DALLAS - Arizona's revenues and the popularity of its new governor continue to fall as the state operates under a budget that remains unbalanced.

With $573 million in tax income for July, revenue for the month fell 10.5% compared to the same month in 2008. Revenues are running 5.7%, or $33 million, below the forecast adjusted in June.

Meanwhile, state spending in July exceeded the same month last year by $117 million, according to the report by the Joint Legislative Budget Committee.

Spending in the first month of the new fiscal year was increased because of budget gimmicks designed to balance the previous fiscal year's budget. The July 2009 outlays ballooned to $1.74 billion because $600 million in public school payments were shoved into the current fiscal year that began July 1.

At the current rate, Arizona's budget is short by about $2.3 billion, according to the committee.

The report notes that the Legislature sent Gov. Jan Brewer a balanced budget on July 1 but that the first-year governor used her line-item veto to spare certain sectors from extremely deep cuts.

The Republican governor called lawmakers into special session last month to raise new revenue through a temporary sales-tax increase, contingent on voter approval.

But the Legislature again refused to raise any new taxes. Brewer must decide soon whether to accept the cuts or veto the bills and call for a new special session.

Politically, both Brewer and GOP lawmakers are on thin ice, according to recent polling.

A mere 18% of likely voters said they would vote for Brewer, while 46% said they would vote for a generic "someone else," according to a poll by the Cardon Group, an Arizona consultant. The remainder were undecided.

Brewer, the former secretary of state who ascended to the governor's office when Democratic Gov. Janet Napolitano joined the Obama administration, received support from only 23% of Republicans, according to the poll. Brewer has not announced whether she plans to run for election in 2010.

According to the poll, 49% of voters say they approve of Brewer's sales tax plan to balance the budget, while 43% disapprove.

The state is on the wrong path, according to 57% of the respondents.

Only 21% of respondents thought the Legislature was doing a good job, while 61% disapproved.

Arizona's fiscal crisis is one of the worst in the nation. In the first quarter of 2009, income taxes collections fell 56%, the largest decline of any state in the nation, according to a Rockefeller Institute study.

The falling revenues in April - usually the plushest month for the state - forced Treasurer Dean Martin to issue short-term IOUs to fund state operations.

In July, sales tax collections were down 18.4% compared to July 2008, and were $22.9 million short of the monthly forecast.

July individual income tax collections were down 11.5% compared to July 2008, and were $29 million below the estimate.

Even if the Legislature and governor agree on a budget-balancing proposal based on current projections, the state will likely face another shortfall before the fiscal year ends due to a number of factors, such as further declines in revenue and lost savings due to delays in funding certain programs, according to the Joint Legislative Budget Committee's report.

"With only one month of data, it is too early to project the status of FY 2010 baseline revenues," the report noted. "The FY 2010 baseline revenue estimate assumes growth of 0.9% over FY 2009. To the extent that July revenues were $33 million less than that forecast, however, it is unlikely that amount will be recovered in the remaining 11 months."

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