Saying it "unbalances the budget,'' Gov. Jan Brewer on Tuesday vetoed a bid to sharply increase the amount of money individuals and corporations could divert from paying the state to instead help students attend private and parochial schools.
Existing law gives individuals a dollar-for-dollar credit on their state income tax, up to $500, for contributions to organizations that provide scholarships to pay the tuition and fees of students at alternatives to public schools, and double that for couples. Last year the credits totaled $43.2 million.
This legislation would have increased the maximum credits to $750 and $1,000, respectively.
Brewer said the move comes just as the state carefully balanced its budget for the coming fiscal year, making "difficult and far-reaching decisions'' she said will promote the state's long term financial health. "Undoing that effort and immediately placing fiscal year 2012 into a deficit is inappropriate.''
But the governor said that was only part of the problem.
Another provision of the bill would have repealed the $15 million total cap on how much all corporations in Arizona can together take in tax credits to help these students. "Aggregate caps on tax credits are critical to the state's ability to budget,'' Brewer said.
The governor also found fault with changes in other provisions which let mining companies avoid paying severance taxes. She said that could have a particularly harsh impact on Graham and Greenlee counties which are heavily dependent on these taxes.
Finally, Brewer balked at creating an entirely new credit for liquor, beer and wine wholesalers.
Overall, the Department of Revenue figured the legislation would have reduced state income tax collections by $25 million, with another $29 million lost to all levels of government from the severance tax provision.
Freshman Rep. J.D. Mesnard, R-Chandler, sponsor of the legislation, suggested he had been blind-sided by the governor. Mesnard said he and other supporters of the plan tried several times to meet with Brewer or her staff.
"They were either just not available or it wasn't a priority for them,'' he said. Mesnard said that, without feedback from Brewer, "we eventually just had to move forward'' with the bill.
Mesnard also rejected Brewer's contention the legislation would have harmed the state's finances.
"I'm not sure where some of her information is coming from,'' he said.
Proponents of the tax credits have consistently argued that they save money for the state.
They say it provides opportunities for students who otherwise would be unable to afford the tuition and fees at private schools. More to the point, they said the amount of money lost in taxes is less than what the state would pay in aid to public schools for the same number of students.
There is no requirement in the law, however, for the money from the individual tax credits to be used to help only students who migrate from public schools. The funds are equally available to parents who would send their children to private and parochial schools with or without the scholarship help.
Ron Johnson, lobbyist for the Arizona Catholic Conference, said he is "somewhat disappointed'' in Brewer's action, given her traditional support for providing alternatives for students. Johnson, who represents the state's Catholic bishops and the diocesan schools they operate, promised to work with the governor next year to see if a more acceptable plan can be crafted.
The governor's veto comes a week after the U.S. Supreme Court rejected a challenge to the tax credits. In a 5-4 decision, the justices sidestepped the issue of whether they amounted to illegal aid to religion, instead concluding challengers from the American Civil Liberties Union lacked legal standing to contest the legality of the system.
Brewer did sign a separate piece of legislation Tuesday to set up a state-run scholarship fund that the parents of special needs students could tap to send their children to private and parochial schools. While that deals with only a limited number of children -- the Goldwater Institute which crafted it estimated about 17,000 could be helped -- backers of that measure say it could become the template for finding ways to use state funds to finance school tuition and fees for students throughout the state.
That legislation is designed to replace a direct voucher plan adopted by lawmakers in 2006 where the state provided checks to parents that had to be endorsed to schools to pay the tuition of these disabled students and children from foster care homes. In 2009, however, the Arizona Supreme Court ruled that runs afoul of a constitutional amendment prohibiting state aid to private and parochial schools.
Sen. Rick Murphy, R-Glendale, said he believes setting up a scholarship fund gets around that problem.