Public Policy Agenda Number 3.

May 31, 2017 The 53rd State Legislature's First Regular Session adjourned sine die on May 10 after 122 days of session. Legislators introduced 1,079 bills, including memorials and resolutions, and passed 353 of them. The Governor signed 342 bills and vetoed 11. On May 8, the Governor signed a $9.8-billion state budget package for FY 2018. The budget requires the state’s Auditor General to conduct a special audit of the CAWCD by December 31, 2017. The amount of $200,000 is appropriated from the Arizona Water Banking Fund for this purpose. The following State Legislative Issues Update is a recap of the 2017 legislative session with regard to the Board-approved 2017 Legislative Agenda, as well as other relevant state legislation and issues for which the Board took official action. ______

Protect Lake Mead Continue to support water conservation and similar efforts that protect the water elevation in Lake Mead and help to avoid Colorado River shortage, including implementation of the Lower Colorado River Basin Drought Contingency Plan, or DCP. Support legislation as needed to implement multistate agreements relating to the Colorado River, including the DCP. Continue to promote CAP’s Protect Lake Mead campaign to raise awareness and support for cooperative efforts that are aimed at improving water elevations in the reservoir.

Final Status:

H.J.R. 2002 (lower Colorado basin; forbearance authority), sponsored by Rep. , authorizes the Director of the Arizona Department of Water Resources (ADWR) to enter into agreements for Arizona’s participation in Minute 32x implementation. A companion bill in the Senate, S.J.R. 1003 (lower Colorado basin; forbearance authority), sponsored by Sen. Gail Griffin, is identical to the House resolution.

The Governor signed H.J.R. 2002 into law March 2.

CAP Position on S.J.R. 1003/H.J.R. 2002: SUPPORT.

H.J.R. 2003 (Colorado River allocation; management) contained placeholder language that would have authorized the ADWR Director to enter into agreements for Arizona’s participation in DCP. S.J.R. 1002 (Colorado River allocation; management), sponsored by Sen. Gail Griffin, is identical to the House resolution. H.J.R. 2003 and S.J.R. 1002 were not heard in committee.

CAP Position on S.J.R. 1002/H.J.R. 2003: MONITOR. ______

Arizona Water Resources Continue to collaborate with various stakeholders on efforts to address in-state and interstate water resources.

Monitor legislative actions that directly impact CAP water supplies and operations.

Monitor legislative efforts that encourage in-state water conservation activities, including the use of residential rainwater harvesting systems.

Final Status:

H.B. 2330 (water augmentation systems; tax credit), sponsored by Rep. Noel Campbell, would have established an individual income tax credit for installing a residential water augmentation system in tax years 2018 through 2025.

Although H.B. 2330 passed the House Ways & Means Committee on February 15, it ultimately was held in the House.

CAP Position: MONITOR. ______

Multi-Species Conservation Program (MSCP) Funding Support the Arizona Game and Fish Department's efforts to collect and maintain revenues sufficient to continue its annual contribution toward the costs of the MSCP.

Monitor legislative and executive proposals that impact dedicated annual state funding of the MSCP.

Final Status:

No legislative initiatives or efforts impacting MSCP or its funding were introduced. ______

Funding of State Water Agencies and Commissions Support the efforts of the Arizona Department of Water Resources and the Arizona Water Protection Fund Commission to secure sufficient state General Fund appropriations in order to carry out statutory functions.

Monitor legislative actions that propose to use funds available to the Arizona Water Banking Commission for other purposes.

Final Status:

Arizona Department of Water Resources: The enacted FY 2018 state budget increases the department’s total spending authority to $15,990,100, roughly a 7-percent increase over the FY 2017 appropriated level. ADWR’s total General Fund appropriation is $13,871,000, an increase of $1,067,900 over this year’s appropriation. Full-Time Equivalent (FTEs) positions are also increased by 11, authorizing 150 FTEs in FY 2018.

These increases reflect the following items that the Governor proposed for ADWR in his budget released in January, although they are not listed as specific line items under ADWR’s budget: • $477,000 for 6 FTEs to provide technical data support to the Superior Court in the general streams adjudication process; • $121,000 for 1 FTE to support existing counsel in representing Arizona in the Little Colorado River adjudication; • $93,000 to pay for the estimated 15,000 worker hours to update groundwater data in Cochise, La Paz and Mohave counties; and • $166,000 to fund 2 FTEs for AMA groundwater monitoring and water use planning required by the Groundwater Management Act.

The budget also appropriates $2,000,000 to ADWR for each of the next three fiscal years for DCP-related efforts. Specifically, the budget authorizes ADWR to use the money for “this state's financial contributions to efforts by Arizona's Colorado River water users to conserve water in Lake Mead to reduce the likelihood of lake elevations dropping to levels that could result in reductions to Arizona's Colorado River allocation.” The $2 million in funding over the next three fiscal years is not included in ADWR’s overall increases listed above for FY 2018.

