GLENN HAMER

The legislative process is a mystery to many. Elected officials are pictured working in closed, smoke-filled rooms.

But while state leaders work to close the $3.3 billion budget deficit for fiscal 2010, the evidence is to the contrary.

That is not to say every detail is in the public domain, but outlines of legislative and executive proposals are widely available to the public.

A few weeks ago, Gov. Jan Brewer, Senate President Bob Burns and Speaker of the House Kirk Adams appeared before more than 800 people at an event organized by the Greater Phoenix Economic Council.

The purpose of this public meeting was to discuss the budget crisis. The media attention generated from this event elevated public consciousness of the severity of the deficit.

Additionally, our elected officials are actively touring the state, having participated in more than 28 public forums to discuss the fiscal 2009 budget fix and 2010 budget proposals.

Adams and Burns have traveled to Flagstaff, Yuma, Tucson, Bullhead City, Prescott, Safford and other cities since the legislative session began. Throughout their travels, both have met with business organizations such as the Arizona Chamber of Commerce & Industry.

They recently addressed the Arizona Chamber’s Public Affairs Committee. A few weeks prior, we heard from Eileen Klein, director of the Governor’s Office of Strategic Planning and Budget, on the seriousness of the structural deficit and the governor’s five-point plan.

As leadership continues to inform the public of the progress of budget negotiations, the Arizona Chamber recommends two reforms that will provide the Legislature and the public with accurate and accessible information regarding spending and debt.

House Appropriations Chairman John Kavanagh, R-Scottsdale, is sponsoring two pieces of legislation that would provide this transparency:

• HB 2279 would require the Department of Revenue to submit information addressing state debt and expenditures to the Joint Legislative Budget Committee for analysis and reporting.

To make fiscally prudent decisions, it is essential that the Legislature assess the potential impact of future debt on the state and its political subdivisions’ ability to afford new obligations.

• HB 2280 requires that each year the budget report, the governor’s Web site and the Economic Estimates Commission include a statement indicating whether state revenues will exceed the previous year’s.

Within a new budget are multiple bills and appropriations, which make it difficult for the public to understand its overall impact on total statewide spending.

An easily-accessible notice describing the extent to which the state is increasing spending more than inflation plus population growth adds transparency and improves public understanding of the growth in state government programs.

The Arizona Chamber also released its updated budget recommendations recently – calling for spending to be reined in, for lawmakers to have flexibility to adjust voter-approved initiatives on a prospective basis, for doubling the “rainy day fund” once revenues stabilize, and for implementing tools such as “reverse triggers” to adjust appropriations based on actual revenues.

A temporary tax hike should be considered if all other options have been exhausted, there is no other viable way of closing the deficit and only if coupled with significant long-term tax reductions that are passed this session (with a delayed effective date).

We remain committed to repealing the statewide equalization rate this session. Additionally, we support the privatization of certain government functions and call for an analysis of the revenue impact of expanded gaming as well as proposals to sell state assets.

Glenn Hamer is president & CEO of the Arizona Chamber of Commerce & Industry.

GLENN HAMER

With a budget deficit for fiscal 2010 projected in the $3 billion range – one of the largest in the nation as a general fund percentage – Arizona clearly will need to reduce expenditures.

The Arizona Chamber of Commerce and Industry urges the Legislature and governor to immediately make significant spending cuts in nonessential programs and activities.

Just as lawmakers increased programs in flush budget years, they must now take corresponding action in lean years. Reductions are imperative to realign the state’s commitments to available revenues and to minimize the deficit in subsequent years.

When evaluating what to cut, the Legislature should analyze the impact on the private sector’s ability to help the state grow its way out of the deficit.

Greater specificity and additional guidance are needed. The Chamber is working on an updated document on how best to close the massive hole.

Part of our process is to review the body of work that has been completed by other organizations and fiscal policy experts. Our goal is to integrate the best thinking with our own original ideas in order to offer policymakers the most useful guidance.

An outstanding piece of work to guide us comes from the Arizona Tax Research Association.

Led by President Kevin McCarty, ATRA’s recommendations are a must-read for anyone interested in solving not only our current deficit, but also our state’s structural shortfall.

Education is a longstanding priority for business. Employers choose to locate where they can access a qualified work force, and the quality of the work force is directly linked to the quality of the education system.

We believe expenditure reductions to education must be structured in a way that does not harm student achievement.

