Gov. Brewer

PHOENIX - Gov. Jan Brewer wants to cut state funding for universities by 20 percent and slash aid to community colleges almost in half to deal with what she said will be a $1.1 billion deficit this coming fiscal year.

Brewer also proposed Friday eliminating free care for about 280,000 of the 1.2 million people enrolled in the Arizona Health Care Cost Containment System, virtually all of them adults. Unaffected would be children, pregnant women, the aged, blind and disabled.

The governor also would not fully compensate public schools for inflation, just as she did not this year. But she did agree to have the state replace some of the federal stimulus dollars schools have received for the last two years, which are now going away.

House Speaker Kirk Adams called it "an excellent framework and starting point."

"The governor has demonstrated that she continues to be willing to make tough choices," he said. "And I think the Legislature is ready to follow suit."

But House Minority Leader Chad Campbell called the plan "the same policies and the same maneuvers that we've seen for several years that have gotten us into this mess in the first place."

He noted that Brewer plans to borrow $575 million just to bridge an anticipated $764 million deficit for the rest of this budget year. Her longer-term plans, he said, are based on a hope the economy will get better, something Campbell said is not a realistic long-term solution.

Campbell wants "long-term tax reform," including closing what Democrats call $10 billion in "outrageous tax loopholes."

He cited sales-tax exemptions for things like spa treatments and country-club memberships. But the list also keeps shoppers from paying taxes on groceries.

The linchpin of the budget is the $541 million Brewer hopes to save in the coming year - an amount that will jump to $1 billion in annual savings when fully implemented - by scaling back AHCCCS. But that change is contingent on approval from the Obama administration, something not guaranteed.

Arizona's program is more expansive than required by Medicaid, the result of a 2000 voter-approved initiative requiring free care for everyone below the federal poverty level, about $18,300 a year for a family of three.

John Arnold, the governor's budget director, said it was thought the additional cost would be covered by cigarette taxes and Arizona's share of a nationwide settlement with tobacco companies. Those bring in less than $200 million a year; Arnold pegged the actual cost next year at $1 billion.

The federal health-care law approved last year, however, forbids states from trimming their existing Medicaid programs. Brewer's budget presumes the state can get a waiver.

If that isn't granted, Arnold said, lawmakers will have to either slash other state funding by that much more or eliminate the AHCCCS program entirely, giving up $7 billion each year in federal aid. That would return Arizona to the situation in 1982 when each county was responsible for providing health care for the poor.

But another hurdle remains.

The Arizona Constitution precludes lawmakers from tinkering with voter-approved programs. While Arnold said he sees a loophole, "we would be surprised if we weren't challenged in state court," Arnold said, conceding there is no Plan B if the program can't be cut.

There are no federal mandates or voter approval needed for Brewer's plan to cut state aid to universities by $170 million, to $702 million.

That includes $50 million in salary cuts that were imposed on all other state employees last year. University workers escaped because it would have put the state out of compliance with strings attached to federal stimulus dollars, strings that now are gone.

Arnold said, though, the schools have other sources of revenue, mainly tuition. But he said Brewer doesn't believe the move will automatically hike what students have to pay.

"We think there's an ability in the university system to find some efficiencies, find lower-cost education models," he said. "I think we can have a strong and healthy university system even with the budget reductions," he said, and without doing anything to price higher education out of the reach of much of the population.

Anne Mariucci who chairs the Arizona Board of Regents, said Brewer's plan would leave state aid 46 percent less than when the cuts started four years ago. In a prepared statement, she said the university presidents will work to find ways to absorb the cuts.

Aid to community colleges, now more than $135 million, will drop by $64 million.

Arnold said these schools, too, have other cash, getting more than half their budgets from local property taxes, with tuition making up another third.

Brewer won't consider higher taxes to make up the shortfall, beyond the nearly $1 billion generated from the temporary 1-cent hike in sales taxes approved by voters last May.

"We think there's a real limit to the amount of new revenues that you can pull out of an economy that is not in aggressive expansion," Arnold said.

One bit of good news for workers that remain is that there is enough money to eliminate plans to force them to take more days off without pay. Employees had to take five unpaid days since this budget year began July 1.