ARIZONA HOUSE OF REPRESENTATIVES
Forty-ninth Legislature – First Regular Session
Minutes of Meeting
House Hearing Room 1 -- 2:00 p.m.
Chairman Kavanagh called the meeting to order at 2:12 p.m. and attendance was noted by the secretary.
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Ms. Cajero Bedford |
Mr. Jones |
Ms. Sinema |
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Mr. Campbell CL |
Mrs. McLain |
Mr. Williams |
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Mr. Court |
Mr. Murphy |
Mr. Biggs, Vice-Chairman |
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Mr. Crandall |
Mr. Schapira |
Mr. Kavanagh, Chairman |
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Mr. Heinz |
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None |
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HB2143 – DP (7-1-0-5) |
HB2604 – DPA (10-2-0-1) |
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HB2495 – DP (11-0-0-2) |
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CONSIDERATION OF BILLS
HB2143 – loan originators; mortgage recovery fund. – DO PASS
Vice-Chairman Biggs moved that HB2143 do pass.
Daniel Plumhoff, Majority
Assistant Research Analyst, explained that HB2143 establishes the Mortgage
Recovery Fund for liabilities resulting from loan originator wrongdoing
(Attachment 1).
Mrs. McLain, sponsor, stated that a licensing bill for loan originators was passed last year. This bill sets up the framework for the Arizona Department of Financial Institutions to collect fees and develop licensing procedures. It also establishes a recovery fund for any wrongdoing by licensees.
Kenneth Scruggs, Arizona Department of Financial Institutions, spoke in favor of HB2143. He said the bill conforms to federal law passed in July which mandates that states have one year to comply with or risk losing regulatory authority over licensees. It is supported by the mortgage broker and mortgage banking industries in Arizona because it will improve competency of the industries and keep regulation local instead of in Washington, D.C.
Vice-Chairman Biggs announced the names of those who signed up in support of HB2143 but did not speak:
Bryan Ginter, representing self
Shirley Gunther, Government Relations Officer, City of Avondale
Elizabeth Hatch, Mortgage Brokers Association
Farrell Quinlan, Arizona Mortgage Lenders Association
Tom Heath, Arizona Mortgage Lenders Association
Paul Parisi, Vice President, Governmental Affairs, Tucson Metropolitan Chamber of Commerce
Question was called on the motion that HB2143 do pass. The motion carried by a roll call vote of 7-1-0-5 (Attachment 2).
HB2495 – in-state tuition; veterans – DO PASS
Vice-Chairman Biggs moved that HB2495 do pass.
Jennifer Anderson, Majority Research Analyst, Education Committee, explained that HB2495 provides in-state student status for tuition purposes at any public university or community college in Arizona for a veteran who was honorably discharged while serving at a military installation in Arizona (Attachment 3).
Vice-Chairman Biggs announced the names of those who signed up in support of HB2495 but did not speak:
Bryan Ginter, representing self
Vice-Chairman Biggs announced the names of those who signed up in opposition to HB2495 but did not speak:
Tania Mendes, representing self
Abby Harbor Wischnia, representing self
Beth Wischnia, Arizona Students’ Association
Nancy Potts, representing self
Representative Patricia Fleming, sponsor, stated that this bill gives new veterans in the state an opportunity to continue to participate in local communities by making it easier for them to attend the universities and community colleges.
Question was called on the motion that HB2495 do pass. The motion carried by a roll call vote of 11-0-0-2 (Attachment 4).
HB2604 – schools; ADM audits; repayment – DO PASS AMENDED
Vice-Chairman Biggs moved that HB2604 do pass.
Calvin Bovee, Majority Intern, explained that HB2604 is an emergency measure that directs a school district or charter school to repay any amount owed to the state as the result of an Average Daily Membership (ADM) audit over a five-year period and retroactively allows Blue Ridge Unified and Snowflake Unified school districts to repay the amounts owed as a result of an ADM audit over a five-year period from the date of the audit findings (Attachment 5).
Vice-Chairman Biggs moved that the Crandall 21-line amendment to HB2604 dated 3/3/09 (Attachment 6) be adopted.
Mr. Bovee explained that the amendment (Attachment 6) allows a school district to petition the State Board of Education (SBE) to extend the original two-year repayment period up to an additional three years, fills in the student count describing the Blue Ridge and Snowflake school districts and stipulates that if the amount due by a school district is reduced by a settlement agreement, the district has two years for the repayment and an option to petition for an additional three years.
