DALLAS — Legislatures in the Southwest will face falling revenue, scattered calls for tax increases, and deeper cuts in spending when they open their regular sessions this month.
While the Texas Legislature does not meet this year, officials there are keeping a close eye on shrinking revenue to see if adjustments are needed in the current two-year budget that was approved in 2009.
Last month, Comptroller Susan Combs announced that sales tax revenue was down more than 14% in November, continuing a decline that began in February.
“Compared to a year ago, sales tax collections were down across all major sectors of the Texas economy, including oil and natural gas production, construction, manufacturing, and retail trade,” she said.
In terms of budget imbalances, Arizona starts the year in the worst shape among the eight states in the region, with a persistent $1.4 billion gap in the current fiscal year and an estimated $3.6 billion shortfall in the 2010-11 fiscal year beginning July 1. After four special sessions in 2009, lawmakers open their regular session in Phoenix Jan. 11.
Arizona’s financial crisis has already brought downgrades from Moody’s Investors Service and Standard & Poor’s, which dropped the state to A1 from Aa3 and to AA, respectively.
The state is preparing to sell $735 million of certificates of participation, representing its first use of long-term debt to cover operating expenses. Hanging over Arizona is a negative outlook from both agencies.
After a series of deep cuts in spending, most recently in December, Republican Gov. Jan Brewer is asking Republican legislative leaders once again to reconsider a three-year sales tax increase to help cover the state’s operating costs.
Brewer was expecting a measure to emerge from a November special session after an agreement with lawmakers, but the proposed tax hike failed to win passage.
In neighboring New Mexico, Gov. Bill Richardson is also calling for a temporary tax increase to cover expenses, but has ruled out raising taxes on income or businesses. Among the remaining sources of revenue is the gross receipts tax, which is similar to a sales tax.
In outlining the sources of revenue, a special panel appointed by Richardson suggested reinstating a tax on food, a levy that was discarded in 2004.
The food tax has generated the most controversy of all the proposals. Richardson is expected to specify which tax or taxes he wants to raise today.
The New Mexico session opens Jan. 19 for 30 days and is expected to deal primarily with budget matters. The Legislature meets for 60 days in odd-numbered years and 30 days in even-numbered years.
Like Arizona, New Mexico must fix the current fiscal year’s budget before moving on to next year’s.
Finance and Administration Secretary Katherine Miller said the state needs to boost its cash balance by about $137 million as a safety net.
One way to provide the cushion could be postponing about $150 million in capital projects, a move that would reduce the state’s bond issuance.
With revenue down only $10 million in the current fiscal year and projected to fall $53 million in the next, New Mexico is not facing straits as dire as those of Arizona.
Just across the Four Corners, Utah enters 2010 with a new governor, its triple-A ratings intact, and the challenge of covering a budget shortfall for the next fiscal year estimated at between $650 million and $850 million.
Gov. Gary Herbert, a Republican who filled the vacancy of Jon Huntsman after President Obama named him ambassador to China, will watch over a 45-day legislative session that begins Jan. 25. Herbert said his proposed budget will include no increases in taxes or fees.
When legislators in neighboring Colorado convene in Denver on Jan. 13, they will share Arizona’s challenge to balance the current fiscal year before moving to the next one beginning July 1.
Colorado’s current shortfall is estimated at $560 million, with a $1 billion budget gap awaiting in the 2010-11 fiscal year. While Gov. Bill Ritter Jr. acknowledged last month the need for spending cuts, he said the General Assembly must keep economic recovery and job creation its top priority.
Colorado’s eastern neighbor, Kansas, begins its legislative session Monday, with recess scheduled in late March. A wrap-up session that would begin April 10 would consider any vetoed bills or other special legislation.
Kansas lawmakers will be dealing with the results of two years of declining revenue, with budget experts predicting another two years of revenue drops before the economy revives. Most of the drops are attributed to declines in manufacturing jobs in the state, the Kansas Legislative Research Department said in December.
“A good deal of uncertainty remains for the Kansas economy and is underlined by very little projected growth in income and the expectation that unemployment will continue to increase during 2010,” the department said.
Gov. Mark Parkinson has reduced allocated expenditures in fiscal 2010 by $750 million from a $6 billion budget due to unexpected declines in revenue collections.
The cuts have reduced fiscal 2010 expenditures for public education by $300 million and for higher education by $106 million, bringing both to 2006 levels.
In Oklahoma, declining revenue means Gov. Brad Henry and the Legislature will have about 20% less to allocate in fiscal 2011. The Legislature will convene its 2010 session at noon on Feb. 1 and extend through March 28.
Lawmakers and the Board of Equalization in late December adopted a general fund revenue forecast for next year of $5.3 billion, down $1.3 billion from the $6.6 billion in spending authorized in the original budget for fiscal 2010.
Oklahoma will have a minimal fiscal cushion going into fiscal 2011 because officials and lawmakers have agreed to plug a budget gap in the remainder of fiscal 2010 with money that was to have been available for next year.
They have agreed to avoid severe cuts in fiscal 2010 with $600 million in federal stimulus funding that had been reserved for fiscal 2011 and some of the $600 million in the state’s rainy-day fund.
Henry has reduced state agency budgets by 10% in December and January, and anticipates having to do so through the remainder of fiscal 2010.
The state has also transferred a total of $233.8 million of cash accounts into the general fund since fiscal 2010 began on July 1, which must be repaid by the beginning of fiscal 2011.
The Arkansas General Assembly will be the latest to convene at noon on Feb. 8 for its first-ever budget session as established by a constitutional amendment voters approved in November 2008.
The new system requires annual rather than biannual budgets, with a regular legislative session in odd-numbered years and a dedicated budget session in even-numbered years.
The 30-day budget session of the 87th Arkansas General Assembly will end March 9 unless three-quarters of lawmakers agree to an extension until March 24, which would be the 45th day of the session.
Gov. Mark Beebe is expected to release a balanced budget for fiscal 2011, which begins July 1, before joint legislative budget hearings commence in Little Rock on Jan. 12.
A special committee that has been studying how to increase funding for highway projects is set to release its findings before the legislative session begins.
The Department of Finance and Administration in December released a state revenue forecast for fiscal 2010 of $4.49 billion, an increase of $89.5 million over expected fiscal 2009 revenues.