December 31, 2009
PHOENIX (AP) — The start of the Arizona Legislature’s 2010 regular session will provide lawmakers with a painful repeat — another big and politically troublesome hole in the state budget.
A year ago, the recession hammering the state’s growth-dependent economy meant lawmakers reporting for the 2009 regular session faced a $1.6 billion shortfall in the budget for the fiscal year that ended June 30. With the economy still ailing and a fiscal landscape among the worst in the nation, those same Arizona legislators now face a problem nearly as large when they begin this year’s session on Jan. 11.
Time is short because the state is close to exhausting its capacity for short-term borrowing capacity. State Treasurer Dean Martin has warned that could force the state to issue IOUs in lieu of paychecks to state employees as early as February.
The budget shortfall stands at roughly $1.4 billion even after approximately $650 million of spending cuts and other midyear changes approved during November and December special sessions. Current spending is set at about $8.4 billion for the fiscal year that ends on June 30.
“We’ve got a long ways to go,” acknowledged House Majority Leader John McComish, R-Phoenix.
And it’s getting harder and harder for lawmakers to whittle down the shortfall, either by cutting costs or finding dollars to prop up spending.
The state’s federal stimulus money has been nearly used up, agencies and programs throughout state government have already seen their funding sliced and diced, and there’s less money to be taken from special funds already raided several times.
Budget-cutting impacts so far have included layoffs, furloughs and pay cuts for thousands of state workers, closures of state parks, reduction of funding for schools to purchase books and computers and eliminations and reductions of social programs ranging from day-care subsidies to temporary welfare for disabled adults.
Meanwhile, as in other states, demand for unemployment insurance benefits and other safety-net services has surged as the recession has hit the state hard. The housing industry has shed tens of thousands of jobs, and the state has sunk from being a leader in job creation to near the bottom.
“People don’t fully appreciate what is happening,” said Rep. David Bradley, D-Tucson. “People are falling through the cracks and not getting preventative services.”
Meanwhile, Gov. Jan Brewer’s proposal for a special-election public vote on a temporary sales tax increase to boost state revenue probably is on life support after failing to emerge from the Legislature several times.
Legislative leaders said lawmakers in January will take up the sales tax proposal again, along with another proposed ballot measure to loosen constitutional protections for voter-approved spending mandates. That could give lawmakers the authority to redirect what could amount to $1.5 billion of spending over three years, House Speaker Kirk Adams said.
Adams, R-Mesa, said lawmakers may approve a new budget for the fiscal year with built-in contingencies on spending, depending on whether the sales tax is increased.
But until the sales tax reaches a ballot and is actually approved by voters, the Legislature can’t assume that the state will receive any revenue from a sales tax increase and that more and deeper speeding cuts will be required, Burns said.
Other budget-balancing ideas still on the table include diverting money now going to early childhood programs and other voter-approved spending mandates, borrowing against future Arizona Lottery revenue and tobacco lawsuit settlement payments, and more spending cuts.
Some aspects of current state spending also are getting reviews with an eye toward finding possible savings. Special House committees will eyeball criminal sentence laws — those affect incarceration costs — as well as the school finance system and behavioral health services.
Arizonans also can expect lawmakers to again debate proposals for future tax cuts that would be phased in over time. That’s a step that Brewer and many Republican legislators view as a way to help the state’s economy by encouraging businesses to move here or expand.
“We have to be competitive with other states and I believe that it is wise to look at tax cuts,” she said.
Democrats generally deride tax-cut proposals, arguing that the state can’t afford to give up revenue. They instead suggest broadening the sales tax to cover more transactions.
Past tax cuts haven’t proven to be a revenue-generator for the state, so a better approach is to focus any tax changes on those that benefit working Arizonans, said Senate Minority Leader Jorge Garcia, D-Tucson.
The wrangling over budget issues is taking place in a political environment that saw lawmakers harshly split along party lines. Republicans complained that Democrats in voted against any and all spending cuts in 2009 and Democrats said Republicans wouldn’t negotiate broader solutions.