Mrs. McLain asked if any future school district that overspends will have five years for repayment. Mr. Bovee responded that school districts will begin with an additional two-year repayment period and could petition for an additional three years. If any other ADM audits occur, the provisions will apply to those school districts as well.
Question was called on the motion that the Crandall 21-line amendment to HB2604 dated 3/3/09 (Attachment 6) be adopted. The motion carried.
Vice-Chairman Biggs moved that HB2604 as amended do pass.
Mr. Crandall, sponsor, related that sometimes new superintendents take over and are charged with “cleaning up a mess.” For example, the new superintendent at Blue Ridge has to repay almost $800,000 in two years, and with recent budget cuts, layoffs would be necessary. This legislation allows school districts to request three more years from the SBE in a public meeting instead of going through the legislature.
Art Heikkila, Chief Auditor, Arizona Department of Education (ADE), spoke in support of HB2604. He related that Section 2 of the bill lists session laws 2006, 2007 and 2008, but the audits in the Snowflake and Blue Ridge school districts were for 2004, 2005 and 2006. He suggested a technical correction in order to retroactively make an adjustment for those years.
Mr. Crandall commented that he will draft a Floor amendment.
Justin Olson, Senior Research Analyst, Arizona Tax Research Association, spoke in opposition to HB2604. He stated that there have been an increasing number of bills in the last few years whereby school districts ask the legislature for additional years to repay overexpenditures. There are situations such as Mr. Crandall described where miscalculation was made for whatever reason, resulting in the school district receiving too much state aid. A new administration should not be punished so he understands the need for the extended repayment period; however, he is concerned about a blanket extension on the repayment period for all school districts in the future. This decreases the incentive school districts currently have to maintain records accurately, properly audit school accounts and not obtain too much state aid inappropriately and spend it inappropriately without authorization. If a school district overbudgets so dramatically that the amount cannot be repaid in one or two years budget years the legislature should be involved.
Vice-Chairman Biggs stated that there has been a bill like this every year for the last seven years and no school district was ever denied an opportunity to repay the funds. Mr. Olson agreed but surmised that a school district will not request an extension if there is a serious problem the legislature should be concerned about which creates some incentive for school districts to be diligent in keeping the books and not obtain too much state aid.
Vice-Chairman Biggs announced the names of those who signed up in support of HB2604 but did not speak:
Bryan Ginter, representing self
Vice-Chairman Biggs announced the names of those who signed up in opposition to HB2604 but did not speak:
Todd Sanders, Vice President of Public Affairs, Greater Phoenix Chamber of Commerce
Nancy Potts, representing self
Question was called on the motion that HB2604 as amended do pass. The motion carried by a roll call vote of 10-2-0-1 (Attachment 7).
FY 2009 – 2010 AGENCY BUDGET HEARINGS
Chairman Kavanagh announced that the members will be going into joint session at 4:00 p.m. to hear from the Governor and a large rally is going on outside. He does not believe it would be reasonable to reassemble after the joint session; therefore, any agency budget hearings not heard by 3:45 p.m. will be rescheduled.
Secretary of State
Jack Brown, Joint Legislative Budget Committee (JLBC), reviewed pages 2 through 6 of the handout relating to the Secretary of State (Attachment 8).
Ken Bennett, Secretary of State, conveyed that Governor Jan Brewer, the former Secretary of State, left a great staff that is doing the work on a daily basis. He said it is not known if there will be an election this year, but the budget fluctuates depending on whether an election is held. Excluding the election department’s full-time equivalents (FTEs) where a base needs to be maintained, the agency operates with about 30 employees and has 9 vacant positions in an effort to absorb the $150,000 cut that was made earlier this year. He is also looking for ways to make services available online such as processing of notary applications, trademarks, etc., to speed up the processes and eliminate paperwork.
Referring to the numbers on page
6 of the handout (Attachment 8), he related that with the exclusion of the elections
department and constitutional officer salary, the budget is about
$2.5 million, so the $150,000 cut is well over 10 percent. The Chairman’s FY
2010 Options would constitute an 18 to 20 percent reduction. He said he appreciates
the opportunity to work with the members over the next few weeks. It is
important not to damage the state’s ability to run elections with integrity,
timeliness and accuracy. Additionally, the $400,000 or $500,000 cut as
proposed in the Chairman’s FY 2010 Options could not be taken from the business
services department, the largest department, which has a salary budget of only $500,000.
