DALLAS — The Republican chairmen of the Arizona Legislature’s appropriations committees have proposed cutting almost $1 billion from the state’s fiscal 2008 budget of $10.6 billion to cope with steep declines in general fund revenues.

Sen. Bob Burns of Peoria, chairman of the Senate Appropriations Committee, and Rep. Russell Pearce of Mesa, chairman of the House Appropriations Committee, said the revenue shortfall could be resolved with $630 million in reduced agency spending and taking $350 million from the state’s $685 million budget stabilization fund.

The Republican plan contrasts with the deficit-cutting plan outlined last week by Gov. Janet Napolitano that included $393 million in long-term debt financing for public school construction, withdrawal of $263 million from the budget stabilization fund, and cuts in state agency spending totaling $214 million.

Napolitano is a Democrat and the Legislature is controlled by Republicans, with 33 of the 60 House seats and 17 of the 30 Senate seats belonging to the GOP.

Legislative committees will meet this week, beginning today and continuing through Thursday, to hear from state agency representatives on how the cuts proposed by the governor and the GOP leadership would affect their operations.

The Legislature will convene for its regular 2008 session on Jan. 14. Lawmakers hope to have a solution to the fiscal 2008 revenue shortfall before beginning work on the fiscal 2009 budget. Initial estimates from the Joint Legislative Budget Committee show a looming deficit of at least $1.7 billion for fiscal 2009, which begins July 1.

The GOP plan calls for a 10% across-the-board reduction in spending by most state agencies, including higher education and health services, shifting $106 million in highway construction funds to finance operations of the Arizona Highway Patrol, and reducing revenue sharing with smaller towns by $850,000.

Under the plan, funds for Arizona State University would be cut by nearly $50 million, with reductions of $36 million for the University of Arizona and $16 million for Northern Arizona University.

The plan would save $42 million by halting work on school construction projects that did not break ground before Dec. 1, 2007, and cut $25 million by delay payments into the 21st Century Fund, which supports bioscience research.

Health coverage for some 19,235 children in Arizona would be eliminated by tightening the eligibility requirements for the KidsCare program to cut off payments to families making more than 175% of the federal poverty level, down from the current level of 200%. The shift would save the state almost $24 million.

Burns said the budgets cuts are unfortunate but necessary to meet the constitutional requirement for a balanced state budget.

“The challenge ahead is monumental and some difficult decisions are going to be required to get our fiscal house in order,” he said.

In a statement outlining the proposed cuts, Burns said the state’s budget process has been out of control for several years.

“The Legislature, with pressure from the governor, has seriously overspent, especially during fiscal 2004 through fiscal 2007,” he said. “Without a significant number of ongoing adjustments implemented by the Legislature during this upcoming session, the state’s bank account can be expected to go over the cliff in fiscal 2009.”

Napolitano spokeswoman Jeanine L’Ecuyer said the governor’s budget plan is better for Arizona than the one put forth by the Republican legislators.

“The legislative proposals do not move Arizona forward,” she said. “The governor’s cuts are surgical in nature, but this is a meat axe.

“The GOP plan hits education hard,” L’Ecuyer added. “The governor’s plan protects the investment that Arizona has made in higher education. This state has relied on housing and population to drive its economy for too long. If this situation tells us anything, it tells us that the way to the future is through education, high-tech industries, and research.”

L’Ecuyer said the Legislature and the governor collaborated on a fiscal 2008 budget that narrowly balanced revenues and expenditures, but anticipated revenue increases never occurred.

“Everyone was surprised when revenues tanked in May and June,” she said. “There wasn’t a lot of fat in the budget to begin with.”

In its report on state revenues in November 2007, the Joint Legislative Budget Committee said the Arizona housing market has slumped to levels not seen since the early 1990s.

Total general fund revenues for the first five months of fiscal 2008 of $3.72 billion are off $336 million, a drop of 8.3%, from the estimate used to develop the state budget. Sales of single-family homes were down 35% from November 2006 and the number of single-family building permits issued during the month fell by 35%.

The Finance Advisory Committee, a panel of 16 economists that advises the Legislature, said in mid-December it expected the economy to falter in 2008 because of an oversupply of housing and a high level of loan defaults associated with the subprime mortgage market. The Arizona housing market will bottom out in 2009 before beginning a gradual recovery in 2010, the panel said.


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