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Updated Apr 17, 2013 - 7:00 pm

Senate bill would provide tax revenue to tribes

PHOENIX -- A last-minute effort to return sales tax revenue to Native American communities in Arizona has won support from Republican and Democratic lawmakers but still faces an uphill battle in the GOP-led Legislature.

American Indian reservations last year generated $39.5 million in sales tax revenue, money that funds the state and local governments but not tribal operations. The state collects money from 21 tribes.

Senate Bill 1283 would return 25 percent of those dollars to tribes each month. The money would be spent on infrastructure and community development, including road and building construction. The other 75 percent would go to counties that are home to reservations.

If the measure became law, it likely would mean fewer tax dollars for the state's general fund, a controversial proposal that could doom the legislation.

The effort represents a rare collaboration between Republican and Democratic lawmakers. Republican Sen. Chester Crandell is championing the issue along with Democratic Rep. Albert Hale, a former president of the Navajo Nation, which covers portions of northeastern Arizona.

The measure would bring much-needed cash to reservations grappling with high levels of unemployment and poverty, Hale said.

``Economic development on Indian reservations is nonexistent,'' he said. ``We need to help. And the bottom line is that Indian people on reservations or off reservations, they are citizens of the state of Arizona, and by that virtue they are entitled to all the same rights as other citizens of Arizona.''

A late amendment to legislation that Crandell had already passed through the Senate and the House could force debate on the tax disparity in the Legislature.

The version of Crandell's bill passed by both chambers would have created a temporary committee to study the feasibility of carving out a county for tribes that eventually would be able to collect sales tax dollars. The measure passed unanimously in the Senate in February, and was advanced in the House in a 52-6 vote this month.

Hale's amendment was approved in a conference committee last week in a 5-1 vote. It had support from Crandell, Hale, Republican Sen. Kelli Ward, Republican Rep. Bob Thorpe and Democratic Sen. Jack Jackson Jr. Republican Rep. Michelle Ugenti voted nay.

The latest version of the bill now mirrors House Bill 2522, a similar effort by Hale that was assigned to three committees in February but was never granted a hearing.

Hale said the proposed overhaul would be dead on arrival without Crandell's help.

``In prior years it has been that basically we didn't have any champion on our side,'' Hale said. ``People see the inequity, but there was no one on our side to push it.''

Crandell said he supports the tax proposal because it would help counties that provide services to tribes. The state distributes sales tax revenue to local governments based on population, tax activity and taxable property. Since reservations are exempt from property taxes, counties with tribal land don't receive their fair share, Crandell said.

``Counties need some relief because they have the responsibility of taking care of the land mass and the people who live on the reservations who are not paying for that in property taxes,'' he said.

Crandell said Senate President Andy Biggs and House Speaker Andy Tobin agree that the current tax distribution system is inequitable, but it could be difficult to convince the Legislature to reduce the state's general fund by roughly $20 million each year to support tribes.

``That's going to be the deciding factor,'' Crandell said.

It's unclear if local governments will oppose the measure. Lenore Stuart, president of the County Supervisors Association of Arizona, said she would be concerned if the legislation meant less money for county governments.

``Obviously it's an issue we are always struggling with, especially now that revenues are down,'' she said.

Jackson, who has rallied to reform the tax distribution system since 2003, said Republicans have supported similar overhauls in the past. But because of Crandell's cheerleading, the effort has never been closer to passage, he said.

``It will make a significant difference on tribal lands,'' Jackson said. ``Better schools, better hospitals, and so on down the list.''

In all, Arizona collected $7.3 billion in sales tax last year, with nearly half going toward the state general fund, according to the Department of Revenue. Cities received about $392 million, and counties got $636 million.

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