Mr. Crandall asked Mr. Bennett to identify items filed at the agency that may also be filed elsewhere and to determine if the documents must be filed at the agency which Mr. Bennett agreed to look into. He said he is also looking for areas where publications are required by older statutes to be published in the newspaper and the statute can be amended to place the publications on websites for people to download and print out. For example, although the agency has nothing to do with the Landlord Tenant Act other than to make copies available to the public over 15 percent of the phone calls received are from people asking questions about the act.
Vice-Chairman Biggs commended Mr. Bennett and the previous Secretary of State on the agency website especially the changes made to the elections portion. He asked if in-house staff or outside contractors were used to develop the program. Mr. Bennett said he understands there was some part-time effort from outside contractors but most of the work was done in-house with Information Technology staff.
Vice-Chairman Biggs said he would like to know how long it took to set up the web-based system and the cost. Mr. Bennett replied that those people are working on creating the same website applications for notaries, etc., which are currently received on paper in full boxes every day that must be divided among employees to rekey all of the data into the system for processing. He will find out how much the campaign finance portion cost, which was a great step forward.
Vice-Chairman Biggs asked if complaints were received from people about not having access to the information. Mr. Bennett responded that if so, it was not brought to his attention, but he will ask the staff when his returns to the office.
Ms. Cajero Bedford, referring to the lump sum reduction and salaries, asked how he is doing with employee reductions pertaining to elections. Mr. Bennett stated that no reductions were made in positions in the elections department where there are seven or eight full-time positions. The position of assistant to the election director has not been filled due to budget challenges, but there is a good working group in the department that he does not want to lose because those people are especially needed to deal with statewide election responsibilities in even-numbered election years, along with some temporary people.
Office of Tourism
Caitlin Acker, Joint Legislative Budget Committee (JLBC), reviewed pages 7 through 10 of the handout relating to the Office of Tourism (Attachment 8).
Margie Emmermann, Director, Office of Tourism, summarized written testimony regarding the importance of tourism in Arizona (Attachment 9) and provided supporting documents (Attachment 10, 11 and 12). She added that there is a tremendous amount of benefit from promoting the state domestically and internationally.
In response to questions, Ms. Emmermann stated that there are certain benchmarks all state tourism offices use to measure productivity but return on investment is the most important. In relation to spending money derived from tourism she said the office hires a consultant to conduct a comprehensive study which cannot be done for every project because it would be too expensive. When a major advertising campaign is started there is a research component that looks at what will be spent and what will be gained from the project based on input from studies done in the field, etc. Other things used from a performance perspective are how many visitor guides are requested, how many people use the website and the level of engagement on the website.
In relation to the decrease in sales tax revenues along the border, Ms. Emmermann conveyed that in the next few weeks the office will be releasing the results of a year-long intercept study to update a 2001 study about the travel patterns and spending habits of the Mexican consumer. She believes the study will show that these consumers are not only increasing spending in Arizona but are going further into the state. Additionally, there is a lot of activity happening in Mexico through trade shows and consumer advertising to encourage consumers looking for retail shopping, medical treatment, etc., to go to Arizona instead of California or other parts of the United States (U.S.).
In response to an inquiry about violence along the border and State Department warnings to American travelers, Ms. Emmermann said that type of publicity does have an impact. The office tries to help people understand that there are safe ways to travel and work with counterparts in Sonoita on how information should be disseminated. The Western Hemisphere Travel Initiative (WHTI) will have a great impact on Arizonans going into Mexico and returning to the U.S., so a majority of employees’ time is spent trying to make sure there will not be a backlog on the border which could significantly negatively impact cross-border trade. She explained that WHTI applies to people traveling outside the U.S. in the Western Hemisphere by land and sea. It has already been implemented by air, but as of June 1, 2009, anyone traveling to Mexico, for example, will not be able to return to the U.S. without a passport of other form of identification that has been approved by the State Department. There will be a huge backlog if people do not have the proper identification.
Ms. Cajero Bedford asked the
impact on communities of the Chairman’s FY 2010 Options to cut
$4.5 million from the Proportional Local Contributions to Tourism Fund. Ms. Emmermann
responded that it would not be taken from their budget but from someone else’s
budget and she cannot speak on behalf of the communities.
Chairman Kavanagh stated that the Chairmen’s Options are not finalized.
Ms. Acker explained how the number was calculated for the $4.5 million reduction from the Proportional Local Contributions to Tourism Fund.
Arizona Department of Agriculture
Leatta McLaughlin, Joint Legislative Budget Committee (JLBC), reviewed pages 11 through 13 of the handout relating to the Arizona Department of Agriculture (Attachment 8).
