The Senate on Tuesday suspended rules in order to allow short-notice consideration of the proposal.

Leader said it’s a revised version of a plan endorsed recently by a House committee and is a joint proposal by House and Senate leaders hoping to intensify negotiations with Gov. Jan Brewer.

Senate President Bob Burns, R-Peoria, previously had said he wouldn’t have the Appropriations Committee consider a budget proposal unless he had enough votes in the full chamber to assure passage.

He indicated that’s not the case now.

“I changed my mind based on the fact that time is slipping away from us. I think we have to make some changes in our plans of actions,” Burns said.

Senate Appropriations Chairman Russell Pearce said the privatization proposal calls for transferring operations of several prisons to a private company in exchange for an upfront payment of $100 million to $200 million.

The Mesa Republican said the state would continue oversight of the prisons and save money on operations. State employees working at the prisons could transfer to other state prisons or find work with the new operators, Pearce said.

Pearce said other elements of the plan include cuts in funding for K-12 schools and having the state grab some vehicle license tax revenues now going to local governments. The local governments then would be authorized to use some of their impact-fee money to backfill for the lost money from the vehicle license tax, Pearce said.

Arizona’s tax collections have been hammered by the recession and the collapse of the housing industry, and the state faces a projected $3 billion shortfall in the fiscal year that begins July 1. Depending on what spending cuts are made, the budget could total approximately $10 billion.

Sen. Jay Tibshraeny, R-Chandler, said the impact-fee proposal is fraught with legal and practical problems. Cities and towns are now preparing their budgets and need to know what money they will have, said Tibshraeny, a former mayor of Chandler.

President-elect Barack Obama with Arizona Gov. Janet Napolitano at a "Stand for Change" rally at Veterans Memorial Coliseum Jan. 30 in Phoenix.

President-elect Barack Obama on Monday announced he has chosen Arizona Gov. Janet Napolitano to be secretary of the Department of Homeland Security. Napolitano’s midterm departure will put Secretary of State Jan Brewer in the governor’s office but not immediately.

The turnover means the governor’s office will change partisan hands — Napolitano is a Democrat, Brewer is a Republican — and comes as the state is grappling with a budget crisis that is expected to force significant cuts in spending.

The turnover of the Arizona governor’s office to Brewer won’t occur before late January at the earliest because Napolitano said Monday she doesn’t plan to resign as governor until the U.S. Senate confirms her appointment.

“It is difficult to leave one job for another but one must go where one can best serve,” Napolitano said during a news conference in Chicago with Obama and other newly announced members of his national security team.

Napolitano later said in a statement released by her office that she was “humbled and honored” to serve the nation and felt a duty to so when called by Obama.

A Senate confirmation vote can’t happen until Obama is inaugurated Jan. 20, though past presidential transitions have seen Senate committees hold pre-inauguration confirmation hearings.

In the meantime, the Legislature may have already held a special session for lawmakers to act on the projected $1.2 billion shortfall in the state’s current $9.9 billion budget this month and the Legislature will have started its 2009 regular session on Jan. 12.

Napolitano said she will deliver the annual State of the State address that day and later present lawmakers with a proposed state budget for the 2009-2010 fiscal year.

“I intend to carry forward with my most important responsibilities as the leader of this state,” she said.

Sen. Bob Burns, a Peoria Republican who is the state Senate’s incoming president, said he welcomes Napolitano’s departure because of years of friction between her and GOP lawmakers. However, he said Napolitano’s plan to remain in office pending confirmation causes troubling uncertainty because it delays Brewer’s transition.

“The timing is the big problem,” Burns said. “How do we prepare to function with a governor that’s going to be the governor for the vast majority of the session when she’s not really the governor yet?”

Napolitano, 51, would be departing after six years as Arizona governor and midway through her second four-year term. She previously served as Arizona attorney general and U.S. attorney for Arizona.

Napolitano said Brewer “will need your support, and I pledge her mine. Specific members of my staff will be designated to oversee the Arizona transition, to ensure that power and responsibility are transferred seamlessly.”

