DALLAS - With its economy tumbling, Arizona will shelve a $1 billion construction program for three state universities due to falling lottery revenues that were to provide debt service on bonds for the projects.

The program, known as Stimulus Plan for Economic and Educational Development, or SPEED, was approved by the Legislature last spring as a way to pump up the faltering economy while expanding and repairing buildings for the University of Arizona in Tucson, Arizona State University in Tempe and Northern Arizona University in Flagstaff.

But at a meeting on Tuesday, the Legislature's Joint Committee on Capital Review decided not to go forward with the program because of the falling lottery revenues and the state's growing budget crisis.

Gov. Janet Napolitano reported last month that tax collections short of projections would create a $600 million shortfall in the state's $10.6 billion budget but added that she is developing a plan to fix the problem. In March, the Legislature was forced to cut $1.2 billion to bring the current budget into balance.

In that same session, the SPEED program was seen as a way to keep the economic engine running while supporting the universities that are key elements in the state's creation of jobs. The program was expected to create 14,000 construction jobs with an immediate economic impact of $140 million and 16,000 jobs in other sectors as the projects unfolded.

The program called for the sale of 25-year bonds, with the universities paying interest only until 2010 and the state paying nothing. After that, the state would pay 80% of the principal and interest on the bonds through lottery revenues, with the universities paying 20%. The debt service was to have been divided between the universities according to the cost of their individual projects.

But a legislative budget report said lottery revenues fell 13% in the first two months of the fiscal year that began July 1. In the first three months of the fiscal year, revenues were down $300 million.

Sen. Robert Burns, R-Peoria, vice chairman of the Joint Committee on Capital Review, said the state needs to rethink the program with the idea that the lottery revenues may be needed for other spending priorities.

In pitching the program last April, ASU warned that "the state appears headed for a recession that is expected to be deeper - and last longer - than the economic difficulties other states will experience. The housing market has plummeted, retail sales are weak, jobs are being lost, and the state is facing budget deficits of $1.15 billion in 2008 and $1.73 billion in 2009."

Napolitano signed onto a petition drive to support the SPEED plan, with a letter pointing to her state of the state address in January calling for the universities to double the number of bachelor's degrees they produce by 2020.

At last month's board meeting, the Arizona Board of Regents approved spending $68 million from the SPEED program for deferred maintenance at UA in Tucson. It also approved $23 million of bonds to build a hotel and conference center at UA's Science and Technology Park. Those bonds will not be affected by the SPEED freeze.

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