Don Butler, Director, Arizona Department of Agriculture (ADAG), said with a cut of 35 percent in staff, the agency is functioning a little slower than usual but it is still functioning fairly well; however, further cuts would drastically affect commerce. Inspectors are needed to write certificates, etc., for product that goes out of state and into other countries. Further cuts would also impact the availability of matching funds from the United States Department of Agriculture (USDA). If an emergency occurred, for example, a product came into the state with a pest or disease, ADAG probably would not be able to handle the situation because it does not have the resources and personnel. He added that agriculture is 10 percent of Arizona’s general product, generating $9.2 billion, but ADAG’s budget has gone from $13 million in 2002 to $10 million, which is difficult. He said the ADAG budget is 37 percent general fund, 48 percent other appropriations and 15 percent federal monies. ADAG has a great relationship with the USDA and federal and state inspectors in Nogales check all products coming from Nogales, which is a substantial amount.
In response to a query, Mr. Butler stated that inspections are necessary. Acreage in Yuma County is decreasing as far as produce is concerned, but more produce is being produced with new technology and equipment. He said because there is less acreage does not mean ADAG should have fewer personnel.
Mr. Jones stated that agriculture is supply and demand driven and one of the largest economic drivers in Yuma County. With all the concern regarding salmonella in fresh produce and other commodities around the country not one incident was traced back to Arizona which he believes is due to the good job that is done by the ADAG. Mr. Butler noted that ADAG administers the Leafy Green Marketing Agreement which was formed because of the e-coli threat in 2006 in the central valley. Many growers in California are doing the same thing. The growers and producers assess themselves, they are audited by outside auditors, the matrix is very stringent and they are very careful. It is a marketing tool and there have been only a few violations, but he said he believes the agreement is a move in the right direction.
Arizona State Lottery Commission
Juan Beltran, Joint Legislative Budget Committee (JLBC), reviewed pages 14 through 17 of the handout relating to the Arizona State Lottery Commission (Attachment 8).
Leatta McLaughlin, Joint Legislative Budget Committee (JLBC), explained that the beneficiaries of lottery funds are chosen by voter-approved initiatives and authorization by the legislature. In FY 2008, about $135 million was received by the lottery beneficiaries.
Mr. Beltran responded to
questions concerning the chart on Page 15 of the handout
(Attachment 8), distribution of lottery monies to the general fund for 2009,
ticket sales and repayment of the Arizona Board of Regent’s $800 million
bonding authority.
Ms. McLaughlin related that the proposed budget reconciliation change requiring that the general fund receive at least $57 million from lottery proceeds can be changed in statute.
Jeff Hatch Miller, Director, Arizona State Lottery Commission, stated that he met with his leadership team and everyone agreed to make a commitment to participate with the legislature to balance the state budget by cutting lottery costs and increasing transfers to beneficiaries and to the general fund while maintaining optimal integrity. He said he would measure productivity by the revenue that is generated from ticket sales for distribution to the general fund and beneficiaries. Fortunately, the amount increased 2.5 percent last year generating $144.5 million in transfers. Sales are up 2.1 percent this fiscal year but the program the legislature put in place last year did not start until the last quarter and sales in December 2008, January 2009 and February 2009 are significantly higher than last year. It does not sound like much until it is compared to other states experiencing a decrease in sales. He added that the office has been successfully taking care of business even in a down economic cycle.
In response to a question, Mr. Hatch Miller attributed the increase in sales to the additional advertising that was allowed in legislation passed last year, as well as a greater number of types of tickets and introduction of ticket vending machines, which take up less floor space in the store.
Mrs. McLain asked if the entire $11 million allocated for 2009 was spent or whether there is still money left through the end of the year. Mr. Hatch Miller responded that it was $20 million and not all was spent. Research and development was done for the performance pay program but it was not implemented and not all of the advertising dollars were spent. He is committed to hiring at a lower salary (he and the public information officer receive significantly lower pay than their predecessors), keeping some positions vacant, limiting outside consultant use, reducing performance pay, tightening travel expenses and restricting conference travel.
Chairman Kavanagh stated that the remaining agency hearings will be rescheduled.
Without objection, the meeting adjourned at 3:41 p.m.
_______________________________
Linda Taylor, Committee Secretary
April 1, 2009
(Original minutes, attachments and audio on file in the Office of the Chief Clerk; video archives available at http://www.azleg.gov)
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COMMITTEE ON APPROPRIATIONS
8
March 4, 2009
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