State falls deeper and deeper in financial hole

By Howard Fischer
Capitol Media Services
Published/Last Modified on Saturday, February 2, 2008 3:05 PM MST


PHOENIX — The state moved another $84 million into the hole in December as consumers continue to refuse to spend more.


 New figures Thursday show Arizona collected $362.1 million in sales taxes that month. That actually is slightly less than the same month in 2006.

 The biggest drop was in retail, the taxes levied on the purchase of items ranging from pencils and computers to cars and trucks. Sales taxes levied on contractors also were down.

 Only increases in taxes levied on utilities and bar and restaurant sales kept the overall picture from being any worse.

 Individual income tax collections, both in terms of withholding from worker paychecks and estimated tax payments, were up more than $3.5 million over the same period a year earlier. But that was more than wiped out by a $49.5 million decline in corporate income tax receipts.

 That big drop, however, may not be a trend: Legislative budge staffers said this is a “technical’’ adjustment based on a 1994 law that changed how corporations file returns, resulting in refunds now for some.

 Overall, the $4.4 billion in receipts for the first half of the state’s budget year are nearly $119 million below the first si months of the prior fiscal year.

 What makes the numbers significant is that the $10.6 billion spending plan approved by lawmakers presumed that tax collections actually would be increasing. So that $4.4 billion figure is i excess of $393 million short of where the state should be at this time.

 Efforts to enact a plan to bring the state’s books back into balance by June 30, as required constitutionally, have so far produced no results.

 Gov. Janet Napolitano has proposed borrowing money for schoo construction, taking cash from other special state funds, using money from the state’s “rainy day’’ fund, deferring some purchases and expenses and making some spending cuts. She also believes that the deficit this year ultimately will be no larger than $870 million.

 Republican legislative leaders put the figure $100 million higher.

 And a plan crafted by the chairmen of the House and Senate

 Appropriations committees makes up the gap with some money from the rainy day fund along with large spending cuts.

 The news comes as the Senate on Thursday gave preliminary approval to permanent repeal of the state property tax.

 That levy was suspended in 2006, when the state had excess cash, as part of a budget deal between the governor and GOP lawmakers. Bu it returns automatically in late 2009 unless a law is approved t make the cut permanent.

 Napolitano has hinted she would veto the measure, saying it i premature because action is not necessary until next session. And she labeled the move “irresponsible’’ with the current budget deficit.

 But Republican lawmakers said failing to act essentially would subject Arizonans to a huge tax hike, something they said would hamper economic recovery.

 The House is set to vote on an identical measure next week.

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