Government Affairs Arizona Update | January 2018

GOVERNMENT AFFAIRS UPDATE
 

Welcome to the first edition of the Fennemore Craig Arizona Government Relations newsletter. Monday, January 8, 2018, marks the first day of the 2018 Arizona Legislative Session following months of political activity from state and local officials. Campaigns have begun to ramp up their efforts in preparation for a contentious 2018 midterm election, and state agencies continue to implement legislation which became effective on July 1.

Fennemore Craig offers a variety of services to help our clients navigate the legislative arena, including proposing or defending against legislation, monitoring legislation affecting an industry, tracking regulatory changes, sending reports concerning potential candidates for office, and making recommendations on potential campaign contributions. Feel free to reach out to our Government Relations team if you wish to receive more information about these services.

WATER ISSUES IN THE INTERIM
 

Following several stakeholder meetings, Governor Doug Ducey (R) is pushing for significant changes to Arizona’s water laws in the upcoming legislative session. Several of the proposed changes are directed at the Central Arizona Water Conservation District (“CAWCD”). First, following an argument raised by CAWCD before the 9th Circuit that it is entitled to sovereign immunity under the 11th Amendment to the U.S. Constitution, the Governor is pushing for legislative changes stipulating that CAWCD is not entitled to sovereign immunity. The Governor’s proposals would also require CAWCD to get approval from the Arizona Department of Water Resources when engaging in interstate negotiations, and would subject CAWCD to regular performance audits by the Auditor General’s Office.

The Governor has also proposed programs pertaining to water conservation in Lake Mead, including a program allowing Indian tribes to store their Central Arizona Project Water in Lake Mead. Other changes apply to active management areas, irrigation protection areas, and rural areas of the State.

EDUCATION
 

In the 2017 legislative session, a bill was passed to expand the school voucher program with the purpose of expanding school choice. After the bill was signed into law, a campaign to collect signatures began in an effort to refer the law to the 2018 general election as a ballot initiative. Over 111,000 signatures were submitted to the Secretary of State’s office, and many were challenged on the basis of incorrect information on the circulation sheet. Although some were invalidated, the Secretary of State’s office ultimately concluded that there were enough signatures to send the expansion to the ballot. A lawsuit is currently underway challenging several of the signatures and the practices used to obtain them. Oral arguments were held earlier this month and the judge’s ruling is expected soon. This will determine whether the school voucher program is placed on a ballot for a vote in the general election in November.  

HEALTHCARE AND TAX REFORM IN THE INTERIM
 

Federal Legislation
In September, Senator John McCain (R) voted against the proposed Graham-Cassidy Health Care Act on the basis that it was fast-tracked and was not fully vetted by the normal Congressional hearing process. The bill had the potential to significantly impact the state’s healthcare system. Under current law, the state receives federal funding for the Medicaid expansion program that covers approximately 80,000 people in Arizona. Under Graham-Cassidy, the state would have begun receiving reduced funding in the form of a federal block grant scheduled to phase out in 2027. The Governor and some state legislators supported the proposal but others urged Congress to craft a bill including sustainable federal grants to prevent the federal government from slowly shifting the cost of unreimbursed health care costs to the state. As a result of Senator McCain’s vote against the bill, Congress tabled the health care bill for the present and instead shifted its focus to corporate tax reform. 

In the waning days of 2017, Congress passed a sweeping Republican-backed overhaul of the tax code, the Tax Cuts and Jobs Act. Passing the tax bill allowed Republicans to return home for the holidays with a political win in a year that otherwise has been marked by few major legislative accomplishments. Troubled by their defeat on healthcare legislation, Senate Republicans inserted language into the tax bill which repealed the individual mandate, one of the critical components of the Affordable Care Act. The elimination of this penalty is expected to bring tax relief to some Arizonans in the short term but may leave some individuals in the state uninsured. As the federal tax reform bill was passed on December 15th, it is likely that Congress will again focus on healthcare in the new year.  

