Business & Our Legislature: Is this Relationship Working?

New laws, friendly regulations indicate lawmakers are listening
by Don Harris

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Receptive Republican majorities and an aggressive, persuasive private sector are making sure that business needs are being heard loud and clear at the state capitol — perhaps louder and clearer than at any other time in recent years.

Evidence of a successful relationship, lobbyists and business-related organizations say, is legislation that fosters economic development, including a hefty corporate income tax reduction, passage of a $3.5-billion funding mechanism for public schools, and the easing of regulations. They say the Legislature has been very receptive to the concerns and ideas raised by the business community, and deserves credit for ensuring that businesses have the ability to plan and invest with some measure of predictability.

Capitol observers believe the relationship is much improved compared to five years ago. It’s strong and beneficial to the Arizona economy, its businesses and its residents. Going through a tough recession together tends to do that.

Business: Engaged and Vocal

Business community messages are getting to legislators through a variety of ways, such as group meetings, one-on-ones, speaking at the legislative hearings, op-eds and viewpoint articles, as well as other written communications, including emails and letters to the editor.

But even with a free-flowing line of communication, the message doesn’t always get through on the first try. For example, Senate Bill 1062, which would have allowed business owners to refuse service based on religion, was passed by the Legislature in 2014. Then, in reaction to overwhelming pressure from the private sector, Governor Jan Brewer vetoed the measure.

The business community really made its voice loud and clear that SB 1062 was not in the best interest of Arizona’s business community,” Mike Huckins, vice president of public affairs for the Greater Phoenix Chamber of Commerce, recalls.

Arizona House Speaker David Gowan agrees that legislators are listening to what business is saying. “When you look at our record of success last session, I’d say the business community is doing a great job of communicating its needs to lawmakers,” Gowan says. “Businesses should interact with their legislators so we can help get out of their way by introducing legislation that will help them thrive.”

Gowan points to business-friendly legislation such as the crowdfunding bill that allows people to finance a project or venture by raising money from several sources, helping entrepreneurs to start their own businesses; the measure that removed regulatory roadblocks, enabling ride-sharing firms like Uber and Lyft to operate in Arizona; and the Small Business Bill of Rights that makes it easier for a business to file a complaint against a state agency that the business felt was unfair in conducting an audit, inspection or other regulatory enforcement. All three were signed into law during the past two years.

“The House of Representatives is the people’s house — and we are open to hearing from all of our constituents,” Gowan says. “We receive hundreds of emails and calls from people asking to be heard, and we try to engage with as many of them as we can. All of our committee hearings are open to the public as well — so the opportunity to testify in front of committees that may have an effect on the citizens of this state is available. I encourage all business owners to speak with their state lawmakers about what regulations are hampering them, so that we can look at fixing those issues.”

Kirk Adams, a former speaker of the house and current chief of staff for Governor Doug Ducey, puts his own spin on the question of how business is getting its message to the governor’s office. “The governor is taking his message to the business community,” Adams relates. “He does this by reaching out and listening to state business leaders, CEOs, influencers and decision makers. By listening to these leaders, the governor is able to focus his efforts on the best policies to help grow Arizona businesses and attract new ones.”

In fact, Adams says, businesses have been very effective in getting their message to the governor’s office. “States compete, and governors compete for new jobs and capital investment,” Adams says. “Arizona is competing at a high level, as evidenced by the many big wins over the past year. But we can always do better and must continually improve our competitive position. Whether it’s taxes, regulations, workforce development or access to markets, Arizona must constantly be monitoring the competition and make the right moves to keep Arizona in the game.”

Clearly, reaching out and paying attention to business needs is working on the Ninth Floor.

Jim Rounds, president of Rounds Consulting Group, credits renewed energy by business interests for recent successes at the Legislature. “I see more members of the business community banging their fist on the podium at legislative hearings,” Rounds says. “They’re more engaged. Four or five years ago, that wasn’t the case. They’re getting fired up about issues. I’m not saying they’re always right. They might push policy that isn’t so good, but at least they’re down there and they’re engaged.”

Legislature: Listening

Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, says lawmakers are listening to business needs and demonstrating their interest in many ways. He cites regulations, taxes and education as core issues.

“Red tape can be expensive for businesses of all sizes, but it’s particularly disruptive to small businesses, costing companies with fewer than 19 employees over $10,000 per employee, according to a Small Business Administration study,” Hamer says. “Governor Ducey deserves credit for instituting a regulatory moratorium as one of his first acts upon taking office. The Legislature has been equally conscientious. Legislative leadership has recognized the harm high taxes can inflict on entrepreneurs who file as personal income taxpayers.”

Hamer praises the Legislature and Governor Ducey for holding firm on the corporate income tax reduction that will phase down the rate to 4.9 percent from 6.5 percent by 2017, resisting calls from some corners to pause or cancel the cuts altogether. They have made it clear that the plan to increase the state’s competiveness will stay in place, Hamer says.

What’s more, Hamer believes the Legislature deserves a lot of credit for convening a special session in November, sending to voters the question of whether to increase distributions from the state land trust to K-12 schools to the tune of $3.5 billion over 10 years. Proposition 123 will appear on the ballot in a special election in May.

Huckins of the Greater Phoenix Chamber of Commerce expresses strong support for Prop. 123 and says his organization is focusing on some workforce issues. Sending an early message to lawmakers in both parties, Huckins says, “We’re also very supportive of getting joint technical education district (JTED) and career and technical education (CTE) funding restored. In addition, we’d also like to see increased funding allocated to Arizona’s public universities and community college system, as they play equally important roles in developing a strong workforce in the state.”

