State Budget: What The Heck’S In It?

Confusing process leaves officials scrambling to assess the impacts

Rep. Brenda Barton (left) sharply criticized Gov. Jan Brewer’s (right) tactics on the state budget passage.

Rep. Brenda Barton (left) sharply criticized Gov. Jan Brewer’s (right) tactics on the state budget passage.

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State and local officials continued to scramble this week to crank out lists of winners and losers in the wake of the adoption of an $8.8 billion state budget after months of deadlock and days of outrage and trauma.

Rep. Brenda Barton (R-Payson) said she’s still trying to sort out what made it into the massive state spending plan, which sat for months stalled over the debate about expanding the Arizona Health Care Cost Containment System — then passed with mostly Democratic votes in two all-night sessions that outraged many Republican lawmakers — including Barton.

She said she’s still researching whether the final version of the budget provided funding for a variety of forest-related issues — including fire protection. The Roundup incorrectly quoted her last week as saying that the budget did include $400,000 for the Gila County Fairground. Actually, that money was for the state fairgrounds in Phoenix, she clarified on Monday.

“This week I’ll begin digging out to find out how badly the two-year (community colleges) did. Maybe there’s hope. UofA, ASU and NAU did very well on top of their tuition hike.”

Payson Mayor Kenny Evans said that at the last minute, lawmakers pulled one controversial element of a sales tax reform plan that Payson had feared would cost it $300,000 once the housing market recovers. The change would have eliminated a provision of the current law that allows cities to collect a portion of the sales tax on construction materials, even when they were bought elsewhere.

“On the last day they stripped out the primary contractor portion “to be dealt with in a future session” — so the impact from HB 2111 is supposed to only have a minimal negative effect,” said Evans.

The budget did include an extra $2 million for rural community colleges, but it’s unclear whether any of that money will come to Gila Community College, since it’s a provisional college.

Dwindling enrollment has put the local community college in a bind, converting a small budget surplus last year into an alarming deficit this year. The GCC board last week adopted a budget that boosted its property tax rate to the maximum allowed by law.

Barton voted against Gov. Brewer’s budget, along with all but nine of the House Republicans. However, the minority group of Republicans proved sufficient to adopt Brewer’s budget, which also received the support of virtually every Democrat.

The final budget included a 3.46 percent increase in spending from this year’s budget. The final budget came in about $100 million less than Gov. Brewer proposed in January, but about $30 million more than House Republicans had proposed.

The budget assumes a 3 to 5 percent growth in personal income and a 2 to 3 percent increase in employment over the next several years. The state this year has ranked in the top 10 nationally for economic growth, although the rate of growth remains well below pre-recession averages.

The growth should produce a 4.3 percent increase in state revenues for Fiscal 2014, rising to about 6.2 percent in Fiscal 2016.

The state had total net revenues of about $8.8 billion in the current year, which included nearly $1 billion from the temporary sales tax. By 2016, projections call for base revenues of $9.3 billion.

Most of the debate centered on the AHCCCS expansion, which will add to the medical plan’s rolls 300,000 additional low-income residents — and prevent the program from dropping another 100,000 of impoverished, childless adults.

The federal government will for the first three years pay 100 percent of the cost of adding some 300,000 women and children making up to 138 percent of a poverty-level wage who lack other medical insurance. The federal share will then drop to 90 percent.

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Rep. Brenda Barton

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Gov. Jan Brewer

Gov. Brewer’s proposal would drop coverage should the federal match fall below 80 percent. Normally, the federal government pays about 66 percent of the cost of the program — which currently covers about 20 percent of the state’s population and about 30 percent of Gila County residents. Although 1.1 million Arizonans are already enrolled in AHCCCS, the state still has one of the highest rates of uninsured people in the country.

Nonetheless, the cost of the program has grown by 35 percent since 2007 — making it the fastest growing program in the budget — followed by prisons.

Gov. Brewer noted that if the state didn’t expand the program, it would likely lose federal funding for several populations added to the AHCCCS rolls by voters previously. Continuing to provide coverage for those populations would cost the state an extra $800 million without the federal help.

Gov. Brewer’s proposal also included a tax on hospitals that will more than cover the state’s share of the expansion, resulting in a net increase to the general fund budget.

However, opponents like Barton fear that the federal government will run out of money and stick the state with the bill for the expanded program.

The debate about AHCCCS took up so much time and space that many other elements of the spending plan lawmakers hope will help build on the state’s slow but significant recovery from the recession were not closely reviewed.

The Joint Legislative Budget Committee concluded that Gov. Brewer’s spending plan will chip away at the built-in deficit, which this year totaled about $300 million. Money stashed from the proceeds of a temporary, $1 billion annual sales tax boost covered the shortfall this year — and next. But the JLBC predicted that state would move into the black by 2016, if the recession doesn’t recur. The governor’s office estimated that over three years the governor’s plan would actually spend $81 million less than House Speaker Andy Tobin’s proposed budget.

Other differences between the final adopted budget and the Senate version adopted several weeks ago included:

• Earmarked $22 million to cover previously deferred payments for small schools, which could benefit Tonto Basin and Pine schools.

• Cut $17 million from funding for the state department of education to set up a statewide system that would make it easier for school districts to report and track student test scores — a key element of education reforms in the state.

• Add $8 million for the University of Arizona to build a medical campus in Phoenix.

• Add $2 million for rural community colleges, a fraction of the amount cut over the last three years.

• Add $3 million to set up a contingency fund for Child Protective Services. Reports of child abuse and neglect have increased by 32 percent since 2009, but CPS has struggled to maintain staffing and funding. The agency no longer has the staff to even investigate all of the reports of abuse and neglect.

• Gov. Brewer’s budget and as well as the final version provides $19 million to hire 150 new CPS workers, on top of the 50 added this year.

• Eliminate $3 million to increase subsidies for foster parents, a measure intended to actually save the state money by starting to address a critical shortage of licensed foster parents in the state. The number of children in out-of-home care has risen 40 percent since 2010. In Gila County, the state has so few foster parents that abused neglected and abandoned children are often placed with foster parents in other areas — causing an even greater disruption in their lives.

• A provision to allow schools to increase their bonding capacity.

• The budget includes some new money for education, but only a fraction of the amount cut in the past three years — which constituted the deepest education cuts in the country as a percentage of the budget. Most of the new money will support changes that link school ratings and funding to student test scores. Districts whose students improve their performance on standardized test scores can get up to $500 extra per student. The amount devoted to the bonuses will rise from about $54 million in fiscal 2014 to about $271 million in fiscal 2018. About half of the money is new and about half is shifted away from other programs — including ultimately payments to schools whose students don’t perform as well.

• The budget restores about $8 million to help school districts pay for school resource officers, police officers stationed on campus who can provide both protection and classes regarding public safety issues. The state cut funding for school resource officers, which prompted the Payson Unified School District to largely eliminate the program.

• The budget does restore funding for the voter-established inflation adjustment for schools the Legislature has suspended for the past several years.

• The budget will make it harder for school districts to qualify for money to build new facilities — linking the funding to actually running out of room rather than projections. That could affect Payson schools if the region resumes growth and the current enrollment decline reverses itself. On the other hand, the budget also makes it easier for charter schools to get construction money for new facilities. That could help the Christian school that recently bought Frontier Elementary School.

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