DALLAS — As the Phoenix City Council prepares to pass an austere $1 billion budget, officials are seeing signs of economic recovery.
For the first time in three years, sales tax revenue increased slightly in April compared to last year, and the May figures continued the trend.
The increase of 1.7% in April to $29.7 million and the 0.7% growth in May to $28.1 million does not include income from an emergency food tax imposed April 1.
In the first month, the city added $3.34 million in revenue from the food tax, with projections of $12.5 million through the end of this month. For fiscal 2011, which begins July 1, officials expect to raise $50 million from the food tax.
“The emergency food tax, which every Valley city other than Mesa and Surprise already has, will cover about one-fourth of our budget deficit,” said Phoenix Mayor Phil Gordon. “So it helps, but it doesn’t solve the problem. The rest of the budget will be balanced through efficiency savings and budget cuts.”
Over the course of the current and coming fiscal year, the city had to make up a combined shortfall of $277.3 million. In addition to the food tax, the city cut services and programs by nearly $64 million and employee pay by 3.2%.
“We have had no choice but to be up to the tasks this economic crisis puts before us,” Gordon said in his state of the city address. “We had no choice but to take action.”
Phoenix’s cutbacks coincided with dramatic reductions in state spending as tax revenue fell statewide.
For fiscal 2011, Arizona added once cent to the state sales tax to raise $1 billion per year for three years.
That temporary tax hike was approved by voters last month to avoid deeper cuts in education and other services after years of reductions and nose-diving revenues.
The Legislature has been dealing with budget shortfalls since 2007 as the collapse of the housing bubble hit Arizona harder than most states.
Since their peak in fiscal 2007, state revenues have fallen about 34% even as major social services grew.
The state Medicaid system added more than 200,000 new members last year.
In Phoenix, the 2010-11 budget of $1 billion that the City Council is considering today is $79.2 million, or 7.2% less than it was five years ago, despite the fact that the city has added 90,000 residents for growth rate of 6% since then.
