PHOENIX — While Gov. Janet Napolitano is proposing no cuts of state-shared revenues with municipalities and counties, she sees a potential problem in next year’s budget for those entities because of the downward turn in local sales taxes being collected.

In one of her occasional one-on-one telephone interviews with media outlets throughout the state, the governor on Wednesday said her proposal to the state legislators is to protect revenues the state provides municipalities and counties, such as the Highway User Revenue Funds.

Many smaller political subdivisions in the state also use local sales taxes as a way to obtain general revenue funds, and the Democratic governor said she and the state legislators have no control over the decisions city, town and county governments will have to make regarding their potential budget shortfalls in local taxes and fees.

Dave Felix, Sierra Vista’s finance manager, said there are a number of city taxes ranging from 1 to 5.5 percent that are put on different services, such as hotels, restaurants and retail services.

Those taxes bring in about $16 million, of which about 25 percent is dedicated for capital improvements and the rest goes to the general fund.

The state government is facing a shortfall in excess of $1 billion for the next fiscal year, which begins on July 1. Part of the shortfall is caused by less sales tax being collected. Felix noted that this is also a local problem as local sales tax collections are flat.

One problem area is the amount being collected in the construction portions of the local taxes is down, he added.

“Cities will feel the pinch,” Felix said of smaller amounts of local sales taxes that will be collected.

Napolitano said there are a number of proposals she has forwarded to the state legislators that will protect other Arizona programs, including veterans benefits.

Again, she has determined state benefits for veterans, such as hiring additional counselors, will not be impacted as her administration and the legislators find ways to cut the state’s budget.

One of her proposals, which the governor said the legislators seem to be hesitant to accept, is not to pay cash for capital improvements but to do what businesses do and borrow what is needed.

“That’s the common-sense approach,” she said.

With good financial procedures, the state will be able to ride out the economic downturn storm, Napolitano said.

She also sees the nation’s economic problems becoming better once Democrats fully control the federal government.

A supporter of U.S. Sen. Barack Obama, the governor said even though his opponent in the party’s race, U.S. Sen. Hillary Clinton, received the majority vote in Texas, and that narrowly, Obama came out with more delegates through a system that includes primary voting and caucuses.

While she believes that either candidate will be better than the Republican nominee U.S. Sen. John McCain of Arizona, Napolitano still hopes Obama for will be party’s candidate.

But she said she will support Clinton if she ends up leading the party’s race for the White House.

There also is an important congressional race in Southern Arizona, , the governor said. That is between freshman Democratic U.S. Rep. Gabrielle Giffords and Republican Arizona Senate President Tim Bee.

In that race, she naturally sees Giffords winning, even though the race is expected to be well-fought by Bee.

“I know them both, and they are good people. It will be a clean race,” Napolitano said.

As for the potential of outsiders in both parties stirring up mud in the national campaigns, the governor said it may happen, but she has faith the electorate “will be able to separate the wheat from the chaff.”