DALLAS - Arizona legislative leaders plan to close a $3.3 billion budget gap in the next fiscal year without raising taxes or additional debt, according to a plan unveiled yesterday.
The proposed budget measures include the application of $989 million of federal stimulus money and $1.2 billion in spending cuts atop $600 million that were made in the current budget.
The proposal calls for the state to save $300 million by requiring that school districts spend down their cash balances. The plan would also tap special funds that districts can carry into the next fiscal year rather than drawing from state aid.
Republican Gov. Jan Brewer - who has joined GOP legislative leaders in blaming her Democratic predecessor, Janet Napolitano, for Arizona's budget woes - had earlier proposed a five-point plan that included a tax hike to raise an additional $1 billion in revenue.
"We're confident that we can get through the 2010 budget year without a tax increase," Rep. John Kavanagh, chairman of the House Appropriations Committee, told a local TV newscast.
Rep. Judy Burges, R-Skull Valley, said she will support the proposal as long as it includes neither tax hikes nor heavy borrowing. She said another necessary component will be to take excess fund balances from K-12 education.
Last week, the House passed two emergency measures to accept $93 million in federal stimulus funding to extend unemployment benefits and $1.6 billion in stimulus for the Arizona Healthcare Cost Containment System program.
"Arizona's unemployment rate jumped from 7.4% in February to 7.8% by March, which is the state's highest unemployment rate since 1983," said Rep. Russ Jones, R-Yuma. "Rural Arizona has been hit particularly hard by the poor economy, posting double digit unemployment rates. In Yuma, the unemployment rate is at 22%."
In her first 80 days in office, Brewer has furloughed more than 15,000 state employees and cut hundreds of state jobs.
In addition to the tax increase, Brewer called for $1 billion in spending cuts, more flexibility on use of state funds that are constitutionally restricted, and an adjustment to the tax code to attract more businesses to the state.
Arizona Senate President Bob Burns, R-Peoria, and House Speaker Kirk Adams, R-Mesa, told a budget summit in Tempe that they would not consider a tax increase.
Rated AA by Standard & Poor's and Aa3 by Moody's Investors Service, Arizona has been hard hit by falling sales taxes. Fitch Ratings does not provide an issuer rating on the state, which does not issue general obligation debt.
"Softness in automobile sales and construction related-spending has had a major impact on sales tax with seven months of actual data in fiscal 2009 showing an 11% decline from the prior year," Standard & Poor's noted in its March 31 report. "For the same period, individual income tax collections were down 12% and we believe continued job losses could impact this further."
