Spending Arizona’s excess cash

Your Guide to State, Local, Federal, Estate + International Taxation

Many states across the country have a good problem to deal with these days. Excess cash. And Arizona’s excess cash is a record $5 billion surplus.

Whether it be from increased tax collections and/or federal funding for pandemic relief. The landmark Wayfair decision in 2018 is also a factor as it cleared the way for states to enforce economic nexus resulting in a material increase in taxpayers that historically would not have been subject to a state’s sales tax rules.

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Each state is of course dealing with excess cash in its own unique way. Whether it be to cut taxes, spend, save, payoff debt or a combination. Here’s what Arizona did with its surplus.

What Arizona did with its record $5 billion excess cash

This past June the Arizona legislature passed a fiscal 2023 budget that was signed by Governor Ducey on June 28.  The budget included a broad array of new spending and savings. Line items include $544 million for border security, $1 billion for highway construction, hundreds of millions for water infrastructure, $1.1 billion to payoff the unfunded pension liability of public safety and corrections officers and $425 million added to the state’s rainy-day fund.

What about taxes?

Arizona made its big move regarding taxes in the previous fiscal year budget of 2021/22 probably making it a lesser priority for the current fiscal year budget.  At about this time last year, Governor Ducey asserted the annual budget as containing the single largest tax cut in state history as budget provisions included a flat tax of 2.5% phased in over three years starting in 2022. Regardless, the current fiscal year budget did include a provision to cut the state’s equalization tax, a property tax for education, and backfill it with $330 million from the general fund.

Of note is that while Arizona has an overall Republican majority in its state government, the current fiscal year budget passed the Legislature with overwhelming bipartisan support. That’s the Arizona way for this year at least and would be great to see that continue going forward.

Questions about Arizona’s excess cash? Contact your Henry+Horne advisor, we’re here to help!

Dale Jensen, CPA

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