Brewer, 64, is a veteran public officeholder, with more than two decades as a legislator, a Maricopa County supervisor and secretary of state. Arizona does not have a lieutenant general.

Brewer had a reputation as a fiscal hard-liner and conservative on social issues while a legislator in the 1980s and 1990s, so her taking over the governorship would mean a new approach from Napolitano’s direction.

A spokesman for Brewer’s office didn’t immediately return a call for comment Monday morning.

As governor, Napolitano has pushed for more spending for education and social services. That drew support from advocates who welcome attention to areas they contended had been given short shrift in favor of tax cuts. However, Republican legislators charge that Napolitano rammed through spending that the state cannot afford.

Meanwhile, Napolitano was a liberal on some social issues, including abortion rights, and pushed for strong state action on environmental initiatives.

Citing the lack of any word from Napolitano, Brewer before Monday declined public comment on the prospect of becoming governor since it was reported in mid-November that Napolitano was Obama’s primary choice for the homeland security post.

Napolitano’s preprimary endorsement of Barack Obama in February was prized by his campaign as a nod from a female governor, and as a Democrat elected in a Republican-leaning state she was included in early speculation about possible running mates.

In an e-mail sent to Arizona Democrats, Napolitano cited achievements in education, health care and economic development.

She thanked fellow Democrats for their “continued friendship and support” and said together they had built a strong state party “that’s stronger, smarter and better positioned for victory in 2010 than ever before.”

———

Statement from Gov. Napolitano

This morning I was proud to accept an offer from President-elect Barack Obama to become Secretary of the United States Department of Homeland Security.

I believe that when called upon to serve – particularly at such a critical time in the history of our country – it is our duty to step forward and say, “yes.”

This was by no means, an easy decision. Over the past six years, we have accomplished a great deal together. We moved our state in a new direction strengthening our schools with voluntary full-day kindergarten, higher teacher pay and higher standards for our students. We expanded access to children’s health insurance and saved Arizonans millions of dollars with one of the largest free prescription drug discount programs in the country. And we’re rebuilding Arizona’s economy with a focus on high-wage, high-tech jobs of the future.

On the political front, we surpassed one million registered Democrats for the first time in history. We reached another milestone by electing four more Democrats to Congress, sending a majority to Washington this January. And we’ve built a Democratic Party that’s stronger, smarter and better positioned for victory in 2010 than ever before.

Arizona is facing a challenging time, and I intend to carry forward with my most important responsibilities as the leader of this state. In the weeks ahead, I will deliver my State of the State address, and shortly thereafter, I will present to the Arizona Legislature a balanced budget proposal for Fiscal Year 2010. Upon confirmation as Secretary by the U.S. Senate, I will tender my resignation as Governor of Arizona.

My pride in this state, my love for it and my dedication to it will never change. I will continue to work for Arizona and Arizonans, but from a different place and with a different charge. Thank you for your continued friendship and support.

Yours very truly,

Janet Napolitano, Governor

PHOENIX – Gov. Janet Napolitano isn’t taking an explicit position on an Arizona ballot measure to partly rewrite the state’s employer sanctions law but she says that law has already been improved since its enactment in 2007.

Proposition 202, which was put on the Nov. 4 ballot through an initiative campaign by business interests, would make business friendly changes to the sanctions law, which prohibits businesses from knowingly hiring illegal immigrants.

Napolitano has taken public positions on about half of this year’s statewide ballot measures but Proposition 202 isn’t going to be one of them.

Illegal immigration remains a major concern in Arizona, the nation’s busiest crossing point for illegal immigrants in recent years, but the issue has not been a front-burner political issue this election campaign.

“I’m going to let the voters make up their own minds,” Napolitano said when questioned Tuesday about Proposition 202 during her weekly availability with reporters.

While declining to take a position on the measure, Napolitano did say that changes approved by the Legislature last spring – and signed into law by her – improved the law.

“Whether that needs to be enshrined by initiative, that I’m not taking a position on. I do think the Legislature improved the employer sanctions law and made it a better law this spring,” Napolitano said.

