Tax credit issue spurs lawmaker conflict debate - East Valley Tribune: News

Tax credit issue spurs lawmaker conflict debate

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Posted: Wednesday, May 27, 2009 5:18 pm | Updated: 1:58 am, Sat Oct 8, 2011.

Two state legislators want to expand what constitutes a conflict of interest under regulations that govern when lawmakers can - and cannot - vote on certain issues.

But they disagree on exactly where that line should be drawn.

The issue arose Wednesday as state senators refused to rescind the tax-exempt status of any organization that collects donations to pay for tuition at private and parochial schools if that organization has a lawmaker on its payroll.

The proposal by Sen. Linda Lopez, D-Tucson, was aimed squarely at the Arizona Christian School Tuition Organization. State Rep. Steve Yarbrough, R-Chandler, is its executive director; Rep. Bob Stump, R-Peoria, has been paid money to help solicit donations.

Republican lawmakers said the amendment was designed to derail a measure to provide tax credits to help pay the costs of students with special needs to attend private or parochial schools. The amendment failed and the legislation was ultimately approved.

But the bigger objection was that Lopez limited her definition of what would be a conflict of interest solely to these scholarship organizations.

More to the point, her proposal would not affect any other tax-exempt organization that has lawmakers on its payroll. That would leave out La Frontera Inc., which through a subsidiary has a state contract to provide mental health services - and where Lopez herself is employed.

Her refusal to expand the definition of a conflict drew derision from Sen. Jonathan Paton, R-Tucson.

He said she is concerned that lawmakers are voting on measures that directly affect the nonprofit organizations where they are employed.

"I can think of a variety of nonprofits that are impacted here every day," Paton said. "I don't see why some nonprofits are special and others aren't." Paton said he can think of situations where lawmakers deal with measures "that could put one of these nonprofits out of business, just like that" depending on the vote.

"How is that not a conflict of interest?"

Lopez insisted there is a difference between an organization that competes for state contracts and a scholarship organization that benefits solely by funneling money that otherwise would go into the state treasury to instead pay the tuition of students at private and parochial schools.

But Paton and Lopez did agree on one thing: Existing conflict of interest laws are inadequate.

State law makes it illegal for any public official or employee to participate in any decision in any matter where they or a relative have a "substantial interest." Both the House and Senate have similar rules.

But the law also says there is no conflict if at least nine other individuals or organizations also would be affected. That has allowed Yarbrough to not only vote for but even sponsor legislation dealing with scholarship organizations, as the one he runs is only one of several dozen.

Paton said he isn't saying Yarbrough did anything legally unethical. But he said there is an "appearance to the public" that lawmakers are casting votes based on possible conflicts.

Paton wants to start by exploring whether lawmakers who work for all nonprofits - not just scholarship organizations - should be excluding themselves from sponsoring bills that could affect them, getting involved in the debate and voting on the measures in committee or on the floor.

Lopez, by contrast, prefers to draw the line at whether legislation has a substantial financial impact on the lawmaker's employer.

That, she said, would cover Yarbrough as the entire income of the scholarship organization is dependent on provisions in state law allowing people to divert their tax dollars to instead provide scholarships. But Lopez said that would not cover her, saying what La Frontera gets from the state - she estimated it at 5 percent of a $50 million budget - would not affect either her job or whether her employer stays in business.

Ultimately, Paton said, there needs to be a broader discussion of conflicts of interest, what with Arizona having a "citizen Legislature" where lawmakers, who are paid $24,000 a year, are presumed to have other employment. He said the solution may be simply to pay lawmakers more and prohibit any outside work.

But Paton said he had no idea how much that salary would need to be to make the job attractive.

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