PHOENIX — Gov. Doug Ducey signed legislation Thursday to pay off about $190 million in state debt, a payment he originally opposed.
The funds are part of the more than $1 billion borrowed by the state during the recession, largely by selling off state buildings in a lease-buyback program. That borrowing, pushed by Ducey predecessor Jan Brewer, was designed to prevent deeper cuts in spending than the $1 billion that had to be instituted.
Brewer also oversaw a temporary 1-cent increase in state sales taxes to generate another nearly $1 billion a year.
With the payment, the remaining debt is now in the $550 million range.
What helped with the prepayment was an unexpected windfall of more than $150 million in state income tax revenues this year due to changes in federal tax laws that increased the obligation on some Arizona residents.
Lawmakers eventually enacted offsetting tax cuts for future years. But that left the question of how to deal with the cash already coming in.
Senate President Karen Fann, R-Prescott, and Sen. David Livingston, R-Peoria, pushed for paying down the debt. They said that reducing the debt would save $50 million in interest over the life of the debt and free up $24 million a year in debt service.
Ducey, as recently as a month ago, rejected the idea, saying he wanted to funnel any extra cash into the state’s rainy day fund.
“The beauty of a rainy day fund is it gives you options in the downturn or the crisis,” the governor said, calling such a turnabout in the economy “inevitable.”
Lawmakers negotiated a plan that boosted the rainy day fund to $1 billion and still managed the $190 million debt payment.
And the governor, in a prepared statement Thursday, praised the debt reduction, echoing the statements made for months by the GOP senators.
“With the ongoing savings from reducing debt, Arizona can focus on investing more dollars in the things that matter most like K-12 education, enhancing public safety and updating our state’s infrastructure,” he said.