Further, we contend that a complete redesign of the state’s school finance system is in order, though this must be a longer-term objective.

ATRA’s recommendations are focused on adjusting outdated funding formulas, eliminating programs that do not improve academic achievementand ensuring resources are better focused on student learning. Some of ATRA’s key recommendations are:

• Update spending formulas. Contrary to what many believe, less than 40 percent of all spending in Arizona is voter protected.

• Don’t exaggerate the state’s obligation to adjust for inflation under Proposition 301, a voter-passed initiative to increase funding for education.

• The state should minimize its exposure to homeowner rebate and 1 percent cap costs by phasing out local school district levies that are outside the public school equalization system. For fiscal 2010, this exposure is expected to be $414 million.

• Move from prior-year growth to current-year funding, which could save $29 million.

• Eliminate early kindergarten for 4-year-olds, to save $26 million.

• Reduce or eliminate redundant funding through dual and concurrent enrollment for community colleges, high schools and Joint Technological Education Districts, which could save $4.4 million

• Eliminate state aid to community colleges for recreational classes, such as Single Again, Humor and Play, and Coping with Stress.

• Eliminate aid for out-of-state university students (28 percent of the full-time student equivalent in the university system is classified as out-of-state).

• Reform the state’s retirement programs, which are among the most generous in the country.

From 2000 to 2008, taxpayer costs for the retirement portion of the Arizona State Retirement System increased 951 percent! To this end, the Arizona Chamber supports a defined contribution option for new state employees.

While closing Arizona’s budget deficit is an enormous challenge, the strong and specific recommendations provided by ATRA will help our policymakers as they look for spending reductions.

In the process, Arizona’s budget will be put on a path to true solvency. Look for a complete set of updated budget recommendations from the Arizona Chamber later this month.

Glenn Hamer is president & CEO of the Arizona Chamber of Commerce & Industry.

GLENN HAMER

As our energy needs increase and the effort to deal with climate change moves forward, it is hard to imagine how ambitious goals could be achieved without an expansion of nuclear energy.

Nuclear would not only help meet our nation’s demand, but also would do so in a way that reduces carbon dioxide emissions and could even reduce our reliance on foreign oil.

It is a terrific resource for baseload generation and is subject to very little price volatility.

Nuclear is the ultimate green, stable energy source, as France and many other nations have figured out.

France, for example, generates 75 percent of its electricity from nuclear power, compared with about 20 percent for the United States.

Make no mistake, even with the economic decline, the need for new energy is enormous.

The U.S. Energy Administration Agency predicts that by 2030, the world will need to increase its energy production by 50 percent.

And the new administration is clearly serious about tackling climate change. The Cap and Trade program proposed by President Obama in his budget is expected to cost $646 billion to $2 trillion over its first eight years. Yet there is very little discussion from the new administration on the role nuclear energy can play.

The focus is on renewable generation. That’s an important component. But the narrow focus on renewables renders any plan incomplete.

Renewable sources, such as solar energy, should and will play an increasingly important role in the generation of electricity in Arizona and the United States, but they cannot deliver the power necessary to fuel our growth today.

Solar, for example, is growing quickly. But it produces less than 1 percent of the electricity generation in Arizona and in the United States.

In contrast, nuclear produces 75 percent of the carbon-free electricity in the United States today and about 25 percent of Arizona’s total electric output.

The United States puts itself in serious jeopardy by being unprepared for its future electricity needs in a carbon-constrained world.

According to the U.S. Department of Energy, electricity demand will rise 21 percent by 2030. To maintain nuclear energy’s current 20 percent of generation, the United States would have to build three reactors every two years starting in 2016.

There is some good news. The 2005 federal Energy Act contained a number of provisions that seem to be revitalizing the U.S. nuclear industry. More than two dozen proposals are in the pipeline to build new reactors.

We need to do more to encourage nuclear, though. Licensing these plants is far too lengthy a process. It can easily take more than a decade to site a plant in the United States – which is more than double the time span in some countries.

Some help is in the creative No Cost Stimulus Act by Rep. John Shadegg, which proposes expediting the regulatory process for plants.

There is no silver bullet for meeting our energy challenges, but nuclear needs to be a serious part of the discussion, especially if we are addressing carbon regulations.

Glenn Hamer is president and chief executive of the Arizona Chamber of Commerce & Industry.

Reducing the number of uninsured Arizonans is a serious policy issue for business.

Because federal law requires hospitals to render care in emergency situations regardless of the patient’s ability to pay, and because government insurance programs pay hospitals less than it costs to provide services, providers pass those costs along to businesses and individuals with private insurance.

Employers, therefore, have a vested interest in the number of uninsured.

Arizona has one of the highest rates of uninsured individuals in the country. The most recent estimates from the U.S. Census Bureau indicate that almost 1.3 million Arizonans, or 20 percent of the state population, lack any form of health insurance.

The average cost for private insurance in Arizona is $4,386 for single coverage and $11,617 for family coverage. The average income is just over $37,000.

Several policy actions must occur in order to bring down the cost. One of these is to reduce the number of benefit mandates on insurance policies.

Currently, Arizona law prescribes about 30 mandates that must be covered on insurance policies.

Each mandate – no matter how well intentioned – drives up the cost of insurance. As the cost increases, insurance becomes more expensive and fewer people are able to afford private insurance.

There is a simple remedy that will help to bring down costs and bring insurance coverage into reach for more Arizonans.

In 2006, the Legislature passed a law that allowed for small business groups to purchase insurance products that do not cover all of the Arizona mandates.

There are plenty of mandates that not every customer desires or needs, such as metabolic foods or maternity coverage for the natural mother of an adopted child.

This “mandate light” proposal has helped make additional, affordable insurance options available to the small group market.

Rep. Tom Boone has introduced HB 2324, which expands the mandate light option to uninsured individual insurance purchasers.

Sen. Barbara Leff has introduced a similar measure, SB 1325, in the Senate.

Less expensive insurance products, tailored to the needs of consumers, will increase affordability and reduce the number of uninsured Arizonans.

As Arizona’s economy weakens, it is even more critical for affordable insurance to be available.

This is the right time to expand the choices available to consumers looking to purchase health insurance.

Consumers would still be able to buy a full policy with all the bells and whistles.

HB 2324 and SB 1325 would enable uninsured consumers, including those who have lost a job or whose employer no longer offers insurance, to purchase a more affordable plan.

This legislation is an important part of the solution to reducing the number of uninsured Arizonans.

Glenn Hamer is president and chief executive officer of the Arizona Chamber of Commerce & Industry.

As California’s economy sinks into the Pacific, its leaders continue to call for more taxes and regulations.

Arizona is headed in a starkly different direction. Our new governor, Jan Brewer, did not make a living as a Hollywood action hero. But as governor, she is all action and may turn out to be a hero if she continues with her efforts to revive Arizona’s struggling economy by controlling spending without raising taxes and reducing the regulatory burden on private industry.

With barely two weeks in office she has called for a review of all regulations in the pipeline, and she took quick action on Arizona’s budget.

She inherited a budget deficit that in percentage terms is the worst in the nation. Last week, Brewer signed a series of budget bills that balance the state’s 2009 budget without smoke and mirrors or tax increases.

This action stands in stark contrast to what is occurring next door. While it is glamorous to lure companies from Germany and other countries to Arizona, our golden opportunity is right next door.

Although California is home to beautiful beaches and temperate weather, people – and companies – are fleeing the state. According to the California Department of Finance, about 150,000 people moved into California in 2000 from other states.

That migratory trend reversed in 2005 when a net 52,000 people moved out. And by last year the outflow topped 135,000 people.

The exodus of people and companies will probably only accelerate.

California’s unemployment rate is now among the highest in the nation. Its $40 billion deficit has left it unable to pay bills.

CNN reported last month that: “Among those who will be left waiting for checks are thousands of businesses that provide services and products to the state; more than 1 million aged and disabled Californians who need to pay for rent, utilities or food; and individuals and businesses awaiting tax refunds to the tune of $1.91 billion.”

U.S. Representative Devin Nunes, R-Calif., recently wrote a thoughtful op-ed in the Wall Street Journal: “California’s gold tush has been reversed,” and concluded that, “After more than 150 years of being a destination, California is becoming a place entrepreneurs, investment capital and the hardy workers who made it a global leader in agriculture, technological innovation and scientific research are fleeing.

“This exodus is the marker of something deeper than a national recession. It’s a sign that the attempts by state leaders to spend their way back to prosperity are killing California.”

Arizona has entered a new age of responsibility. Though the decisions are difficult, the new guard in Arizona clearly is serious about fiscal discipline.

Its 2009 budget adjustment called for about $584 million in cuts, $597 million in fund sweeps and an estimated $500 million in federal stimulus funds to close the $1.6 billion hole.

All attempts were made to provide agencies with flexibility in managing the budgetary cuts. The Legislature did its work with no serious discussion on raising taxes.

Next, the Arizona Legislature must tackle a fiscal year 2010 deficit that may exceed $3 billion. As cuts are made, it is important to prioritize.

The research capabilities of the universities are valued by many employers in Arizona. We must do more to retain and recruit the highest-performing teachers to improve our K-12 education system. And a healthcare safety net is critical both to provide for our indigent citizens and to save businesses from the cost-shifting that occurs when care is not properly compensated.

Therefore, when evaluating where to make cuts, we should consider how the federal stimulus bill that Congress is poised to pass will impact our state by way of increased matching funds for Medicaid.

This fiscal crisis calls for wise, thoughtful leadership to prevent any collateral damage that may occur due to reduced spending.

Budget cuts are painful, but we only need to look to our neighbor to the West for a far worse fate if responsible action is not taken. If we make the right moves, Arizona could attract more companies looking to escape California’s heavy tax and regulatory environment.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce & Industry (www.azchamber.com).

Gov. Jan Brewer’s actions to reduce unnecessary regulatory burdens are an outstanding way to improve Arizona’s competitiveness.

Gov. Jan Brewer wasted no time putting into place one of the major themes in her inaugural address: giving businesses the freedom to create jobs as a way to improve the economy and state budget.

On her second day in office, Brewer issued a management directive freezing all new agency regulations and rulemakings until the end of April, subject to health and safety exemptions.

This will give her office an opportunity to review the scores of costly regulations in the queue.

Arizona went from being second in the nation for job growth in 2006 to being 46th in 2008, the Bureau of Labor Statistics reports.

The state is losing jobs at an alarming pace. The cost of complying with layers of regulations compounds this problem.

On just the federal level, regulations cost the average small business more than $7,000 per employee. When you add state and local regulations, this number grows much higher.

The money that businesses spend complying with regulations is money they are not spending on salaries or investing in ways that could help them grow.

As businesses struggle in this tough economy, the governor’s directive promises to bring some order and sensibility to the rulemaking process.

She has expressed her intention to carefully evaluate rules moving through the process, and some that were recently passed, in order to mitigate any potential economic harm.

An example of a well intentioned but potentially harmful rule is that proposed by the Department of Liquor to mandate employee education. This comes as the hospitality industry is struggling with a very weak economy.

The directive provides time for further review of current training within the industry before enacting new rules.

Brewer is also re-evaluating the so-called “clean car” rule that the Department of Environmental Quality moved forward last year.

This rule ties Arizona’s emission standards to California’s. There is scant scientific evidence of environmental benefit, and it will add thousands of dollars to the cost of each new vehicle.

Auto sales have plummeted over the past year as consumers struggle to access the credit necessary to purchase a car or truck. Thanks to the governor’s good judgment, Arizona consumers and car dealers may get a reprieve from these new costs.

The mission of the Arizona Chamber of Commerce and Industry is to advance Arizona’s competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans.

The governor’s actions to reduce unnecessary regulatory burdens are an outstanding way to improve Arizona’s competitiveness.

With California drowning itself in the Pacific Ocean as a result of high taxes and regulations, Arizona may be able to attract businesses looking for a less-hostile environment.

Glenn Hamer is president and chief executive officer of the Arizona Chamber of Commerce & Industry.

Please send examples of burdensome regulations to Allison Bell at abell@azchamber.com.

Hamer

School’s out, but a new crop of excited kindergartners will enter Arizona classrooms next month.

Many of these youngsters will aspire to be doctors, engineers or lawyers. To make these dreams reality, they must receive a high-quality education from qualified teachers.

That’s why Arizona must use innovative strategies to recruit the best and brightest to the teaching field.

Arizona students deserve to reach their highest potential, and Arizona businesses depend on their success.

Arizona currently faces a tremendous teacher shortage. The recent increase of math and science standards has intensified the need for good teachers with subject matter expertise.

Arizona must explore innovative ways to erase this growing shortage and make teaching more attractive and accessible to highly knowledgeable individuals.

The Arizona Chamber of Commerce and Industry has supported and will continue to support alternative methods of teacher certification and ongoing retention efforts in our state.

Proposals such as the Adjunct Teacher Initiative, the American Board for Certification of Teacher Excellence and performance-based pay will allow more high-quality teachers to enter and remain in the classroom.

