans hoping to return the seat back to Republican power. The list includes former Tempe legislator Laura Knaperek, current House member Mark Anderson, former County Treasurer David Schweikert, former congressional aide and lobbyist Jim Ogsbury, and current lobbyist and former Scottsdale City Council member Susan Bitter Smith.
Legislative Turnover
Fourteen lawmakers will be ending their legislative careers after the end of the 2008 legislative session. Some members are leaving willingly; others are pursuing new political offices; and a few are retiring because of term limits. Some members stepped out of the spotlight because they decided the $24,000 a year salary wasn’t enough to survive (by the way, voters will have a chance to increase legislator salaries by $6,000 in the upcoming election in the form of Prop 300. Lawmakers haven’t had a pay raise since 1998). One member withdrew from his race because of a domestic abuse charge. Another member withdrew his name from the ballot because he submitted invalid nominating petitions.
In the end, the Legislature is losing some of its best and brightest members. The greatest loss of the 2008 session was the death of State Senator Jake Flake. Senator Marsha Arzberger, Senate President Tim Bee, Senator Victor Soltero, Tucson representative Marian McClure, Representative Bob Robson, Representative Doug Clark, Representative Mark DeSimone and Representative Bob Stump are just a sample of the large number of legislators retiring or running for other political offices. The Legislature will greatly miss the leadership and personalities of these members.
Ballot Measures
During the 2006 election cycle, Arizona voters faced a record 19 initiatives or referendums on the ballot. To put it into perspective, Arizona voters have faced an average of 14 different ballot measures over the course of the past five statewide elections. This year, eight citizens’ initiatives are expected to appear on the November ballot, along with the Marriage Amendment measure referred to the ballot by the Legislature, and another measure referred by the Salary Commission proposing to increase legislative salaries by $6,000 returns to the ballot this year after being defeated by voters in 2006.
And if there was ever any doubt that there isn’t a tremendous marketing value in a name, consider the titles of the upcoming measures expected to appear on the ballot: “Marriage: One Man, One Woman”; “Arizona Civil Rights Initiative”; “Protect Our Home”; “Majority Rules—Let the People Decide”; “Conserving Arizona’s Water and Land”; “Stop Illegal Hiring”; “Homeowner’s Bill of Rights”; “Payday Loan Reform Act”; and “State Legislator’s Salaries.” One thing that is clear is that Arizona voters are being asked to vote on an above average amount of ballot measures. It is also worth noting that no citizens’ initiative has ever qualified in the state of Arizona without the assistance of paid signature gatherers.
Conclusion
It is amazing how well the Society prevailed during the 2008 legislative session given the economic woes of the state and the often hostile environment in which policy was shaped. But let’s make no mistake—the many successes of this session were not by serendipity. The ASCPA has worked hard to achieve the standing it has at the Arizona State Capitol, and this session is no exception to the fact that sound policy can elevate above political partisanship. A majority of this credit goes to ASCPA President & CEO Cindie Hubiak, the diligent work of the entire Society staff, and the the participation of the ASCPA’s board of directors and Tax Legislation Committee and a cooperative working relationship with the accountancy board.
DeMenna & Associates looks forward to another successful year with the ASCPA during the 2009 legislative session.
DeMenna & Associates is the lobbying firm for the Arizona Society of CPAs.
AZCPA – September 2008
