PHOENIX — State lawmakers agreed late Thursday on a combination of raiding the state’s bank, budget cuts and short-term borrowing to finally bring the current state budget into balance.
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And the situation could get worse if tax collections between now and June 30 continue to defy expectations.
This package fills that gap largely by taking $487 million out of the state’s “rainy day’’ fund, with another $300 million coming out of special funds earmarked for other less-essential purposes.
It also means no major cuts for most state agencies, though the three state universities will have to slash spending by a combined $14.7 million, with the exact split determined by the state Board of Regents.
But in agreeing to the immediate fix, Democrat and Republican legislative leaders simply deferred the more difficult decisions of how to balance next year’s budget and a deficit approaching $2 billion.
In fact, one of the “budget cuts’’ for this year actually makes the problem worse: The state will delay $272 million it is supposed to pay public schools in June until the following month — and, more to the point, the following fiscal year.
That, however, just puts that obligation on top of that $2 billion shortfall.
Not everyone was happy with that prospect.
Sen. Ken Cheuvront, D-Phoenix, called this plan “irresponsible’’ because it relies heavily on “accounting gimmicks’’ and does not make deep enough spending cuts, leaving the state in a fiscally precarious position next year. And Sen. Karen Johnson called the package “pretty much smoke and mirrors.’’
But Sen. John Huppenthal, R-Chandler, called the measure “a good start.’’ Most senators agreed, approving the package on a 24-5 margin; the House voted 53-3 for the plan.
Despite that, a sharp divide does remain over how lawmakers will bridge next year’s $2 billion gap.
Napolitano wants to save operating cash by borrowing money for school construction. In fact, her financial advisers conclude the state can borrow money next budget year not only for more than $450 million in schools to be financed then but even $318 million for schools actually paid for this fiscal year, making that much more cash available to balance next year’s budget.
Many Republican lawmakers have balked at long-term bonding, which is why it is not part of this package. But even Senate President Tim Bee, R-Tucson, admitted Thursday there are few alternatives.
“The problem in (fiscal year) 2009 is so big we will utilize virtually every tool available to us,’’ he said.
Senate Majority Leader Thayer Verschoor, R-Gilbert, said the big fight will be how much to borrow — which goes directly to the issue of how much to cut state spending.
But Senate Minority Leader Marsha Arzberger said there are other options, like the “revenue enhancements’’ proposed by Napolitano.
Key among them is having the state collect $90 million in net new revenues from the more than 170 fixed and mobile photo radar cameras she has directed the state Department of Public Safety to order.
Napolitano already has the power to order the cameras. But without legislative approval, all the proceeds from tickets woul go to the cities and counties where citations are issued.
The governor also hopes to get legislative approval to shift $60 million in state prison costs to counties. And she believes more people will buy Lottery tickets if lawmakers allow the agency to spend more money to advertise.
And the deal to resolve this year’s budget does leave about $20 million in that rainy day fund to plug next year’s deficit.
Aside from state agency spending cuts, the deal takes back $10.5 million lawmakers allocated to design new buildings at the medical campus in Phoenix jointly run by the University of Arizona and Arizona State University.
Bee said, though, that doesn’t mean they won’t be built. He said those design costs may instead be rolled into the eventual borrowing for actual construction.
Lawmakers also would save more than $43 million by not providing some funds to schools for building maintenance and repairs. And the plan also would replace $42 million in tax dollars now earmarked to pay the salaries of Department of Public Safety officers with separate funds that had been set aside for Maricopa County freeways.
The deal also requires Pima and Maricopa counties to absorb a total of $7 million in increased costs for long-term care. Bee said they agreed to that one-time deal in exchange for lawmakers restoring the regular funding formula next year.
Just The Facts
How the budget would be balanced:
- Take $487 million from the state’s ``rainy day’’ fund, leaving approximately $200 million;
- Delay $272 million of payments due to schools in June until the following fiscal year in July;
- Divert $300 million sitting in other special funds;
- Reduce funding for Maricopa County road projects by $42 million to pay instead for Department of Public Safety officers’ salaries;
- Require the three state universities to collectively reduce their budgts by $14.7 million;
- Eliminate $10.5 million cash for design of the joint UA/ASU medical campus in Phoenix;
- Reduce building renewal funds for schools;
- Move funding for new state Veteran Home in Tucson back one year;
- Scrap funding for a new program to help teach math and science;
- Lump sum reductions from appopriations to various state agencies.
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