PHOENIX (AP) — Democratic Gov. Janet Napolitano on Wednesday vetoed a bill that would have repealed a suspended state property tax, saying it was imprudent at a time when lawmakers should be focused on the state’s budget troubles.
“It’s untimely. It’s untenable. It’s unwise,” Napolitano told reporters, accusing repeal supporters of failing to take into account the state’s budget troubles and suggesting that repeal could hurt education.
Arizona faces a $1.2 billion deficit in the state’s current $10.6 billion budget and an even larger projected shortfall in the still-developing budget for the fiscal year that begins July 1.
“Permanently repealing a tax that supports such basic needs as schools and education during a time of severe budgetary deficits would be the height of fiscal irresponsibility,” she wrote in her veto letter.
The so-called “equalization” property tax was suspended in 2006 for three years, but business lobbies and homeowners advocates want it repealed outright to keep it from coming back in 2009.
Supporters of the repeal bill in the Republican-led Legislature argued that letting the tax return would amount to a tax increase that would burden property owners and hamper the state’s economic development.
Senate Finance Committee Chairman Jim Waring, a Phoenix Republican who sponsored a Senate version of the bill, said the veto exploded Napolitano’s campaign claim to be a tax-cutter.
“It’s just unfortunate with this governor property tax cuts are not a priority,” Waring said. “When push really came to shove, she really didn’t want to cut your taxes. I think her cover is blown on this issue.”
While Waring predicted that lawmakers will take up the issue again in 2009, a group advocating tax cuts said legislators should immediately put the repeal on the November ballot.
“The Legislature should not waste one second in referring this measure to the ballot to see if the voters will override her veto,” said Steve Voeller, president of the Arizona Free Enterprise club.
Legislative budget analysts have calculated that the return of the tax would produce $250 million in additional state revenue, with half of the money from taxes paid on homes and about half on business and other property.
The cost for the owner of a $250,000 home if the tax takes effect again would be about $100. The increase would show up on fall 2009 tax bills.
Speaking with reporters, Napolitano said the tax’s revenue is “used for education.” However, she later acknowledged that money from the property tax goes into the state’s general fund without directly affecting state formulas that determine state K-12 school funding.
Nonetheless, repealing the tax could jeopardize school funding, she said. “We have a deficit and if you take that temporary suspension out of play and you don’t replace it with something else, there’s really only one place for it to come from.”
A lobbyist for one business coalition which supported the repeal said the veto could make it harder to defeat California-style property tax initiatives proposed for the November ballot.
“We were hoping this tax rollback could be made permanent as a way of keeping this property tax revolt from developing,” said Farrell Quinlan of the West Valley Chambers of Commerce Alliance.
The Legislature completed action on April 8 and the House sent the bill (HB2220) to Napolitano on Monday, with repeal supporters using that time to urge Napolitano to sign it.