A proposal to increase the state sales tax for a limited time, if passed, would eliminate Arizona's budget deficit this fiscal year, but provide only limited relief in the future.
A report from the Legislative Budget Committee said even if voters approve the proposed tax increase, revenue would not meet expenditures in fiscal 2011, 2012, and 2013.
Gov. Jan Brewer has proposed a temporary three-year increase in the current 5.6% state sales tax to 6.6% for two years. The tax rate would drop to 6.1% in the third year before reverting to 5.6% in 2013. Her proposal also includes a $400 million reduction in income taxes beginning in 2013.
The legislative report said the sales tax would bring in $388 million in fiscal 2010, $968 million in fiscal 2011, $822 million in fiscal 2012, and $325 million in fiscal 2013.
Without the higher tax, the state would have a deficit of $3.2 billion in fiscal 2010, but a surplus of $366.6 million if it were approved. However, even with the higher sales tax, the report projects revenue shortfalls of $892.5 million in fiscal 2011, $2.2 billion in fiscal 2012, and $2.7 billion in fiscal 2013.
Brewer had hoped to put the sales tax increase question on the November ballot, but delays in approving a budget plan means the first available election date would be Dec. 8.
Arizona has an issuer rating of Aa3 from Moody's Investors Service and AA from Standard & Poor's.