One innovative method is Superintendent of Public Instruction Tom Horne’s Adjunct Teacher Initiative.

When implemented, it will allow professionals in math, science and engineering to dedicate one hour per day to teach in a classroom.

This will help students see a real connection between skills learned in the classroom and how they can translate into a career.

Most important, the quality of math and science education will dramatically increase. And it comes at no cost to the school district or state.

This type of partnership is exactly what Arizona needs – strengthening schools by using community resources to enhance classroom instruction.

The Adjunct Teacher Initiative will not solve our teacher shortage single- handedly.

Arizona also needs to make alternative certification paths available.

The American Board for Certification of Teacher Excellence is a national organization that provides a self-paced, computer-based certification at no cost to the district or school.

State Rep. John McComish, R-Phoenix, introduced the concept this legislative session. The program allows an individual to engage in a 10-month process toward certification.

The program design differs per state and adapts to the certification requirements of each.

Arizona currently does not allow nationally certified teachers in our public schools. If it did, Arizona school districts could hire from a much larger pool and potentially draw more qualified teachers.

Arizona has dabbled in performance-based teacher pay through the Career Ladders Program and the implementation of Proposition 301 in 2000.

Still, no viable system properly associates teacher salary with student achievement. The creation of a true performance-based pay system would reward topnotch teachers and motivate others to encourage better academic achievement.

According to the Arizona K-12 Center, one third of new teachers leave the teaching profession within their first two years.

A simple way to keep effective, qualified teachers in the classroom is by rewarding them for their success. An effective performance pay system would help retention and improve education standards.

The Arizona State Board of Education decision to increasing the graduation requirements for math and science was a positive step.

Now we must work together to place qualified teachers in the classroom to teach these high-level subjects.

This will require innovation and openness to new techniques. The end goal is that when students enter kindergarten dreaming about becoming doctors or lawyers, we know our teachers are equipped to help them make those dreams reality.

Glenn Hamer is president and chief executive officer of the Arizona Chamber of Commerce and Industry.

Things are upside down in this country when the U.S. aids Hugo Chavez and hurts a Latin American ally such as Colombia.

That’s what will happen if the U.S. spurns a free trade agreement with Colombia. Chavez will gain greater control of Latin America and Colombian President Alvaro Uribe will be hurt in his efforts to create greater economic and political freedom.

The real rub is that the free trade agreement with Colombia comes down to basic fairness.

Most imports from Colombia enter the U.S. market duty-free under the Andean Trade Preference Act, which Congress has renewed repeatedly with bipartisan support plus the backing of the business community and even the AFL-CIO.

By contrast, U.S. exporters face double-digit tariffs when selling goods in Colombia. This is unfair to American workers, businesses and farmers.

The U.S. Chamber calls the Colombian market “enticing,” and says with the trade agreement in place, U.S. exports could rise by more than $1 billion per year.

With that kind of logic, it’s hard to understand what the problem is with approving the trade.

In discussions, the U.S. House said before the agreement took effect, it would need “concrete evidence of sustained results on the ground in Colombia.” One could argue the “sustained results” could not be clearer.

The Colombian murder rate is at its lowest level, kidnappings have decreased by 80 percent, and two-thirds of the country’s opium production has been eliminated. In addition, the country’s narco-guerrilla groups have lost legitimacy and more than 40,000 fighters have been demobilized.

The Colombian trade agreement would have a direct impact on Arizona exports. Currently, Arizona is ranked 19 among the 50 states in terms of total exports in 2007.

In 2007, Arizona’s export shipments of merchandise to Colombia totaled $11.7 million, an increase of 19 percent from 2006. Look at the statistics below to see the trend of positive impacts of free trade on Arizona.

• Since the U.S.-Chile Free Trade Agreement took effect in 2004, Arizona’s annual exports to Chile increased 59 percent.

• Since the North American Free Trade Agreement entered into force in 1994, Arizona’s combined exports to Canada and Mexico have increased by 206 percent.

• Since the U.S.-Singapore Free Trade Agreement took effect in 2004, the state’s exports to Singapore have jumped 123 percent.

The evidence is clear that the Colombian Free Trade Agreement will positively benefit the U.S. and Arizona specifically. It’s time for Congress to approve this beneficial agreement.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry (www.azchamber.com).

Arizonans are fortunate to have a leader like Sen. Jon Kyl, who is willing to take a courageous and politically difficult position on an issue of such great national importance.