Arizona Water Banking Fund: Although the department receives an overall increase in General Fund monies, the budget continues legislative sweeps of the Arizona Water Banking Fund to support other purposes. These sweeps were proposed by the Governor in his budget that was released in January:

• $1,211,400 for ADWR; and, • $200,000 for Arizona Navigable Stream Adjudication Commission (ANSAC) legal fees.

It’s important to note that CAWCD’s four-cent ad valorem property tax revenues would not be available for these sweeps, as CAWCD transfers four-cent revenues on a transactional basis for the Arizona Water Banking Authority (AWBA) to purchase Long- Term Storage Credits in accordance with an IGA among the CAWCD, AWBA, and ADWR. The Water Banking Fund’s primary funding source are groundwater withdrawal fees or “pump taxes” that are collected in the Phoenix, Pinal and Tucson AMA. The pump tax generates more than $3 million per year on average.

CAP Position: Oppose the proposed legislative transfers from the Arizona Water Banking Fund that are contained in the Governor’s proposed FY 2018 state budget.

In addition to the transfers outlined above, the budget requires $200,000 from the Water Banking Fund to pay for the CAWCD audit. This brings the total FY 2018 transfer of the fund to $1,611,400.

Arizona Water Protection Fund: As a line item to ADWR’s budget, $250,000 was appropriated to the Arizona Water Protection Fund in FY 2018. The legislation that would have appropriated $500,000 to the Water Protection Fund, S.B. 1124, ultimately was held in the House.

CAP Position on S.B. 1124: SUPPORT. ______

Central Arizona Groundwater Replenishment District (CAGRD) Monitor any proposed CAGRD-related legislation to ensure its operations are not adversely impacted.

Promote awareness of CAGRD’s statutory functions, operations, and funding to inform lawmakers of its critical contribution to Arizona’s water management and economic development.

Final Status:

No legislation was introduced that would have negatively impacted CAGRD operations. ______

OTHER LEGISLATION WITH BOARD POSITIONS

H.B. 2112 (multi-county water district; directors; elections), as introduced by Representative , modified the election structure of the CAP Board of Directors by requiring that candidates’ names be included on the general election ballot with party designation. The Senate amended the bill to remove the partisan election provision. As amended, the bill prohibits a CAP employee or spouse of an employee from serving on the CAP Board.

H.B. 2112 was signed by the Governor on May 10 (Laws 2017, Chapter 289)

CAP Position: MONITOR, provided an Amendment is adopted to remove the partisan election requirement from the bill. ______

H.B. 2317 (partisan offices; districts; cities; schools), sponsored by Representative Jay Lawrence, would have required that candidates’ names for the CAP Board of Directors be included on the general election ballot with party designation, and also would have required a primary election for the CAP Board.

H.B. 2317 did not receive a committee hearing.

CAP Position: OPPOSE. ______

As passed the House, H.B. 2128 (JLAC; auditor general), made multiple changes to state statute relating to agency sunset review procedures. It also provided access to political subdivisions’ executive sessions and communications protected under attorney- client privilege. The Senate amended the bill to remove all provisions relating to attorney-client privilege and limited provisions related to executive sessions such that CAP was no longer impacted.

H.B. 2128 was vetoed by the Governor on April 27. In his veto letter, the Governor stated that, although the bill was a step in the right direction to fight waste, fraud, and abuse in government, it included vague and ambiguous language that will result in unintended consequences.

CAP Position: MONITOR + Seek Amendment. ______

S.B. 1210 (state law; violations; political subdivisions), sponsored by Sen. Steve Smith, would have required the Attorney General to investigate, at the request of a

Legislator, alleged violations of state statute or the Arizona Constitution by a political subdivision, including CAP. The bill also would have established penalties for violations such as the withholding of monies that would otherwise be distributed by a county treasurer or the state treasurer.

S.B. 1210 was held in the Senate.

CAP Position: MONITOR + Seek Amendment. ______

H.B. 2143 (public contracts; procurement), sponsored by Representative Vince Leach, would have required all CAP’s construction and maintenance activities, including equipment and material costs, that exceed $25,000 be competitively bid. CAP’s current dollar amount trigger, which is based on an inflation index, is $226,033. This would have had the practical effect of requesting bids for most canal maintenance work that has historically been performed by CAP employees, resulting in a significant disruption of CAP staffing and scheduling for required maintenance.

H.B. 2143 was not heard in committee.

CAP Position: MONITOR + Seek Amendment. ______

S.B. 1478 (occupational safety and health omnibus), sponsored by Sen. Steve Smith, codified a “model system” to promote effective worksite-based safety and health that corresponds to the state’s Voluntary Protection Program (VPP), which CAP has been a participant since 2006.

