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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
law enforcement; defunding; prohibition
Purpose
Prohibits a city or town (municipality) from reducing the annual operating budget for a law enforcement agency by any amount below the previous year's budget. Outlines requirements for the State Treasurer to withhold state shared monies from a municipality upon notification of an operating budget reduction.
Background
The annual operating budget for a municipal law enforcement agency is allocated from a municipality's general fund. A municipality's general fund revenues are a combination of local revenues raised by the municipality, federal revenues and state revenues shared with the municipality.
The transaction privilege tax (TPT) is a gross receipts tax levied by the state on certain persons for the privilege of conducting business in the state. TPT revenues are shared with the state's counties and cities through a system of statutorily prescribed formulas. Monies in the distribution base are allocated on a monthly basis as follows: 1) 25 percent is paid to cities in proportion to the cities' population based on the last U.S. decennial census, special census or the most recent annual population estimates by the U.S. Census Bureau; 2) 40.51 percent is paid to the counties; and 3) the remaining 34.49 percent is retained by the state and is used to make various allocations and appropriations specified by statute.
The Urban Revenue Sharing Fund (URS) provides that a percentage of income tax revenues be shared with incorporated cities and towns in the State of Arizona. The individual income tax represents 28.9 percent of total state General Fund (state GF) revenue collections in FY 2024. The distribution is based on the most recent population estimates of each city and town made annually by the U.S. Census Bureau. In FY 2025, the URS distributes 18 percent of the individual income tax collections (JLBC; League of Cities and Towns).
The Joint Legislative Budget Committee Fiscal Note on H.B. 2221 estimates that the fiscal impact depends on the frequency with which municipalities reduce law enforcement annual operating budgets relative to the prior year. If a municipality does not restore funding to law enforcement, the revenue withheld from the municipality would remain in the state GF. The fiscal impact of H.B. 2221 cannot be estimated in advance (JLBC fiscal note).
Provisions
1. Prohibits a municipality from reducing the annual operating budget for a law enforcement agency by any amount below the previous year's budget.
2. Exempts a municipality from the prohibition on reducing an operating budget if:
a) the municipality does not have the monies required to continue the annual operating budget for a law enforcement agency at the same amount as the previous year;
b) the annual operating budget for all departments and agencies in the municipality have been reduced at the same or a greater amount as the reduction in the law enforcement agency's annual operating budget;
c) the municipality has not experienced population growth; or
d) the municipality approved a temporary increase in the law enforcement agency's annual operating budget in the previous year for a onetime expense or capital outlay and the municipality restores the law enforcement agency's annual operating budget to the same amount as before the temporary increase.
3. Requires, if a municipality does not have the monies required to continue the annual operating budget for a law enforcement agency and reduces the operating budget of the law enforcement agency, the municipality to reduce the operating budgets for all other departments or agencies in the municipality first.
4. Prohibits, if a municipality does not have the monies required to continue the annual operating budget for a law enforcement agency and reduces the operating budget of the law enforcement agency, the municipality from reducing the annual operating budget for a law enforcement agency in an amount greater than the reduction to the operating budgets of all other municipal departments or agencies.
5. Requires a municipality that reduces the annual operating budget for a law enforcement agency to notify the State Treasurer of the reduction.
6. Requires the State Treasurer, upon notice of an operating budget reduction, to withhold any state shared monies from the municipality in an amount equal to the amount of the reduction of the annual operating budget for the law enforcement agency.
7. Requires the State Treasurer to continue to withhold state shared monies from a municipality until the State Treasurer receives notification that the reduction in the law enforcement agency's budget has been restored.
8. Prohibits the State Treasurer from withholding any amount of shared monies that a municipality certifies as being necessary to make any required deposits or payments for debt service on bonds or other long-term obligations of the municipality that were issued or incurred before the reduction in the law enforcement agency's budget.
9. Defines law enforcement agency as a municipal police department.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date.
House Action
PSLE 1/27/25 DP 8-7-0-0
3rd Read 2/11/25 35-24-1
Prepared by Senate Research
March 3, 2025
AN/SDR/slp