Opioids
The 2018 Legislative Session is likely to yield legislation addressing the pervasive crisis of opioid addiction and overdose in Arizona. Following a report that 790 people died in Arizona as a result of opioid overdose in 2016, Governor Ducey declared a statewide public health emergency to address the opioid epidemic. The Department of Health Services is seeking to enact several new laws to help combat the opioid crisis by reducing the use of opioids, decreasing risk of opioid abuse, improving access to treatment, and promoting safe prescription by physicians.

2018 ELECTIONS
 

Don’t let it’s midterm-status fool you; 2018 is a crucial year for elections here in Arizona. A number of offices are up for grabs, including every constitutional office and several members of the state’s federal delegation. Those who wish to enter the race have just over four months remaining to file for office by the May 30th deadline leading up to the 2018 Primary Election on August 28th.

Frenzy for CD 8
Just as the 2018 election cycle was already heating up in Arizona, Republican Congressman Trent Franks’ resignation from Congressional District 8 (“CD 8”) has flipped the political landscape on its head. A special election will be held to replace him, with a primary scheduled for January 29th. On the Republican side, former state Representative Phil Lovas (R), who also served last year as President Trump’s campaign chairman for Arizona, has announced his intention to run for the seat. He will be joined in the race by several state senators who are eager to run. Senator Debbie Lesko (R) has announced that she will resign her seat after the session begins, and Senator Steve Montenegro (R) has already resigned from his seat to enter the CD 8 fray. Former Arizona Corporation Commissioner Bob Stump (R) has also jumped into the race on the republican side. Although CD 8 is an overwhelmingly conservative district, Hiral Tipirneni (D) and Brianna Westbrook (D) entered the race before Franks’ resignation.

Reverberations in the Legislature
While there were already several open seats in the state senate, the special election for CD 8 has left open even more space for new legislators. There was a legal debate recently  over whether candidates intending to run for CD 8 would be required to resign from their seats to do so. Although Legislative Counsel issued a memo on December 12th indicating that members running for CD 8 are not legally required to resign, several members are resigning nonetheless, including Steve Montenegro (R) and Debbie Lesko (R) as mentioned above

Constitutional Offices Up for Grabs
Governor Doug Ducey (R) faces no Republican challengers in his quest for re-election; however, he is faced by two candidates on the Democratic side. David Garcia (D), who ran for Superintendent of Public Instruction in 2016 and was defeated by Diane Douglas, has entered the race. Ducey also faces a challenge from state Senator Steve Farley (D), who has received several endorsements from Arizona leaders.

In the race for attorney general, incumbent Attorney General Mark Brnovich (R) is not slated to face a primary challenger. He will likely face opposition during the general election from January Contreras (D), former director of the Arizona Department of Health Services.

Though his term was scheduled to continue through the rest of 2018, Treasurer Jeff Dewitt (R) will be departing office early as he was recently appointed by President Trump to serve as Chief Financial Officer at NASA and is awaiting Senate confirmation. Governor Ducey is likely to appoint a placeholder that will only serve out the rest of his term, allowing candidates to duke it out during the 2018 election. DeWit has already endorsed Senate Majority Whip Kimberly Yee (R) for the office. However, Yee is currently considering a run for CD 8. If Yee runs for Treasurer, she will face Arizona Corporation Commissioner Tom Forese (R) as a challenger on the Republican side. 

Secretary of State Michele Reagan (R) will be up for re-election this fall as well. With Steve Montenegro’s announcement that he will be running for CD 8, Reagan faces only two democratic challengers. State Senate Minority Leader Katie Hobbs (D) has announced that she will be running for this office. Reagan also faces a challenge from the left by attorney and political newcomer Mark Gordon (D), who has never run for public office.

Other Important Announcements

• Senator Jeff Flake (R) announced that he will not be seeking reelection in 2018. Congresswoman Martha McSally (R) will be facing off against Kelli Ward (R) in the Republican primary, while Kyrsten Sinema (D) will be running for the seat from the democratic side.
• Senate President Steve Yarborough (R) reached his term limit and has announced that he will not be seeking public office in the 2018 election.
• State Senator Steve Smith (R) will be leaving LD 11 to run for CD 1.
• City of Phoenix Mayor Greg Stanton (D) announced that he is resigning as Mayor to run for CD 9 after Kyrsten Sinema announced that she will be leaving to run for Jeff Flake’s seat in the Senate.