DALLAS - The Arizona Supreme Court is scheduled to hold hearings tomorrow on Gov. Jan Brewer's lawsuit demanding that legislative leaders send her the $8.2 billion budget that lawmakers passed 18 days ago.

Legislative leaders on Friday filed a response to Brewer's suit, challenging her claims that the court could tell the Legislature when to submit the budget for her signature.

At tomorrow's hearing, the court will consider whether it has jurisdiction in the matter. Republican legislative leaders hired Phoenix attorney David Cantelme to defend the House and Senate. Brewer's chief counsel, Joseph Kanefield, will argue that the Legislature's inaction violates the state constitution.

Brewer, also a Republican, is expected to veto the budget bill because it does not agree with her plan for a temporary tax increase to stave off deeper cuts in basic services. By holding onto the budget until the end of the month, GOP lawmakers reduce her flexibility in demanding changes.

Arizona must have a budget in place by the start of the new fiscal year in eight days. Brewer has already ordered state agencies to prepare for a government shutdown.

To balance the budget, lawmakers had to cover a $3 billion revenue shortfall through cuts in spending, retention of shared tax revenue, various accounting adjustments, and the application of federal stimulus funds.

With the deficit ranging between $3 to 4 billion - or more than 40% of the overall budget - Arizona has the second-worst shortfall of all the states in the coming fiscal year on a percentage basis, behind California.

Last week, a study by the Rockefeller Institute for Government reported that Arizona also ranked worst in the nation in income tax revenue declines, with collections falling nearly 55% compared to last year.

Revenues were so bad after the April 15 filing date that Treasurer Dean Martin had to use short-term borrowing as "overdraft protection" to reverse a negative balance in the general fund.

In May, Martin reported that the fund had been restored to solvency, but the negative balance was alarming at a time when the state expected to be most flush with cash. While the state is not as dependent as many on income tax revenue, it has also suffered a steep fall in sales tax income, on which it is more dependent.

"The general fund was in the red for 13 days, and is now back in the black, although just barely," Martin reported.

The Rockefeller study examined January-to-April tax collections for 37 of the 41 states that impose broad-based personal income taxes. It showed an overall decline of 26%.

"The bad news from April collections makes it very likely that many states will be forced to consider budget cuts later this year," said the institute's senior fellow, Donald J. Boyd. "Further spending and revenue actions in 2010, and large budget problems when the stimulus assistance ends in 2011, are now more likely as well."

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