If approved by voters, Proposition 202′s changes to the sanctions law would be protected by the Arizona Constitution’s shield for voter-approved laws.

Any subsequent changes made by lawmakers would have to track the measure’s intended purpose.

While the sanctions law is widely credited with helping reduce illegal immigration into Arizona, Napolitano said it remains to be seen whether the sanctions law has actually had a deterrent effect on illegal border crossers.

“I don’t think we know yet,” she said, citing stepped-up border enforcement and the economic downturn.

Proposition 202 would not affect the current law’s penalties of suspending or revoking the licenses of businesses that knowingly or intentionally hire illegal immigrants.

The proposed changes include tightening a rule on reporting violations, raising the standard for proving cases and strengthening a legal protection for those who follow the law.

Proposition 202 supporters say it would change the sanctions law to target dishonest employers and protect honest ones.

Critics say Proposition 202 would make it difficult to take violators to court.

Pearce defeated immigration attorney Kevin Gibbons, 5,717 votes, or 68.8 percent, to 2,587 votes, or 31.2 percent, with all 51 precincts reporting in results Tuesday from the Republican primary for the Senate seat from Legislative District 18 in Mesa, a Phoenix suburb.

Term limits barred Pearce, a four-term representative, from running for re-election to the House.

In other closely watched legislative races:

• Senate Majority Leader Thayer Verschoor defeated term-limited Rep. Eddie Farnsworth in the Republican primary for the Senate seat from District 22 in Gilbert, another Phoenix suburb.

Verschoor is regarded as a strong contender for Senate president if Republicans retain control of the chamber.

• Moderate Republican Sen. Tom O’Halleran of Sedona trailed conservative challenger Steve Pierce, a Prescott businessman, in early results in the GOP primary in District 1 in Yavapai and Coconino counties.

• Rep. Trish Groe of Lake Havasu City trailed in a three-way Republican primary for two seats in District 3 in northwestern Arizona as she tried to put a 2007 misdemeanor DUI conviction behind her.

One of several bills to implement the Senate leaders’ budget plan would set $165 fines for state photo enforcement citations. Those fines would not be subject to normal surcharges except for a 10 percent add-on required under a voter-approved law on public campaign financing.

Also, the state would not consider photo speed enforcement citations in determining whether a driver’s license should be revoked or suspended.

The budget plan specifies that $26.5 million from citations would be used to cover costs of the DPS, courts and a contractor. It also says any money left over would go into the state general fund, but there’s no figure in the budget for how much that would be.

Senate President Tim Bee, R-Tucson, said that’s because it’s not known in advance how much money would be raised. “It’s unpredictable,” he said.

Napolitano included $90 million in revenue from photo enforcement in her January budget proposal but lawmakers and others derided the figure as unrealistically high based on the number of cameras and citations expected to be involved.

Napolitano first publicly advocated statewide use of the technology roughly a year earlier as a means of improving public safety, well before the state fell into fiscal hard times.

Citing reduced speed and accident rates on a Scottsdale stretch of the Loop 101 freeway monitored by cameras, Napolitano in early 2007 ordered the Department of Public Safety to start planning a statewide program.

However, legislative critics have criticized the initiative as being designed to raise money for the state.

Republican Sen. Ron Gould of Lake Havasu City unsuccessfully proposed naming the system as “Janet Cams — Smile and Pay Up.”

The DPS is evaluating bids submitted under a request for proposals using 100 or more cameras, both in mobile units and at fixed locations.

The next key step in that process could come as early as midday Thursday with formal House votes on a rival plan by House GOP leaders.

Both plans would erase a big revenue shortfall that has some lawmakers worried about a possible partial state government shutdown after the current fiscal year ends next Monday.

The Senate approved the $9.9 billion plan negotiated by the chamber’s top leaders, with the 16-10 vote on the package’s main spending bill (HB2209) being the minimum needed for passage. That was after the leaders spent hours fending off hostile amendments offered by critics who protested time limits on debate.

“I think this disenfranchises me and the people I represent,” said Sen. Ron Gould, a Lake Havasu City Republican who offered more than a dozen unsuccessful amendments to change the plan.