S.B. 1478 was signed by the Governor on April 6 (Laws 2017, Chapter 147).

CAP Recommended Position: SUPPORT. ______

If you have any questions or would like more information regarding any of the issues contained in this report, please contact CAP Strategic Initiatives & Public Policy, 623-869-2150.

Public Policy Agenda Number 3. Attachment 1.

State Legislative Update

Public Policy Committee June 8, 2017

Jeff Gray Legislative Affairs Manager

Recap: 53rd Legislature, First Regular Session

• Legislature adjourned on May 10, after 122 days of session.

• Legislators introduced 1,079 bills, passing 353.

• Governor signed 342 bills and vetoed 11.

• General effective date for most bills is August 9.

1 Protect Lake Mead ►Continue to support water conservation and similar efforts that protect the water elevation in Lake Mead and help to avoid Colorado River shortage, including implementation of the Lower Colorado River Basin Drought Contingency Plan, or DCP. ► Support legislation as needed to implement multistate agreements relating to the Colorado River, including the DCP. ► Continue to promote CAP’s Protect Lake Mead campaign to raise awareness and support for cooperative efforts that are aimed at improving water elevations in the reservoir. Joint Resolutions on Colorado River Issues SJR 1003/HJR 2002 were ADWR’s bills to authorize the Director to enter into agreements related to Minute 32x implementation on behalf of Arizona. Signed by Governor. • CAP Position: SUPPORT

SJR 1001/HJR 2003 were ADWR’s placeholder bills for DCP-related language. Bills were held. • CAP Position: MONITOR

Funding of State Water Agencies and Commissions ► Support the efforts of the Arizona Department of Water Resources and the Arizona Water Protection Fund Commission to secure sufficient state General Fund appropriations in order to carry out statutory functions. ► Monitor legislative actions that propose to use funds available to the Arizona Water Banking Commission for other purposes. Arizona Department of Water Resources • $2 million for DCP-related efforts on behalf of the state for each of the next three fiscal years.

2 Funding of State Water Agencies and Commissions ► Support the efforts of the Arizona Department of Water Resources and the Arizona Water Protection Fund Commission to secure sufficient state General Fund appropriations in order to carry out statutory functions. ► Monitor legislative actions that propose to use funds available to the Arizona Water Banking Commission for other purposes. ADWR: • Increased FY 2018 funding for ADWR: $15,990,100 (7% over FY 2017 level). • Increased FTEs and funding for Governor’s priorities.

Water Protection Fund (AWPF): • Budget appropriates $250,000 to the AWPF in FY 2018. • S.B. 1124 (Griffin) would have appropriated $500,000 to the AWPF, but was held in the House. • CAP Position (SB 1124): SUPPORT

Funding of State Water Agencies and Commissions ► Support the efforts of the Arizona Department of Water Resources and the Arizona Water Protection Fund Commission to secure sufficient state General Fund appropriations in order to carry out statutory functions. ► Monitor legislative actions that propose to use funds available to the Arizona Water Banking Commission for other purposes. Arizona Water Banking Commission Arizona Water Banking (AWB) Fund legislative transfers* for FY 2018: - $1,211,400 for ADWR; - $200,000 for Arizona Navigable Stream Adjudication Commission (ANSAC) legal fees. CAP Position: OPPOSE the fund transfer.

* Additional $200,000 AWB Fund transfer for CAWCD audit, bringing total to $1,611,400.

3 Funding of State Water Agencies and Commissions ► Support the efforts of the Arizona Department of Water Resources and the Arizona Water Protection Fund Commission to secure sufficient state General Fund appropriations in order to carry out statutory functions. ► Monitor legislative actions that propose to use funds available to the Arizona Water Banking Commission for other purposes.

CAWCD Special Audit (Laws 2017, Chapter 305 , Section 129) • Requires the Auditor General to conduct a special audit of CAWCD using $200,000 from the Arizona Water Banking Fund. • Due by December 31,2017.

Arizona Water Resources ► Continue to collaborate with various stakeholders on efforts to address in-state and interstate water resources. ► Monitor legislative actions that directly impact CAP water supplies and operations. ► Monitor legislative efforts that encourage in-state water conservation activities, including the use of residential rainwater harvesting systems.

H.B. 2330 water augmentation systems; tax credit

• Statewide tax credit for installing residential rainwater capture systems.

• Bill was heard in committee but held in the House.

• CAP Position: MONITOR

4 Legislation with Board Positions

H.B. 2112 multi-county water district; directors; elections H.B. 2317 partisan offices; districts; cities; schools

• These bills would have transitioned CAWCD Board elections from non-partisan to partisan.

