What on earth is going on with Arizona's budget crisis?

2010-03-26T12:25:00Z What on earth is going on with Arizona's budget crisis?Becky Pallack/Arizona Daily Star Arizona Daily Star
March 26, 2010 12:25 pm  • 

Former state senate president Tim Bee, who now runs Gov. Jan Brewer's Southern Arizona office, gave a really interesting talk at the UA yesterday about the state budget crisis.

If you have time to listen to it, you really should.

If not, here are some quick notes and quotes from his talk.

Education supporters aren't calling. The No. 1 thing people call his office about is why the rest stops are closed. The second most frequent call is about why the signs on I-19 are changing from metric to miles.

It's more like three state budget crises. There's the $1.4 billion current deficit, there's the cash flow problem and there's the $3.2 billion structural deficit. That's not to mention last year, when the legislature borrowed significantly to cover the budget and cut like $1 billion in spending.

What the checkbook looked like before the recession. The state brought it $10 billion from sales tax (40 percent), income tax (40 percent), corporate taxes (10 percent) and fees (10 percent). We spent that on K-12 eduaction (60 percent), AHCCCS (20 percent), the university system (10 percent), prisons (10 percent) and 150 other state agencies (10 percent). Now the state brings in like $6 billion.

What the heck happened?

  • The recession. Since 2007, the state has lost 270,000 jobs.
  • Tax cuts (sales tax, income tax, corporate tax, property tax) to the tune of $1.5 billion in lost revenue. "Right before the recession hit we had some of the largest tax cuts in Arizona's history enacted," Bee said.
  • Increased spending by $600 million a year during the last six years before the recession.
  • State policy.
  • Voter policy. To name a few: Prop 108 made it hard to increase revenues through the legislature or voters, Prop 105 protected spending on AHCCCS and education (half the budget), and Prop 204 hugely increased AHCCCS spending.
  • Federal policy. The state agreed to maintain certain spending when it accepted federal stimulus dollars.

How to cut our way out of this problem. Or not. "If you were to solve this budget problem just with cuts alone, if that was the only solution you wanted to enact, and you want to have a balance budget which they have to have — you'd virtually have to eliminate everything in the state government that's not (voter protected). So that would mean closing the department of corrections, closing all 150 smaller state agencies, not paying our debt service bills, and having some significant reductions to the unprotected funds in K-12, universities, AHCCCS and health services," Bee said.

You may be wondering what those "smaller" state agencies are. The judiciary system, juvenile corrections, the legislature, the Department of Public Safety, the revenue department, kid health programs and the state mental health hospital are in there.

About a third of non-protected funds have already been cut.

About Prop 100. A 3-year temporary 1-cent sales tax would raise about $1 billion (a third of the deficit). It's on the ballot. The election is May 18.

When/if Prop 100 fails. The legislature has already enacted what's called a "trigger mechanism" of the cuts that will happen if the sales tax fails, Bee said. It looks like this:

  • $428 million cut to K-12
  • $107 million cut to the university system
  • Other education cuts to community colleges, charter schools and the Arizona Schools for the Deaf and the Blind
  • $63 million cut to corrections will mean releasing some felons, closing some prisons and laying off some officers
  • $114 million cut to AHCCCS
  • $50 million cut to DES, which includes Child Protective Services

"All of us, as citizens of Arizona, are going to have to make a decision May 18, or before if you vote early, on what we are willing to accept and what we want our state government to look like. ... Obviously our position is we want to see it pass," Bee said.

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