Senate Democrats and four GOP senators supported the plan, while other Republicans opposed it.

Senate President Tim Bee, R-Tucson, said the plan was a compromise whose mix of budget tools was dictated by circumstances, including the fast-approaching end of the current fiscal year.

“We had very, very diverse opinions about how to resolve the budget this year,” Bee said. “This is the best package we were able to pass.”

“There’s no other budget that could get 16 (votes),” said another supporter, Sen. Paula Aboud, D-Tucson.

With the contentious floor session’s start delayed by paperwork until shortly before midnight Wednesday, senators didn’t finish work until 5:30 a.m.

The Senate earlier suspended advance-notice requirements to enable leaders’ bipartisan proposal to be considered later in the day. Hours later, lobbyists and other advocates crowded the Senate lobby as they waited for printed copies of bills.

“This is absurd to run a $10 billion business this way,” said Tim Schmaltz, a lobbyist for a coalition of groups trying to protect social services from cuts.

The Senate leaders’ plan now goes to the House for possible consideration after what was expected to be a close vote on the House Republican leaders’ proposal.

While both plans would erase a revenue shortfall of about $2 billion, or about a fifth of the budget for the fiscal year that starts Tuesday, there were key differences in their respective approaches.

The plan pushed by House Republican leaders would rely on more spending cuts and less borrowing than the Senate version, also backed by House Democrats.

Tacked onto the Senate plan: a Napolitano-backed $1 billion borrowing package for university building projects that would be financed by Arizona Lottery proceeds. Supporters call the package needed to enhance and maintain the universities while detractors said the added debt would put the state in a fiscal hole.

“For fiscal and social conservatives, there is much at stake,” said Sen. Jack Harper, a Surprise Republican who opposed the package.

Most of the cuts in the House Republican leaders’ plan come in lump sum reductions that agencies would decide how to implement. Specific cuts include $25 million for biotech research.

The Senate’s senior budget writer on Wednesday raked the Senate leaders’ plan, saying it sets up the state for devastating spending cuts or burdensome tax increases a year from now.

“We’d be better served if we were to stop up to the plate now and to make much more significant reductions now,” said Senate Appropriations Chairman Bob Burns. He unsuccessfully tried to have the plan titled “the Bankrupt Arizona Act.”

Burns, R-Peoria, at one point halted his committee’s hearing on the Senate leaders’ plan, demanding that supporters explain how the state would cope a year from now with a shortfall of $1 billion or more.

When the hearing resumed, the Legislature’s budget director said the state sales tax would have to increase by a penny on the dollar or the income tax by at least a percentage point to cover a $1 billion shortfall.

Sen. Jorge Garcia, D-Tucson, noted that nobody has proposed a tax increase to cover the coming year’s shortfall and said Napolitano will present lawmakers in January 2009 with a balanced budget proposal.

“We have to work through it,” Garcia said, referring to the state’s fiscal troubles that have been blamed chiefly on tax collections falling below expectations due to the poor economy and on increased state spending.

———

ON THE WEB

Arizona Legislature: www.azleg.gov

Napolitano said she signed the bill into law because a lack of adequate federal funding makes Real ID “just another unfunded federal mandate.”

“My support of the Real ID Act is, and has always been contingent upon adequate federal funding,” Napolitano said in a rare signing letter.

However, the Arizona measure overwhelmingly approved by the Republican-led Legislature has no immediate impact because Arizona has already received a federal extension on Real ID compliance to 2009.

A National Conference of State Legislatures databank on Real ID legislation indicated that at least 12 other states have approved legislation to bar implementation of Real ID.

States listed as rejecting Real ID, some with conditions, include Alaska, Colorado, Hawaii, Idaho, Maine, Michigan, Montana, New Hampshire, Oklahoma, South Carolina, Tennessee and Washington.

Like Napolitano, other states’ leaders have voiced concerned about a lack of funding to implement Real ID. And some critics, including the American Civil Liberties Union, have voiced privacy concerns.

The Bush administration says Real ID’s requirement for more secure identification will hinder terrorists and illegal immigrants.

