/ Modified may 5, 2017 8:56 a.m.

Legislature OKs $9.8B Budget; Universities Funded

House adjourns at 3:55 a.m. after deal-making abounds in marathon session.

AZ Capitol HERO The Arizona Capitol Building. January 2017 (PHOTO: Christopher Conover, AZPM)

The Arizona Legislature approved a $9.8 billion state budget package early Friday, including a program that will allow the state's public universities to borrow up to $1 billion for new buildings and maintenance.

The Senate approved the 11 bills in the budget package in a series of votes ending at 12:55 a.m. The House completed its votes three hours later.

Republican Gov. Doug Ducey praised the Legislature for the budget, issuing a statement within minutes of House passage, saying "public schools, teachers, universities (are) big winners" in the budget.

“Arizona has passed a budget that prioritizes education, boosts teacher pay, and invests in our universities,” Ducey said in the statement.

The budget deal negotiated between the governor's office and majority Republican leaders was in trouble for most of the week because of the university borrowing plan. Even Thursday morning, enough Senate Republicans had been opposed that Senate President Steve Yarbrough thought he'd need Democrats to win passage.

Democrats withheld support from the proposal because they wanted a full restoration of welfare cuts Ducey approved in 2015 and a 4 percent teacher pay raise — rather than the 2 percent over two years in the Republican budget.

Arizona has among the lowest teacher pay in the nation and a critical teacher shortage, so boosting pay was a Democratic priority. They got neither, and seven Senate Democrats ended up backing the bonding plan.

Yarbrough got all but one of the 17 Senate Republicans to back the bonding — one more than needed for passage.

Asked how he managed to turn a deficit into a win, Yarbrough was typically folksy.

"This is a hat, I'm getting a rabbit out," he said. "We worked our fannies off, OK? I wanted to light my hair on fire multiple times the last two days."

House leaders also worked hard to gain Republican backing, persuading all but two of their caucus to back the bonding measure with no Democratic support. That was enough, by two votes.

Democrats said the state's K-12 schools needed the money more than the universities.

"They actually have to justify $1 billion in bonding for universities when we're being sued for not ensuring that K-12 schools aren't falling apart," House Minority Leader Rebecca Rios said. "Teacher pay is 50th in the nation. In terms of priorities, university bonding falls well below No. 1 and 2, and that's teacher pay and ensuring that the classrooms our kids are in aren't falling apart."

House leaders worked throughout Wednesday to overcome opposition from members to the bonding proposal, even adding an $11 million income tax cut to sweeten the deal. The additional deals on top of that tax cut were added Thursday.

House Speaker J.D. Mesnard said three new provisions were added to the budget deal to help ease the way without minority Democratic support.

They include $1 million each in new money for "freedom school" programs at Arizona State University and the University of Arizona that have received millions in funding from the conservative Charles Koch Foundation. The programs got $5 million in ongoing spending in last year's budget and the new cash would be on top of that.

Republicans also got a ban on universities hiring contract lobbyists. A requirement that cities place tax-raising measures only on even-year general election ballots failed in a late-night Senate vote but could get another chance using a procedural move.

Democrats offered up a slew of amendments during debate, including the bigger teacher raise, welfare restoration and cuts to corporate tax credits that are funneled to private schools. None were approved.

The opposition among some Republicans to the proposal allowing universities to issue 25-year construction bonds fell into several categories. Some believe the universities are overfunded now or have raised tuition too much. Others believe there's not enough legislative oversight in the package, although project review was added.

Sen. Warren Peterson, the only Republican not backing the bonding, said he was worried about a deficit in the future. The state is now committed to spending $27 million a year for the university loan, with yearly upward adjustments, to help make the bond payments.

"I could just not get to the point where I thought it would be a wise decision," Peterson said. "It's a 25-year commitment. The legislators aren't going to be here that are here now. I worry about binding future legislators and just losing flexibility on the budget."

Republican Sen. Judy Burges, who Thursday morning was a hard no, changed her mind.

"I had a discussion with the governor's office, and they made some very valid points about why we need to support the universities," Burges said. "And I thought it would be good to step forward and that's what I did."

The spending plan for the budget year beginning July 1 includes the teacher raises and about $114 million in new K-12 spending overall. Included is $37 million in extra cash for high-performing schools, new money to expand all-day kindergarten or early literacy programs and other programs pushed by Ducey.

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