DALLAS — Arizona lawmakers are preparing to meet in a special session tomorrow to consider calling for a temporary sales-tax increase and $200 million in spending cuts to ease an estimated $1.6 billion deficit.

The session comes less than a month after the last one in which the Legislature cut spending by $450 million and less than a month before the regular session on Jan. 11.

After repeated spending cuts, Republican legislative leaders indicated that they are finally ready to back Gov. Jan Brewer's proposed three-year, one-cent sales tax increase.

In their previous negotiations, Brewer had agreed with lawmakers' demands that the tax hike receive voter approval. If passed in the Legislature, an election could come in May at the earliest, officials indicated.

The governor proposed the tax increase as a way to avoid deeper cuts in state spending that would affect the neediest citizens.

But her fellow Republican lawmakers in the House are seeking to offset the additional tax revenue with income and property tax cuts.

Some lawmakers have urged that discussions of tax cuts wait until the regular session next month.

In the meantime, Arizona is preparing to sell and lease back government buildings to raise $735 million. That deal is also expected next month.

Treasurer Dean Martin, who has called for structural changes in state spending, said that the revenue from the sale of state buildings would keep operations going for a few weeks.

Without the additional revenue, the government would have to pay employees with IOUs in February, he warned.

Arizona is planning to raise or save money by privatizing prisons, and possibly imposing a four-day week for schools.

Despite the fact that Martin, Brewer and legislative leaders are all Republicans, they have disagreed — bitterly at times — over how to balance the budget.

Hanging over their heads is the threat of a credit downgrade from Moody's Investors Service, which rates the state Aa3, and Standard & Poor's, which maintains AA rating.

Both ratings have a negative outlook.

While both the governor and leaders of the Legislature are Republicans, they have maintained a standoff since June over how to balance spending and revenues. Calling last-minute cuts by lawmakers in June too severe, Brewer has insisted that the state seek additional revenue through a three-year sales-tax increase with voter approval.

While legislative leaders appeared to agree to the concept in a July special session, they failed to submit such a plan to the governor.

Amid the frantic budget-slashing, the economy continues to worsen in once booming Arizona.

Phoenix and Las Vegas were identified as the metro areas hardest hit by the housing market collapse and unemployment, according to a report from Brookings Institution MetroMonitor.

"Each of these metros has been devastated by the bursting of the housing bubble inflated by years of easy credit and a proliferation of exotic and usually subprime mortgages," the report said.

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