Lobbyist Highlights Bleak State Budget

Election gave Republicans overwhelming control, but only worsened the gnawing state budget crisis

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Republican state legislative triumphs have made Democratic lawmakers largely irrelevant, but left the party with sole responsibility for a daunting budget problem, said lobbyist and former lawmaker Mike Gardner at a recent Gila Community College board meeting.

“It’s a very, very nasty budget,” said Gardner, in a briefing on the legislative prospects for community colleges. Gardner heads Triadvocates, the lobbying firm for both GCC and Eastern Arizona College.

The state faces an $800 million deficit in the balance of the current fiscal year and a projected $1.4 billion deficit in the budget year that starts in June.

Gardner said short-term budget fixes and the debate about immigration and SB 1070 dominated the elections and the Legislature last year.

He said that in March, Gov. Jan Brewer was “unelectable” with a 33 percent approval rating, but “as soon as she signed SB 1070 she was unbeatable,” with an immediate jump to a 66 percent approval rating.

Even so, the Legislature passed 358 bills, 14 of which Brewer vetoed. The tally on the bills passed included 151 “strike all” bills, in which lawmakers replaced the language in a bill that had gotten through committee hearings with completely new language.

However, the election only made the metastatic budget problems worse, said Gardner.

The budget the Legislature adopted for Fiscal 2011 included $6.7 billion in revenues but $10.2 billion in spending — producing a whopping deficit of $3.5 billion.

Lawmakers tried to cover the shortfall with $918 million from a temporary sales tax hike, $625 million in budget sweeps from various state funds, $574 million in federal stimulus funds, $217 in other revenue increases and about $1.2 billion in cuts in state programs.

However, no sooner had lawmakers balanced the budget on paper the projections started to disintegrate.

For starters, voters rejected two propositions that would have let the lawmakers take money from early childhood education and the state lands trust fund. That added $469 million to the deficit. Moreover, federal funding dropped by $158 million and other revenues trailed some $300 million behind projections. All that means the Legislature will have to deal with a $825 million deficit as soon as it convenes in January.

As soon as they get past that problem, they’ll have to figure out how to deal with an additional $1.4 billion shortfall for the fiscal year starting in June.

Unfortunately, the Legislature already borrowed to the hilt and even sold off most state assets and buildings, which they must now lease back from private investors.

The Legislature “maxed out the credit card and sold all their assets,” said Gardner.

As a result, the budget still features $8 billion to $9 billion in spending and $6 billion in revenue.

“The bad news is that when the recession hit, we went straight down. The good news is that we’re at the bottom and the revenue path is starting to turn up again,” said Gardner. However, projections suggest it could take the state eight or nine years for revenues to return to the levels seen before the crash, barring a significant tax increase.

Even the three-year boost in the sales tax hasn’t brought in as much money as lawmakers hoped, given the continued weakness in the economy. The sales tax increase was supposed to have brought in $290 million by now, but has actually yielded only $260 million.

The state’s general fund gets about 55 percent of its revenue from sales taxes, 30 percent from individual income taxes, 5 percent from corporate income taxes and 10 percent from all other sources.

The Legislature only has effective control over the $8.5 billion in spending from the general fund, which accounts for only about a third of total state spending. For instance, the state pays 5 percent to 10 percent of the cost of AHCCCS — but can’t cut its spending on the program without running the risk of losing nine times as much in federal payments.

When it comes to the general fund, K-12 schools account for 42 percent of state spending. AHCCCS accounts for another 16 percent, the universities for 11 percent, the Department of Economic Security for 7 percent and corrections for about 10 percent.

The election left the job of fixing the budget squarely in the hands of the Republican Party, which swept every single statewide office.

Republicans also control 40 of the 60 seats in the state house and 21 of the 30 seats in the state senate, said Gardner. “The Senate Democrats could literally hold their party caucus in an elevator,” said Gardner.

Gardner noted Sen. Russell Pearce raised eyebrows when he signed his first letter to fellow lawmakers after his election as Senate President as “Tea Party President.”

“He’s not planning to govern from the middle,” said Gardner. “But he doesn’t have to, since the Democrats need six Republican votes to stop any legislation or pass any legislation in the Senate.”

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