PHOENIX — Ten months ago, Gov. Jan Brewer asked state lawmakers to approve her plan to balance the budget, including a temporary tax hike.
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On Monday the governor is going to bring the same message back to legislators in her first — and perhaps her lasts — State of the State speech. But this time she’s not planning to be nice about it.
“We’re a year behind now,’’ she told Capitol Media Services, saying the financial situation has only gotten worse because of legislative inaction. “We need revenue.’’
Brewer, who already has presided over more than $1 billion in spending cuts since taking office a year ago, conceded more will need to be trimmed. But she said lawmakers need to understand that can’t be the only answer.
“ We could cut every service in the state of Arizona that’s not mandated by the federal government and still not balance the budget,’’ Brewer said.
“It’s all about revenue,’’ the governor said. “And I said that in March.’’
Brewer specifically wants a one-cent hike in the state’s 5.6 percent sales tax for at least three years.
The levy would generate close to $1 billion a year, taking a big chunk out of next year’s deficit which is hovering in the $3 billion range.
It takes a two-thirds vote of both the House and Senate for the tax hike to be directly enacted. With that considered politically impossible, Brewer said she is willing to settle for legislators putting the issue before voters in May, a move that takes a simple majority.
Is there no middle ground?
“No one has come forward with a solution, Howie. No one,’’ she said in an interview.
“They just sit and keep, you can cut the budget, you can do this, you can do that,’’ Brewer continued. “But none of it makes any fiscal sense.’’
And she chided legislators who say the way to deal with the sharp drop in state tax collections caused by the recession is to return to 2006 spending levels.
“Well, hello!’’ she said. “We’re already at 2006.’’
That’s only partly true. Overall state spending is higher. But the amount being spent of tax dollars is close to 2006 levels, thanks to more than $2 billion in federal stimulus cash.
Senate President Bob Burns, R-Peoria, an initial opponent of referring a temporary sales tax hike to the ballot, now said he is on board.
But that conversion isn’t going to be enough. Burns conceded he cannot get the necessary 16 votes for a referral out of the 18 Republicans in the chamber. What that means, he said, is some Democrats are going to have to go along.
Senate Minority Leader Jorge Garcia, D-Tucson, said that’s a possibility.
But Garcia said there is a price for that: Democrats do not want a second measure on the same May ballot being pushed by Republicans. It would ask voters to let lawmakers take money away from programs that voters have previously mandated.
None of this bodes well for what is going to be the primary issue for lawmakers to deal with when they return on Monday.
The problem is the recession — and how it relates to Arizona’s tax structure.
More than 40 percent of the state’s revenues come from sales taxes, with a fifth of that linked just to vehicle sales alone. When people are out of work or they are unsure of their future financial prospects, they spend less.
The other big chunk of state revenues is from individual income taxes. Fewer people working means less money coming in.
Brewer blames her inability to get the votes to even refer the sales tax question to the ballot on a lack of comprehension of just how bad is the state’s financial situation.
“Perhaps, in the past, the gravity of the deficit didn’t register to the extreme that it is, for whatever that reason is,’’ she said. “It takes everybody awhile to get their hands around it and understand it.’’
The picture is bleak.
Four years ago, state revenues totaled $9.6 billion. The estimate for the current budget year is just $6.4 billion.
And even with spending cuts, the recession has resulted in more people qualifying for free health care from the state. And a constitutional amendment — the one Republicans want to send to the ballot in May — keeps lawmakers from trimming eligibility for that and other voter-approved programs.
So, even with the cuts, current spending is close to $10 billion.
The reason the operating “deficit’’ is less relates to several factors.
First, the state is borrowing money, including this week’s scheduled sale-leaseback of $735 million of state buildings. Those dollars, plus interest, will be repaid over 20 years.
The second involves accounting maneuvers, delaying payments that are due in this fiscal year into the next one. That balances the current set of books but simply defers the problem.
Finally, the state got more than $2 billion in federal stimulus dollars, mainly for health care and education. But that cash will disappear next budget year.
Brewer said there will need to be more cuts and more borrowing. But she said it all underlines the need for more revenues.
The governor supports the GOP plan for a May vote on that constitutional amendment to give them flexibility to alter voter-mandated programs and divert the funds. That move, for example, would enable them to take at least part of the $150 million a year now being collected on an 80-cent-a-pack tax on cigarettes voters approved in 2006, money that now is legally earmarked for early childhood development programs.
More than the state’s finances may be at stake when Brewer calls on lawmakers Monday to hike taxes.
Brewer, who inherited the office from Napolitano, already faces primary opposition within her own party, much of it from foes who have argued — and hope to convince voters — that higher taxes are not only unnecessary but also a bad idea for the economy. The governor’s success at getting Republican legislators to see things her way could blunt some of the criticism.
“Well, I’m not giving my State of the State speech in regards to my election,’’ Brewer said.
“I’m giving my State of the State speech to the people of Arizona and to the Legislature to assure them that Jan Brewer’s got a plan and that she’s concerned about the economy and a solution to bring Arizona back to its feet, to make it successful,’’ the governor said. “And the sooner we act, the sooner it’s going to happen.’’
JUST THE FACTS
Capitol Media Services
PHOENIX How did the state get into its current mess?
It’s simple: It is spending more than it takes in.
Some of that is being “managed’’ through accounting maneuvers, like paying and booking some current expenses in future fiscal years. Legislators also have approved longterm borrowing, providing the state immediate cash but having to be repaid, with interest, over a long period of time.
And the infusion of more than $2 billion in federal stimulus dollars has supplemented the tax collections.
But when all that is factored out, Arizona has a “structural deficit,’’ where ongoing revenues don’t keep pace with ongoing expenses.
Budget Year / Ongoing revenues / Ongoing expenses
2001 / $6.18 / $6.28
2002 / $5.76 / $6.27
2003 / $5.80 / $5.94
2004 / $6.46 / $6.46
2005 / $7.80 / $7.31
2006 / $9.27 / $8.36
2007 / $9.56 / $9.46
2008 / $8.79 / $9.91
2009 / $6.97 / $10.22
2010 / $6.32 / $10.53+
2011* / $6.77 / $10.47
2012* / $7.24 / $11.21
2013* / $7.76 / $11.99
2014* / $8.29 / $12.83
All numbers in BILLIONS
+Lawmakers approved close to $200 million in “cuts’’ to this figure in December. But the majority is either onetime reductions or money taken from special dedicated funds.







Comments
out of a home... wrote on Jan 15, 2010 10:19 PM: