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New GOP Leaders of Arizona Legislature Lay Out Priorities

The new Republican leaders of the Arizona Legislature hope to use part of a $1.1 billion state budget surplus to boost pay for corrections officers and state troopers.

Incoming House Speaker Rusty Bowers and incoming Senate President Karen Fann said raises for those workers is a top priority when the Legislature opens its 2019 session next month.

The two leaders diverge on some other top spending priorities for the surplus that is considered to be "one-time" funds.

Fann wants to put more money into the state rainy day fund to ensure there is money to pay for just-approved teacher raises if a recession hits.

Bowers is looking to use much of that cash to pay down a $930 million education "rollover." The budget trick pushes funding into the following fiscal year.

Paying down the rollover would immediately inject cash into schools that could be used to pay staff, repair buildings or buy new textbooks.

"That's just what we've owed them, $900 million-ish, for a long time," Bowers said. "I'd like to take care of a lot of that. If we could take care (of) all of it, I would, but I don't think we'll get that far."

The two leaders elected by Republicans in their respective chambers after the November election spoke to The Associated Press in separate interviews.

Their positions allow them to significantly influence what legislation moves through the House and Senate and negotiate budget items with Republican Gov. Doug Ducey.

Minority Democrats gained seats in the state House, which has a 31-29 split, but were unable to erode the Republicans' 17-13 Senate majority. The tighter House split gives Democrats more power, but if no GOP members break ranks, Republicans can pass a budget on their own.

Ducey will release his budget plan early next month.

Fann said the budget surplus, driven by improving revenue from an economy that has recovered from the Great Recession, can be a double-edged sword.

"The good is that we get to make some good decisions - the bad is when you have extra money everybody has great ideas how to spend that money," she said. "And it's important that we make sure that the bulk of it is one-time spending because we can't commit ourselves to something knowing full-well that we will be going through a recession again, just because we always do."

Despite both making raises for prison guards and Department of Public Safety troopers a priority, Fann and Bowers were less optimistic about giving raises to the remainder of the state's 32,000 employees.

The most recent state analysis, done in November 2017, shows state workers lagging private sector compensation by nearly 14 percent.

Bowers said he's focused on corrections and DPS, and "if there's enough for others that's great." Fann said she worries about committing to ongoing spending and wants to review state benefits packages as part of any discussion about raises.

A top priority for both is "conforming" the state income tax code to the federal tax code, which was overhauled to cut rates in late 2017. That will need to be done quickly, so taxpayers can file a simplified state return based on their adjusted federal gross income.

Simply adopting the federal code means Arizona would see a boost of state revenue, and GOP leaders see that as a tax increase, even though affected taxpayers will receive much bigger federal tax breaks.

Legislative budget analysts estimate the potential additional state revenue from conforming to the federal changes at $133 million to $236 million, while Ducey's administration estimates it between $180 million and $200 million.

"What I don't want is the need to have to file two forms." Bowers said. "And I would much prefer to have as much money as possible in the hands of the people."

Fann said the elimination of many deductions and the increase in the standard deduction will help many taxpayers but hurt some who heavily itemize, such as small businesses and Realtors. And no matter what lawmakers do, the complexity of taxes means it will be hard for lawmakers to quickly digest.

Ducey spokesman Patrick Ptak said the governor wants Arizona to conform to the federal changes and put the resulting additional state revenue from the 2018 tax year into the state's rainy day fund.

That will provide taxpayers with certainty about the 2018 tax year while letting the governor and lawmakers then work out what to do about future tax years, Ptak said.

Other top issues include adopting a plan addressing the state's Colorado River water shortage and a push to reform the criminal justice system.

Both lawmakers say they're upset with a new car registration fee adopted last year to free up money for highway repairs and schools. That was estimated to be $18 per vehicle, but when Ducey's administration announced its final fee last month, it was $32. That angered many Republicans who voted for the proposal, including Bowers and Fann, and the first bill filed for the upcoming session is a repeal.

"I will say that we are all very, very disappointed," Fann said. "We need to have a conversation about that, because that's not what was intended."

Ducey told reporters recently that the ongoing fee is part of last year's budget deal and he's not open to revisiting the issue.

"I hope he's not really nailed down on that," Bowers said.

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