Senate committee advances multiple pension, tax and bond-notice bills; tips subtraction narrowly passes

A Senate committee on Tuesday advanced a series of bills addressing public-safety retirement plans, retirement-system administration, tax subtractions and bond-notice disclosures, and sent them on with recommendations to the next stage of the legislative process.

The package included measures affecting the Public Safety Personnel Retirement System (PSPRS) cancer insurance program and corporate employer-account rules, multiple clarifying changes for the Arizona State Retirement System (ASRS), an individual income-tax subtraction for tips reported to employers, an increased adoption-expense subtraction, a captive-insurer dormancy mechanism, and changes to truth-in-taxation and ballot language for bond and override elections.

Committee action matters because the bills change how public retirement-system assets and liabilities are measured and used, adjust state tax policy, and alter the information voters receive before bond and override elections.

Diane McAllister, speaking for the Public Safety Personnel Retirement System, described two PSPRS proposals. On House Bill 2013, McAllister said the change would let the PSPRS board base allowable program administration on “the actual total amount of claims paid over 5 years” and exclude the costs to process claims from that calculation, noting the cancer-insurance fund “is very healthy. We have $33,000,000 in our kind of reserve.” On House Bill 2015, she said the bill removes a minimum employer contribution rate for Correction Officer Retirement Plan employers and permits the board to account for excess valuation assets up to 100% of the present value of future benefits (instead of 50%), and allows transfers of stranded assets from accounts with no beneficiaries to other employer accounts.

Jessica Thomas, legislative liaison for the Arizona State Retirement System, testified on several ASRS bills that clarify eligibility or contribution rules. She described House Bill 2034 as specifying that a PSPRS participant is not eligible to participate in the supplemental deferred compensation program overseen by ASRS. Thomas also described HB 2035 (defining an unfunded liability when an employer adopts a termination incentive program), HB 2036 (allowing ASRS credited service for certain FEMA reservists up to 60 months), and HB 2077 (clarifying that an ASRS long-term disability must have occurred while employed by an ASRS employer). Thomas characterized those measures as technical clarifications to existing administration and contribution frameworks.

Public testimony and debate centered most visibly on House Bill 2081, a tax bill that would create an individual income-tax subtraction starting in taxable year 2025 for tips reported to an employer. Geraldine, representing the Arizona Center for Economic Progress, opposed HB 2081, saying the change would be fiscally costly and reach only a small portion of workers: “This bill won't provide the intended, you know, hard relief that all hard working Arizonans need right now, and it's also a cost that Arizona just can't afford,” she said, estimating the bill would cost “at least $31,000,000” and warning of potential abuse if high-income earners recharacterize income as tips.

Committee debate included concerns about fairness and long-term revenue effects. Opponents argued the policy could be abused and would shrink the state’s revenue base; supporters framed the measure as preserving the nontaxable character of voluntary generosity. By roll call, the committee approved HB 2081 by a 4–3 vote.

Other bills the committee advanced included: - House Bill 2155, which increases the income-tax subtraction for unreimbursed adoption expenses (effective tax year 2026) to $5,000 for single filers and $10,000 for married filers; the committee recorded a fiscal-impact figure discussed in the hearing of roughly $40,000 and approved the bill 4–3. - House Bill 2193, creating a certificate-of-dormancy process for captive insurers, authorizing rulemaking at the Department of Insurance and Financial Institutions and adjusting license-renewal timing and certain capital-surplus minima; industry advocate Mark Osborne said the change lets organizations suspend but not dissolve captive insurers and keeps Arizona competitive; the committee passed the bill (vote reported as in the majority; committee tally recorded in the hearing transcript). - House Bill 2515, which requires including the estimated tax impact of proposed capital improvements on a $400,000 single-family home in informational pamphlets and truth-in-taxation notices and adds clarifying ballot language for bond sales; Jack Moody of the Arizona Tax Research Association testified in support, saying the higher illustrative property values better reflect current market values; the committee approved HB 2515 by a 4–3 vote.

Several retirement-related bills were moved with limited debate and with agency staff present to answer technical questions; most of those measures were approved by the committee with affirmative roll-call outcomes recorded in the transcript (multiple bills carried unanimous or near-unanimous committee support). The committee chair and vice chair directed further committee or calendar scheduling for bills whose sponsors were absent.

Votes at a glance (committee action recorded in hearing): - HB 2013 (PSPRS cancer-insurance administration): advanced (vote tally not clearly specified in transcript). - HB 2015 (PSPRS corporate EORP employer asset/account rules): passed, committee recorded as 6–1. - HB 2034 (ASRS supplemental deferral eligibility): advanced (vote tally not clearly specified in transcript). - HB 2035 (ASRS unfunded liability definition for termination incentives): passed, committee recorded as 7–0. - HB 2036 (ASRS credited service for FEMA reservists): passed, committee recorded as 6–1. - HB 2077 (ASRS long-term disability occurrence requirement): passed, committee recorded as 7–0. - HB 2081 (income-tax subtraction for tips reported to employers): passed, 4–3. - HB 2155 (increased adoption-expense subtraction): passed, 4–3. - HB 2193 (captive insurer dormancy certificate; DiFi rule authority): passed (committee majority recorded). - HB 2515 (truth-in-taxation and bond-notice disclosure updates): passed, 4–3.

Committee members and agency representatives repeatedly emphasized these bills are technical or clarifying changes to existing programs in many cases; where fiscal impacts were raised (HB 2081, HB 2155), witnesses and members cited specific cost estimates to the general fund or noted potential behavioral responses that could change revenues.

The committee will forward the advanced bills with recommendations to the next legislative step; several sponsors were listed as absent for parts of the hearing, and members said additional sponsor Q&A could occur before further floor action.

Sources: hearing testimony and roll-call statements in the committee transcript (presentations by Diane McAllister for PSPRS; Jessica Thomas for ASRS; Geraldine for the Arizona Center for Economic Progress; Mark Osborne for the Arizona Captive Insurance Association; Jack Moody for the Arizona Tax Research Association).