Mentioning last year’s successes, Huckins notes that, of the 44 bills the chamber supported, 30 became law. “That’s how we gauge how effectively we’re ensuring that our elected officials at the local, state and federal level hear the voice of businesses on important issues.”

Rounds, likewise, suggests that lawmakers should pay greater attention to appeals for additional education funding because of the link to business interests. Rhetorically asking, “Where do we stand with workforce quality and the ability to grow from within?” he says, “I couldn’t answer that question. We need to invest a little extra money or redirect from one area to another. That’s a little more complicated, but it can be done. We need to be doing a better job of researching public policy decisions and not base decisions on political dogma.”

Small businesses and associations that represent them, including the National Federation of Independent Business, are finding a friendly reception at the Legislature. Farrell Quinlan, NFIB/Arizona state director, says lawmakers are providing “entrepreneurs the freedom to flourish or fail based on the merits of their ideas and work ethic, not on their membership to a preferred industry sector favored by state government planners.”

“One example of this trend,” Quinlan observes, “is the recently enacted law that made Arizona the first state in the nation to fundamentally change how its government interacts with small businesses. It is now Arizona’s default regulatory policy to offer an opportunity to correct an inadvertent violation of a regulation that doesn’t present a clear danger to health and safety. This commonsense change in enforcement posture means our state government is more concerned with a small business effectively complying with rules rather than punishing them for every minor or technical infraction.”

Minding the Message and Messaging

As a long-time lobbyist, Quinlan says, “It’s been my experience that Arizona’s small-business owners are truly appreciated by our elected officials from both political parties, who, in their own ways, make an honest effort to listen to our concerns and help our small-business job creators grow and thrive.”

Despite its successes, however, Quinlan says business is getting its message to the Legislature “schizophrenically and intermittently.” Observing, “Sadly, some elected officials have been duped into embracing every cronyist scheme that puts government in the position of directing economic activity toward this season’s fashionable industry sector,” Quinlan says, “The message small businesses consistently want our lawmakers to hear is: Unless we are breaking the law, leave us alone and stop trying to pick winners and losers.”

Wendy Briggs, director at Veridus LLC and a lobbyist, knows her way around Capitol corridors. Her advice to individual business owners is straightforward. “Get to know your legislators,” she says. “They work for you and can carry forward your concerns at the state capitol. Besides, there is nothing so sacred at the state capitol as a small business. You have cachet; use it.”

But Briggs notes that businesses of different sizes have different issues and messages. “The business community isn’t monolithic,” she notes. “Big corporations often have different priorities than a mom-and-pop shop on the corner. This can hamper the messaging, but I think businesses have, generally, been effective at communicating the need for big-ticket items like reducing government red tape, keeping taxes competitive and growing a strong workforce.”

She believes the Legislature and governor are focused on reducing regulatory burdens and keeping the tax structure as competitive as possible. “Basically, it’s the belief that a smaller, less intrusive government will leave space for businessmen and women to succeed,” Briggs says.

Partisanship as a Factor

Then there is the issue of whether the deep partisan splits hinder and perhaps derail some business efforts at the Legislature.

Neil Giuliano, new president and CEO of Greater Phoenix Leadership, says partisanship at the legislature is part of the political system. “That doesn’t mean business leaders will accept the status quo because of disagreements between Republicans and Democrats,” he says. “Many times, stringent partisan positions can be overcome when business leaders engage in the political process. Part of our role is to articulate the real-life negative outcomes if we don’t come together for the common good.”

Says Huckins, “Hyper-partisanship hinders everyone’s effort in some form or another at the legislature. Some of the best policies are developed when you have coalition-building efforts where people reach across the party line to enact good public policy. But when legislators vote strictly along party lines, that partisanship can certainly hinder the debate at times and prevent good public policy from being implemented.”

To get around partisanship, Rounds says the state needs to work with cities, counties and local governments on controversial issues. The more people at the table, the better, he says. “One-third of the legislators really understand economic issues, one-third base their opinion on the party’s handbook when they first ran, and one-third has no clue whatsoever,” Rounds says. “I’d like to see first group grow in size.”

Looking ahead — and behind — Quinlan suggests that business interests must continue to lobby vigorously because government is almost always the last to change, instead “tenaciously holding onto outmoded ways, oftentimes for decades after the rest of our society has moved on.”

He cites examples: “Our exhausted and rickety unemployment insurance system is essentially unchanged from its New Deal-era inception. Another is the near-religious devotion to the 19th-century solution of choo-choo trains for our 21st-century transportation challenges. In the age of Uber and Lyft, our public sector relentlessly and remorselessly pursues every multi-billion-dollar scheme to lay rail from where we don’t live to where we don’t work.”

Even so, Quinlan urges the business community to “maintain an open dialogue with every political leader regardless of party so long as the politician favors our free market system and deals with our concerns in good faith.”

On the flip side, while welcoming bipartisan support, Quinlan says business “must also combat and defeat those politicians, regardless of party, who refuse to support a free-market system.”

But the view that government often moves too slowly might be in for a change. It is considered a positive sign that the Legislature has followed Governor Ducey’s lead in “building an administration that moves at the speed of business,” Huckins says.

Gowan, who oversees activity at the House and is in a powerful position to push legislation, has his own view of government. “Sometimes we hear government officials and politicians talking about how they work to create jobs. I never liked that because government does not create jobs. As Republicans, we believe the best way to help our small-business owners grow is to get out of their way. In recent years, that’s what we have been doing. In fact, in the Arizona Small Business Friendliness Survey, our state moved from a C+ grade in 2013 to a B in 2014. So, while we are moving in the right direction, there is still more work to do.”

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