Assigned to MAPS FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
FACT SHEET FOR H.B. 2120
law enforcement; defunding; prohibition
Purpose
Prohibits a city or town from reducing the annual operating budget for a law enforcement
agency by any amount below the previous year's budget. Requires the State Treasurer, upon receipt
of notification that the city or town reduced the annual operating budget for a law enforcement
agency, to withhold any state shared monies from the city or town in an amount equal to the amount
of the reduction of the annual operating budget for the law enforcement agency.
Background
The transaction privilege tax (TPT) is a gross receipts tax levied by the State of Arizona on
certain persons for the privilege of conducting business in the state. The TPT is currently imposed
under retail, transporting, utilities, telecommunications, publication, job printing, pipeline, private
car line, commercial lease, transient lodging, personal property rental, mining, amusement,
restaurant, prime contracting and online lodging marketplace. 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 bases 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 31.2 percent of total General Fund revenue collections in FY 2023. 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 24 the URS is set to distribute 18 percent of the individual
income tax collections (JLBC).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Prohibits a city or town from reducing the annual operating budget for a law enforcement
agency by any amount below the previous year's budget.
2. Requires the city or town, if the city or town reduces the annual operating budget for a law
enforcement agency, to notify the State Treasurer of the reduction. FACT SHEET
H.B. 2120
Page 2
3. Requires the State Treasurer, upon receipt of such notification, to withhold any state shared
monies from the city or town in an amount equal to the amount of the reduction of the annual
operating budget for the law enforcement agency.
4. Requires the State Treasurer to continue to withhold state shared monies until notification from
the city or town that the reduction in the law enforcement agency's budget has been restored.
5. Provides exemptions for a city or town if:
a) the city or town 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 budgets for all city or town departments or agencies have also been
reduced by the same or greater amount as the reduction in the law enforcement agency's
annual operating budget;
c) the city or town has not experienced population growth; or
d) the city or town approved a temporary increase in the law enforcement agency's annual
operating budget the previous year for a onetime expense or capital outlay and the city or
town restored the law enforcement agency's annual operating budget to the same amount
as before the temporary increase.
6. Requires the city or town, if the city or town reduces the city's or town's annual operating
budget in a manner that qualifies for the outlined exemptions, to reduce all other departments'
or agencies' annual operating budgets in the city or town by at least 50 percent or at the same
amount as the law enforcement agency's annual operating budget, and prohibits the city or
town from reducing the annual operating budget for a law enforcement agency first.
7. Prohibits the State Treasurer from withholding any amount that the city or town certifies as
being necessary to make any required deposits or payments for debt service on bonds or other
long-term obligations of the city or town that were issued or incurred before the reduction in
the law enforcement agency's budget.
8. Defines law enforcement agency as a municipal police department.
9. Makes technical and conforming changes.
10. Becomes effective on the general effective date.
House Action
MAPS 2/12/24 DP 8-7-0-0
3
rd
Read 2/27/24 35-23-1-0-1
Prepared by Senate Research
March 11, 2024
ZD/SB/cs