With Republicans thrown out of control of Congress, the chances for an immigration reform package that would reflect conservatives’ border security concerns seemed impossible.

Fortunately, Kyl emerged as the point person to ensure a federal immigration bill would include certain conservative elements.

It is imperative that Kyl remain at the negotiating table with other leaders to craft a final, comprehensive immigration bill.

He is a natural choice to lead on this issue, having worked toward immigration reform for two decades.

No one in Congress has worked harder to increase border security or ensure reimbursements to states and private entities bearing the cost of illegal immigrants.

In a recent meeting with the Arizona Chamber of Commerce and Industry, Kyl explained provisions of the current bill.

Although no compromise provides the optimal solution, he said the STRIVE Act would put our nation on the right track.

The Arizona Chamber believes the Senate compromise has the proper framework to restructure our flawed immigration system.

The proposal identifies core reforms, including: enhanced border security, a temporary worker program, accurate and nondiscriminatory verification of work eligibility, and increased availability of work visas.

Additionally, it provides a way to settle the legal status of undocumented immigrants.

The act requires tough fines, background checks and well over a decade of wait time before citizenship is even possible.

Opponents from all sides are quick to criticize, but they only offer alternatives that have no real chance of moving forward.

One such proposal would be lax on border security and push all of those now in the country illegally toward citizenship without penalty.

On the opposite extreme are those who would deport the 12 million living here illegally.

Even if this were possible, an estimated 5 percent of the U.S. work force would be lost.

The effects on the economy would be catastrophic, and families would be inhumanely separated.

The third option is to do nothing, which, given the current disaster of our immigration system, should be thought of as “amnesty plus.”

The Senate compromise represents a solid starting point. It provides a realistic approach to increasing our security and improving our economy.

Now we need to encourage congressional leaders to embrace the structural components of the agreement and continue working to improve the specific provisions.

This is the year to implement comprehensive reform. To ignore it for another two years exacerbates the problem and puts us further from our goal.

Arizonans are fortunate to have a leader like Sen. Jon Kyl, who is willing to take a courageous and politically difficult position on an issue of such great national importance.

It benefits the people of Arizona and the United States to have Sen. Kyl at the table.

Glenn Hamer is president and chief executive officer of the Arizona Chamber of Commerce and Industry.

In politics, it’s a feat to reach across the aisle and garner bi-partisan support for an issue.

This year, state House leadership was able to do just that by securing support for their budget from both parties. In fact, nearly half the Democrats on the House Appropriations Committee voted to support the proposal.

The Arizona Chamber of Commerce and Industry commends members of the House for crafting a strong budget proposal.

The House plan strikes the right balance between spending in the appropriate areas and offering tax relief that will make our state economy more robust.

The tax package contained in the House budget continues the culture of tax relief that the Legislature and governor have embarked on during the past several years.

The House budget plan contains a number of elements that have been legislative priorities of the Chamber since the beginning of session.

It makes investments that will improve Arizona’s infrastructure, spur high-wage job creation and enhance educational choice. Such investments include acceleration of road construction, additional funds for charter schools and continued support for the work of Science Foundation of Arizona.

Additionally, the House budget places priority on several key tax relief measures, a sure-fire way to spur economic growth. Importantly, it accelerates property tax relief for businesses, which are currently assessed at more than twice the rate of residential property owners.

The House budget also provides a 2.5 percent decrease in the corporate income tax rate and establishes a valuable tax credit for insurers.

In total, the House proposal calls for $60 million in tax relief. As a state with one of the higher corporate tax structures in the country, these cuts are critical for boosting our economy.

One particularly essential component in the House budget is the enhancement of the research and development tax credit.

This increase has been on the table the last two years. It is currently included in the House budget but not the Senate version.

This credit is vital to Arizona’s ability to compete for high-tech companies and their high-wage jobs. With competition from a global market, Arizona is in real trouble if we can’t even make our tax climate as attractive to high tech companies as California, which offers a more generous R&D credit.

In an overall budget of $10.6 billion, it simply makes no sense to exclude R&D when the cost would be modest and the return would be great.

Arizona is the fastest-growing state in the country. The legislative decisions made during this time will determine whether we have the robust economy to match.

As negotiations continue, it is important the good work done by House legislators on tax relief be included in the upcoming year’s budget.

