DALLAS — The Arizona Department of Transportation estimates it would have to fire up to 60% of its workforce, halt all non-emergency maintenance, and close all highway rest stops under a legislative plan to close a $2 billion budget shortfall.
The estimate was one of 115 submitted by state agencies to Gov. Jan Brewer, who asked how a 15% reduction in funding would affect their operations.
In her letter requesting the estimates, Eileen I. Klein, director of the Office of Strategic Planning and Budgeting, noted the impact of Arizona’s unbalanced budget.
“The severity of our fiscal situation has not escaped the notice of the financial markets,” she wrote. “As of last week, two major credit rating agencies have now revised downward the state’s rating outlook. While credit ratings themselves have not yet been impacted, it is clear that without a comprehensive solution to address the deficit, the state risks paying higher interest rates in the future. This is not only an issue for outstanding debt but for future issuances such as those authorized in the current budget.”
Standard & Poor’s and Moody’s Investors Service have both pointed to Arizona’s failure to enact a balanced budget as a key factor in their negative outlooks. But the state’s conservative fiscal policies have been cited as positives in sustaining the AA issuer rating from Standard & Poor’s and the Aa3 from Moody’s.
As one of the largest debt issuers through the Arizona Transportation Board, ADOT is a critical component of the state’s credit profile. The two funds that back the department’s revenue bonds — the highway user revenue fund and the state highway fund — have been tapped over the past two years to help balance state budgets.
“More than $500 million in transportation funding has been diverted in the past year to address the state’s budget challenges,” wrote director John Halikowski. “ADOT’s customers pay their own way by using transportation services, but because the state is using transportation funds to pay for other needs and people are buying less fuel and fewer vehicles, we are simply running out of money.”
An additional 15% cut on top of the previous reductions would bring the decrease in ADOT funding to 35%, Halikowski said. The agency has already deferred $370 million in highway construction projects. So the additional 15% would bring dramatic changes, he wrote in a letter to the governor’s office.
“We believe achieving such a significant reduction in the remaining months of the fiscal year will require the termination of 50% to 60% of ADOT’s active workforce (2,000 to 2,400 employees) no later than Jan. 1, 2010,” he wrote. “Staffing cuts of this size are unprecedented, and if implemented, would be devastating to the department, our employees, and our customers.”
A greater threat could be the loss of federal funds if ADOT fails to maintain adequate levels in its state highway funds. That could cause curtailment of even more projects.