Under Real ID, states would have to bring their driver’s licenses under a national standard and link their license record-keeping systems.

Implementation of Real ID would require the public to show need Real ID-compliant driver’s licenses or other identification in order to enter federal buildings or board airplanes.

Napolitano said she still wants the Arizona Legislature to authorize a proposed “3-in-1″ enhanced driver’s license program. Authorization legislation was introduced but not heard during the current session, which is now in its final weeks.

Under an agreement negotiated by Napolitano and the U.S. Department of Homeland Security for the 3-in-1 license, Arizona would develop an optional, alternative license with enhanced security features that could also be used to cross borders and verify employment eligibility.

Now, without adequate federal funding that would make Real ID “practicable,” the 3-in-1 proposal “must proceed on its own,” Napolitano said.

The prohibition bill’s sponsor, Republican Rep. Judy Burgess of Skull Valley, hailed Napolitano’s signing of the bill but said she would “absolutely not” support authorization of the governor’s proposed 3-in-1 license.

The 3-in-1 license also raises concerns about loss of privacy, identity theft and unfunded mandates, Burgess said.

Burgess acknowledged the state still faces a federal mandate. “We will have to deal with it as it comes up, but for right now, I think we did the right thing.”

———

ON THE WEB

Arizona Legislature: azleg.gov

Gov. Janet Napolitano: governor.state.az.us/

U.S. Department of Homeland Security: dhs.gov/index.shtm

National Conference of State Legislatures: ncsl.org/

The appointment of Allen as the midterm replacement was made by the board’s unanimous vote late Friday afternoon during a special meeting in Holbrook after the supervisors interviewed her and two other people recommended by a special citizens panel.

Meanwhile, at least a two-way competition was shaping up for the September primary election ballot spot also vacated by the death of Flake, who was running unopposed for re-election.

Allen and State Rep. Bill Konopnicki both indicated an interest in being picked by Republican precinct committee members from Legislative District 5 to be the new Senate candidate, said Brett Mecum, state Republican Party political director.

The precinct committee members meet Saturday in Globe.

Allen, a longtime Republican Party activist who ran unsuccessfully for the Legislature in 2004, has held leadership posts with the social-conservative Arizona Eagle Forum. She is a former regional organizer for People for the West, an advocacy group on natural resources, property rights and other issues.

Her swearing-in Monday will return the Senate to its full 30 members.

The 72-year-old Flake died Sunday, about two weeks after he fell from a horse and broke multiple ribs.

The other two people recommended to serve out the remaining seven months of Flake’s term were Show Low City Councilman Gerry Whipple and utility company manager Charlie Hendrickson.

State law required the midterm replacement to — like Flake — live in Legislative District 5 and Navajo County and be a Republican.

Konopnicki was not eligible to seek the midterm appointment to the Senate seat because state law required that the appointee be from the same county as Flake. Konopnicki is from Graham County.

Both Allen and Konopnicki had filed nominating petitions to run for the district’s two House seats, so the selection of either to replace Flake as the Senate candidate would require the precinct committee members to also pick a substitute House candidate, Mecum said.

Legislative District 5 sprawls across much of east-central Arizona, taking in all or parts of seven counties. The chief population centers include Globe, Safford, Payson, Show Low and Winslow.

Republicans and Democrats are nearly evenly matched in voter registration in the district, and it is regarded as competitive between the two parties.

Konopnicki, 63, is a three-term House member and chairman of the House Financial Institutions and Insurance Committee.

No Democrat filed to run in the Senate primary, and state party spokeswoman Emily DeRose said Friday that party officials hadn’t decided whether to field a write-in candidate because of the newly open seat.

The district’s other representative is Jack Brown, a St. Johns Democrat who said after Flake’s death that he expected to still run for re-election to the House.

Highlights of the 50-page bill include mandates on energy conservation by school districts, idling of diesel engines and use of energy-saving features in construction of new public buildings.

It also would establish voluntary statewide goals for construction of energy efficient residential and commercial buildings and make policy declarations for increased use of renewable energy and reducing greenhouse gases in auto emissions.