The tax package proposed in the House budget comprises less than 1 percent of the entire budget. Considering the positive effects of tax cuts on our economy, such a small measure of relief seems like a reasonable request.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry (www.azchamber.com). This Guest Opinion appears online only and not in the Tucson Citizen’s print edition.

Arizona lawmakers are circling around this year’s budget agreement. Leadership has indicated there will be a tax cut package.

After facing the reality of the April 17 tax filing deadline, most Arizonans would gladly welcome relief for next year.

Continued tax relief is a core priority of the Arizona Chamber of Commerce and Industry. As the leading voice for business, we recognize the importance of promoting a culture of tax reform.

With neighbors such as Nevada, with no state income tax; and California, with competitive research and development tax credits, Arizona must adjust its state tax structure to be equally attractive.

Promoting tax relief is a sure-fire way to expand our state economy and strengthen our global competitiveness.

As the Arizona Legislature debates what part tax cuts will play in this year’s budget, we encourage lawmakers to revisit the business community’s top tax cutting priorities:

Accelerate the business property tax reduction

In 2004, Arizona’s business property tax rate ranked sixth-highest in the nation. The following year the Arizona Legislature voted to reduce the business property tax assessment ratio from 25 percent to 20 percent over a 10-year period.

This legislative session, Republican Sen. Jim Waring of Phoenix introduced SB 1028 which implements the 5 percent reduction over six years instead of 10. Starting in 2008, the assessment ratio for commercial property would drop by one full percent per year rather than one-half percent as prescribed in the 2005 legislation.

This acceleration would enable the state to achieve a 20 percent assessment ratio by 2011 rather than 2015.

Other states and nations competing for business relocations, startups and expansions are taking increasingly aggressive approaches to attracting businesses.

Because Arizona’s business property taxes remain high, our state’s ability to successfully bid for business is not as robust as it should be. Reducing the property tax burden will improve our ability to compete for industry.

Permanently eliminate the state assistance property tax rate

In 2006, the Arizona Legislature passed the Omnibus Tax Relief Act, which suspended the county education equalization assistance rate tax for three years.

Because the state assistance property tax rate is calculated based on assessed property value, it is riddled with the same inequity as other property taxes in Arizona. Significant disparity remains between the assessment ratios of individual and commercial property – 10 percent vs. 24.5 percent currently.

The Arizona Chamber supports the permanent elimination of the state assistance property tax rate. According to the Joint Legislative Budget Committee, the total estimated savings to taxpayers from the suspension of the tax will be just more than $200 million annually.

Increase tax credits for research and development

To attract high-wage jobs, state Rep. Michele Reagan, R-Scottsdale, introduced a bill that would enhance Arizona’s existing tax credit for research and development activities.

Her proposal would increase the credit from 20 percent to 22 percent for the first $2.5 million in qualifying expenses and from 11 percent to 13 percent of the amount exceeding $2.5 million.

Beginning in 2009, the credit would be calculated at 24 percent for the first $2.5 million in qualifying expenses, plus 15 percent for any additional qualifying investment.

There is no cap to the credit and it would be permanent. Both are essential features that give businesses confidence to invest in Arizona.

This modification would closely match an increase recently enacted by the state of California and put Arizona in a far more competitive position among the states.

In order for Arizona to maintain its competitive edge, the Arizona Chamber of Commerce and Industry urges the Legislature to include the increased rates for R&D tax credits in this year’s budget.

The modest fiscal impact of $5 million in 2008 and $10 million in 2009 will be offset many times over by the new investment it will generate.

Reduce corporate and personal income tax rates

Businesses and individuals looking to relocate their home or business are likely to consider a state’s income tax rate when making the decision to move.

Currently, Arizona’s corporate tax structure consists of a flat rate of 6.97 percent on all corporate income. Arizona’s personal income tax system consists of five brackets and a top rate of 4.79 percent kicking in at an income level of $150,000.

Arizona is no longer competing on a purely regional level. Countries across the globe are adjusting their own tax structures to attract highly-skilled workers and advanced industries.

If Arizona is to continue to grow and become a global player, it is vital that we lessen the burden of taxes on individuals and businesses.

This year state and local taxes will consume a record-high 11 percent of the nation’s income. Additionally, there are 21 other states with lower corporate income tax rates than Arizona.

The Arizona Chamber of Commerce supports efforts by members of the Legislature to cultivate a culture of tax reform that will make our state a more attractive place to live and do business.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry. This Guest Opinion appears online only and not in the Tucson Citizen’s print edition.