Assigned to GOV FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
FACT SHEET FOR H.B. 2722
public resources; expenditures; prohibition
Purpose
Prohibits a public entity from spending, loaning or allowing the use of public resources to
aid an individual, association, corporation or other private party, unless the expenditure is for a
public purpose as outlined.
Background
The Gift Clause of the Arizona Constitution prohibits the state, counties, municipalities
and subdivisions of the state from: 1) giving or loaning credit in the aid of, or making a donation
or grant to any individual, association or corporation 2) becoming a subscriber to, or shareholder
in any company or corporation; and 3) becoming a joint owner with any person, company or
corporation, except as to such ownerships that may accrue monies for investment to various state
funds (Ariz. Const. art. 9 ยง 7).
The Arizona Supreme Court has issued various opinions on cases that allege a violation of
the Gift Clause by a public entity. In 2020, following the Arizona Supreme Court's ruling on
Schires v. Carlat, the state filed an amicus curiae brief to emphasize the practical points regarding
the Gift Clause test. Wistuber v. Paradise Valley Unified Sch. Dist. established the Gift Clause test
which considers two factors to determine if a public expenditure violates the Gift Clause by
examining if: 1) the expenditure has a public purpose; and 2) in return for the expenditure, the
public entity receive consideration that is not so inequitable and unreasonable that it amounts to
an abuse of discretion, thus providing a subsidy to the private entity (Arizona Supreme Court).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Prohibits a public entity from spending, loaning or allowing the use of public resources or
using the public entity's taxing power to aid an individual, association, corporation or other
private party unless:
a) the expenditure, loan or use of public resources is for a public purpose;
b) is supported by consideration; and
c) the public entity exercises continuing control over the expenditure, loan or use of public
resources.
2. Allows the Attorney General or a taxpayer in the state to file an action in a court of general
jurisdiction to challenge an expenditure, loan or use of public resources.
FACT SHEET
H.B. 2722
Page 2
3. Requires a plaintiff to prevail if the court finds by a preponderance of evidence that:
a) the challenged expenditure, loan or use of public resources does not advance a public
purpose;
b) the challenged expenditure, loan or use of public resource is not supported by
consideration; or
c) the public entity failed to maintain control over the expenditure, loan or use of public
resources.
4. Specifies that consideration:
a) means an exchange for goods, services or money that is proportional, direct, ascertainable
and contractually obligatory; and
b) does not include indirect benefits that are speculative or anticipatory.
5. Defines control as the public entity maintaining strict and continuing authority over the public
expenditure, loan or use of public resources to ensure that the public purpose of the
expenditure, loan or use of public resources is accomplished.
6. Specifies that a public entity:
a) means the state, an agency or unit of state government, a city, town, county, school district
or other political subdivision of the state;
b) does not include irrigation, power, electrical, agricultural improvement, drainage and flood
control districts and exempt tax levying public improvement districts; and
c) is broadly construed.
7. Specifies that public purpose:
a) means an activity that is directly related to a function of the government and for which the
primary beneficiary is the public as a whole; and
b) does not include providing subsidies, grants, loans or other aid to private business,
individuals or entities for the purposes of economic development.
8. Specifies that public resources must be broadly construed and includes all revenue, real
property and other assets owned and controlled by a public entity.
9. Designates this legislation as the Taxpayer Protection Act.
10. Makes technical changes.
11. Becomes effective on the general effective date.
House Action
WM 2/12/25 DP 5-4-0-0
3
rd
read 2/26/25 32-28-0
Prepared by Senate Research
March 10, 2025
AN/DL/slp