Passed by the House back on March 27, the bill (HB2766) has been struggling to reach the full Senate after it emerged from a committee last month.

And it seems likely to face stiff opposition in debate that could come next week, with an opponent vowing to propose numerous amendments. At least one would likely make the bill a target for a veto by Democratic Gov. Janet Napolitano, whose administration backs the measure.

The bill is needed to promote energy conservation and efficiency so that Arizona utilities can serve growing demand for power, said the bill’s chief sponsor, Republican Rep. Lucy Mason of Prescott.

“Our energy suppliers, our electricity suppliers, are in a real bind (on) where they’re going to be able to either create or buy electricity,” Mason said.

The bill represents “a very public statement by statute that we are going to move the state forward to address the energy supply issues that we have,” Mason said. “It’s all about the grid. That’s the bottom line.”

A critic, Republican Sen. Pamela Gorman of Anthem, said fellow lawmakers should study the bill carefully because it includes burdensome and ill-advised mandates that could have dire effects on the state’s economy.

“You can’t look yourself in the mirror unless you’ve done this,” she said. “It deserves a level of conversation that we haven’t had.”

Mason said she has made numerous changes in the bill to resolve concerns voiced by local governments, the housing industry and others.

“This doesn’t exist. There are no ‘against’,” Mason said, pointing to a list of groups that previously registered opposition to the bill. “I’m very confident about what we’ve created here as being a good economic development mover and energy saver.”

Energy efficiency by public schools is especially important because they are among the “biggest wasters” of energy and their costs are borne by taxpayers, Mason said.

Gorman said she plans to propose numerous amendments when the Senate debates the bill.

One, she said, would be to include a vetoed bill that would have prohibited Napolitano’s administration from moving forward with recently approved rules to limit greenhouse gases in auto emissions.

The vetoed bill was sponsored by Sen. Jake Flake, a Snowflake Republican who died Sunday.

“As part of his legacy, I think it’s important to do that,” she said.

Including the vetoed bill in the energy bill surely would cause it to be vetoed too, Mason said. “And maybe that’s what these people want to have happen.”

Trusts are legal mechanisms that families and others use to hold money and property or convey it to designated beneficiaries such as younger relatives and charities.

The House completed legislative action on the current bill (HB2806) Wednesday, approving it 60-0. A previous House vote also was unanimous, and a Senate vote was 28-0.

The bill provides new flexibility to creators of trusts and new protections for the trusts themselves.

But the biggest value may be the new legislation fleshes out current state law that is skimpy, creating a clear path for judges to follow when there are disputes involving trustees and beneficiaries, attorneys said.

“With this new law it will be easier to resolve those issues,” said James W. Ryan, a trust and estate lawyer who worked on the legislation.

The 2003 law was first suspended and then repealed in 2004 because of complaints, mostly about provisions that made it apply retroactively and required existing trusts to make new disclosures to beneficiaries and the state.

The legislator who sponsored both the repealed 2003 law and the new bill said he’s made sure that the replacement version doesn’t require changes to trusts already in effect when the bill takes effect on Jan. 1, 2009, assuming Napolitano signs it into law.

“They’re all basically grandfathered,” said Rep. Tom Boone, R-Peoria.

In fact, the new legislation has many provisions that trustees might want to use for existing trustees, Ryan said. “But they don’t have to.”

Boone, now the House majority leader, was a freshman legislator in 2003 when he sponsored the bill — drawn from model legislation being adopted by states across the country — that sailed through the Legislature without controversy that spring.

Only during the following summer did a deluge of complaints start pouring in as word got out to retirement communities in his district that people with trusts had to change them and make new notifications.

“I had individuals coming up to me saying how could I possibly have done this to their trusts,” Boone recalled.

Attorney Les Raatz was one of those people sounding the alarm.

“A lot of these trusts are set up by parents for children and they don’t want the children’s work ethics tainted or polluted by knowing they’ve got these trust funds set up for them,” said Raatz, a Phoenix tax specialist.

The new bill was supported by representatives of the Arizona Bankers Association and the State Bar of Arizona, a professional organization representing attorneys.