• As enacted, H.B. 2112 prohibits a CAP employee or spouse from serving on the Board. (Oppose to Monitor)

• H.B. 2317 did not get a hearing (Oppose)

Legislation with Board Positions

H.B. 2128 JLAC; auditor general • As introduced, H.B. 2128 would have allowed the Auditor General access to communications protected under attorney- client privilege and to attend e-session. (Monitor, Seek Amendment) • Bill amended, but vetoed by the Governor. S.B. 1210 state law; violations; political subdivisions

• Bill would have required Attorney General to investigate alleged violations of statute or Constitution by a political subdivision, at the request of a legislator, and established penalties. (Monitor, Seek Amendment) • Held in Senate.

5 Legislation with Board Positions

H.B. 2143 public contracts; procurement

• As introduced, would have reduced the threshold for contracts to be bid out, from $226,033 (for CAP) to $25,000. • Major negative impact on CAP operations and employees. (Monitor, Seek Amendment) • Bill did not receive a hearing.

S.B. 1478 occupational safety and health omnibus

• S.B. 1478 codifies the state’s Voluntary Protection Program (VPP) in statute. (Support) • Bill passed and was signed into law (Laws 2017, Chapter 147).

Questions

12

6 Public Policy Agenda Number 3. Attachment 2. STATE LEGISLATION WITH BOARD POSITIONS At-A-Glance Board Bill # Short Title Sponsor Summary FINAL Status Position ADWR's bill to authorize the Director to enter into SJR 1003/ Lower Colorado Basin; Sen. Gail Griffin/ Signed into law agreements related to Minute 32x implementation on SUPPORT HJR 2002 forbearance authority Rep. Brenda Barton (March 2) behalf of Arizona.

Arizona water protection As passed the Senate, appropriates $500,000 in General S.B. 1124 Sen. Gail Griffin SUPPORT Held in House. fund; appropriation Fund monies to the Water Protection Fund in FY 2018.

Requires the Attorney General to investigate alleged violations of state statute or the Arizona Constitution by MONITOR + state law; violations; a political subdivision, including CAP. Also establishes S.B. 1210 Sen. Steve Smith Seek Held in Senate. political subdivisions penalties for violations that include the withholding of Amendment monies that would otherwise be distributed by a county treasurer or the state treasurer.

Among various changes to state OSHA laws, also occupational safety and Laws 2017, S.B. 1478 Sen. Steve Smith codifies the state’s Voluntary Protection Program, or SUPPORT health omnibus Chapter 147 VPP.

MONITOR, As enacted, prohibits a CAP employee or spouse of an provided bill is multi-county water district; employee from serving on the CAP Board. Previous amended to Laws 2017, H.B. 2112 Rep. Mark Finchem directors; elections versions of the bill required partisan elections for the remove the Chapter 289 board. partisan election requirement

As introduced, would have provided access to political subdivisions' executive sessions and communications MONITOR + Vetoed by the H.B. 2128 JLAC; auditor general Rep. John Allen protected under attorney-client privilege. The bill was Seek Governor on amended in the Senate to remove attorney-client Amendment April 27. privilege provisions and limit e-session attendance.

Limits tax-levying districts such as CAP to use its own employees to perform construction for certain activities without advertising for bids, including water works, MONITOR + public contracts; H.B. 2143 Rep. Vince Leach provided the total cost of the contract does not exceed Seek Held in House. procurement $25,000 (currently $226,033). Also expands the provision Amendment to include contracts for reconstruction and maintenance activities. partisan offices; districts; Similar to H.B. 2112, requires partisan elections for the H.B. 2317 Rep. Jay Lawrence OPPOSE Held in House. cities; schools CAP Board, but also a primary.

Establishes an individual income tax credit for installing water augmentation H.B. 2330 Rep. Noel Campbell a residential water augmentation system in tax years MONITOR Held in House. systems; tax credit 2018-2025.

Held in SJR 1001/ Colorado River allocation; Sen. Gail Griffin/ ADWR's placeholder bill for DCP-related language. MONITOR respective HJR 2003 management Rep. Brenda Barton chambers. Arizona Governor Ducey’s FY 2018 budget proposed the following transfers from the Arizona Water Banking OPPOSE the Laws 2017, Water Fund: $1,211,400 to support ADWR and $200,000 to help pay for the Arizona Navigable Stream Governor's Chapter 305, Banking Adjudication Commission’s legal fees. The enacted FY 2018 budget included those proposed sweeps (S.B. proposed §§ 64, 103, and Fund 1522) and an additional $200,000 to pay for the CAWCD special audit, bringing the total FY 2018 legislative 129 Sweeps legislative transfer of the Arizona Water Banking Fund to $1,611,400. transfers