Arizona Pulls a “Scott Walker” With Funds Meant for Struggling Homeowners

Arizona Governor Jan Brewer and her allies in the state legislature are seeking to use millions of dollars intended for struggling homeowners to pay for prison construction and tax cuts instead, echoing a policy put in place earlier this year in Wisconsin by Governor Scott Walker.

Remember the $26 billion foreclosure settlement, the one agreed upon by the five biggest banks and 49 state Attorneys General? As one of the hardest hit states, Arizona is getting $1.6 billion, as well as an additional $97.7 million to be overseen by the office of Attorney General Tom Horne, to be used for “housing counselors, legal aid, hotlines, and to help stressed homeowners with their payments.”

Two main things to understand about these funds: they are wildly insufficient given the scale of the problem, but all the same they are extremely crucial. In March, Arizona had the highest foreclosure rate in the country, according to RealtyTrac, with 9,497 foreclosures. If any state needs all the help it can get when it comes to homeowner education, assistance, and relief, it’s Arizona.

Even so, Governor Brewer and Republican state legislators want to siphon $50 million from those funds to “relieve pressure on the budget.” So in other words, use money intended to help homeowners for…other things.

Lawmakers say the money amounts to a pricey outreach and education fund. It won’t hurt to take half of it, House Speaker Andy Tobin said.

“We’re using the funds to relieve the pressure on the budget,” said Tobin, R-Paulden. Those stresses range from a push to replace welfare dollars lost to federal budget cuts to prison construction, he said.

How is this justified? You can thank a loophole in the settlement language, which says the funds can be used “to compensate the state for costs resulting from the alleged unlawful conduct of the defendants.” Arizona lawmakers like House Speaker Tobin are claiming that since foreclosure fraud hurt homeowners, which in turn hurt tax revenues and by extension the state budget, they can use the money for whatever they damn well please.

They can make this logical jump without acknowledging a.) that the big banks committed any actual fraud, or b.) that maybe Gov. Brewer’s $538 million tax handouts to businesses has anything to do with budget problems.

What’s scarier is that this move by Arizona is not unprecedented. They are doing exactly what Gov. Scott Walker already did in Wisconsin.

In February, Walker and Attorney General J.B. Van Hollen decided to use $25.6 million of Wisconsin’s share of the foreclosure fraud settlement to plug holes in his state budget. For justification, he used the very same loophole in the settlement language:

“Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment. . . . This will offset that damage done to the state of Wisconsin,” Walker said.

A week later, Missouri followed suit, taking $40 million from their share for the state’s general fund. Ohio decided to allocate $75 million meant for homeowner assistance to actually demolish vacant homes. South Carolina legislators insidiously pushed for using $31 million of settlement funds for corporate tax breaks.

Of all the horrific policies that have come out of the offices of governors like Walker in the past two years, this is one of the worst – and the most under-reported. With Walker and Brewer giving out huge tax handouts to businesses, cutting services and education, and then dipping into foreclosure fraud assistance to pay for their bad decisions, they are no different than a modern day Bonnie and Clyde. Robbery in multiple steps is still robbery, even if you’re a governor.

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