Arizona school tax backers cry foul after Andy Biggs links their funding to PPP loans

Arizona Republican Rep. Andy Biggs is calling on the federal government to investigate whether a nonprofit used money from Paycheck Protection Program loans to back a referendum on Arizona school taxes, a claim the organization calls a "desperate lie."

In an Oct. 6 letter provided exclusively to Fox News, Biggs told Treasury Secretary Steven Mnuchin and Small Business Administration chief Jovita Carranza he was "alarmed" to learn from constituents that an Oregon-based non-profit, Stand for Children, was "a major recipient of between $1-2 million" in Paycheck Protection Program (PPP) funding from last spring's CARES Act.

The organization contributed well over $3 million in the second quarter of 2020 to advocate for an Arizona ballot initiative, Proposition 208, that would raise state income taxes to fund public education, Biggs wrote, asking the agency heads to review the reports.

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"I am disturbed that a nonprofit seemingly took advantage of a program designed to help employers meet basic payroll needs in order to extravagantly fund a highly charged advocacy effort," he continued.

Stand for Children has vehemently denied that any money from PPP loans has been used for its support of Prop 208, noting that its community programs and lobbying efforts are handled by separate organizations with similar names.

Stand for Children Leadership Center Inc. is a 501(c)(3) public charity that devotes its resources to educational activities. Such organizations, to which donations are tax-deductible, are strictly prohibited from engaging in any political activity for or against candidates for public office.

Alternatively, Stand for Children Inc. is a 501(c)(4) organization that engages in political activities including lobbying. Its contributions aren't tax-deductible.

Stand for Children Inc. explained in an Oct. 1 statement that it had not applied for a PPP loan, though the charity had received one.

Stand for Children Inc. Arizona Executive Director Rebecca Gau told Fox News that while the organizations share some staff members, they have separate boards with firewalls between them. Contributions aren't shared between groups, she said.

Stand for Children Inc. joined the fight for education funding during the 2018 "Red for Ed" movement, but its work supporting the act was upended when a state Supreme Court ruling kicked Prop 208 off the ballot at that time.

This year, the organization worked with stakeholders to devise something "everybody could support" and launched signature-gathering in February.

Gau said that Biggs was coming after the non-profit "because lobbyists told him to." 

"This is their tactic right now," she said. "Instead of discussing the actual issues honestly, they're making these ridiculous, absolutely false claims and trying to gin up interest in a story that is not a story."

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Prior to her role at Stand for Children, Gau served as director of the Governor’s Office of Education Innovation where she launched and led state efforts to implement former Republican Governor Jan Brewer’s Education Reform Plan. Her two children were educated in Arizona public schools.

Gau highlighted her organization's roots in the Arizona community, with 11 years of engagement in the Phoenix area and support from respected local foundations.

"Stand [for Children] is focused on ensuring all students receive a high quality, relevant education, especially those whose boundless potential is overlooked and under-tapped because of their skin color, ZIP code, first language, or disability," she wrote.

The group became involved with Prop 208 "after years of frustration over the funding cuts to education in our state," she said. 

If approved by voters, the measure -- generating an extra $940 million a year -- would levy an additional 3.5% income tax surcharge on Arizona taxpayers with taxable income over $250,000, or over $500,000 for taxpayers who are filing joint returns.

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Tax hikes would be placed on the top 1% of earners in the state, and a "yes" vote would mean raising the maximum income tax rate for high earners to 8%.

Proponents of the ballot measure, or the Invest in Education Political Action Committee's "Invest in Ed" Act, want the additional revenue to go toward increased pay for teachers as well as classroom and student support and the addition of career and technical education programs.

"I’m very disappointed that Congressman Biggs has blindly picked up the opposition campaign’s desperate lies about Stand for Children," Gau said. 

According to the Arizona Secretary of State's election fund's portal, the Invest in Education PAC has received over $4.67 million in contributions.

Prop 208 is co-sponsored by "Invest in Ed" chairperson and high school teacher Amber Gould, most of the state’s Democratic state legislators, and State School Superintendent Kathy Hoffman, who is also a Democrat, according to 12 News.

Its critics include Molera Alvarez LLC and Republican Gov. Doug Ducey, who argue Prop 208 would harm Arizonans, not improve education.

Opposition groups claim that Prop 208 does not guarantee funding would go toward raising teacher salaries because an expanded definition of who is deemed a teacher would provide loopholes for administrators to pocket the money.

The "Yes on 208" camp retorts that the state's existing definition of a teacher is too narrow, pointing out that schools will be subject to the same accountability measures they are now.

A key part of the dissent against Prop 208 is that the measure will hurt small business owners by placing an onerous tax on them. Opponents estimate that 50% of those affected by the tax are small business owners.

"Invest in Ed" supporters unequivocally deny that, pointing out that a surcharge isn't calculated until deductions are factored in. 

According to the U.S. Small Business Administration, the median income for self-employed individuals is about $50,000.

The independent Joint Legislative Budget Committee estimates the average tax increase for those making $250,000 to $499,999 would be $120, the average increase for those making $500,000 to $999,999 would be $5,549 and the increase for those reporting income of $1 million to $4 million would be $40,287, according to an analysis by The Arizona Republic.

Gau told Fox News she had conducted her own analysis in accordance with the study and found that 99.95% of Prop 208 dollars "will go exactly where intended" to support teachers, support staff and mentorship programs.

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The amount of money that's flowed into education in Arizona since 2018's "Red for Ed" demonstrations is significant. In its 2020 budget, the state spent $6.5 billion on education, compared with $5.3 billion two years ago.

However, not every teacher received a 20% raise promised by Ducey's phased "20x2020" plan because allocating the money was left up to school districts and charter schools.