The state isn’t bringing in enough money to pay its bills this year as the economy isn’t recovering as fast as anticipated.
Figures released Wednesday by the Joint Legislative Budget Committee estimate tax collections are running at a rate that will leave the state with $206 million less than the amount of money budgeted. On top of that, federal funds for programs are anticipated to be $158 million less, with another $100 million shortfall in funding for public education.
But the real problem is that lawmakers built the budget counting on approval of two measures in November allowing them to divert funds voters had previously set aside to preserve open space and for early childhood development programs. If Propositions 301 and 302 are defeated, that increases the hole by another $469 million, to $825 million.
And at that point, key legislative leaders say they will have to come into special session, before January, to make even deeper cuts to education and health programs.
Whether that is legal, though, remains in question: The state agreed not to trim those two areas of the budget in exchange for accepting federal stimulus dollars. But Senate President Bob Burns, R-Peoria, said Arizona may simply have to ignore that commitment.
“At some point we have to take the position that we can’t honor the ‘maintenance of effort’ (provision) because the money isn’t there,’’ he said. “At some point, you can’t keep spending what doesn’t exist, regardless of the requirements of what the federal government tells you you have to do.’’
Sen. Russell Pearce, R-Mesa, foresees a challenge to the federal government. He said four states already have said they can’t meet the requirements not to cut state spending on programs as a condition of taking stimulus dollars.
“I think Arizona’s in a position to make some of those same arguments: Can’t do it, not going to do it, you can’t tie our hands like that,’’ said Pearce, who chairs the Senate Appropriations Committee.
“We have a responsibility to our citizens,’’ he said. “And (if) the feds don’t like it, some of that is just too bad.’’
Pearce has his sights set on the Arizona Health Care Cost Containment System, the state’s Medicaid program, saying it has the fifth most generous set of benefits of any program in the nation.
“The socialist programs have to be tweaked,’’ he said. “You can’t continue to be a welfare state when you don’t have money, giving things away when you don’t have money.’’
But the problem of cutting goes beyond the fact the state got federal stimulus dollars to run its Medicaid program.
The new federal health care bill approved by Congress earlier this year eventually will provide states with even more money for Medicaid. But the law also says that eligibility for those extra funds is contingent on states maintaining their programs the way they are now.
And that’s only part of the problem: Richard Stavneak, staff director of the Joint Legislative Budget Committee, said the federal law says any state that trims its program loses all of its federal Medicaid dollars, including those for which it qualifies now. And that totals about $7 billion a year.
Paul Senseman, press aide to Gov. Jan Brewer, said she has no solution to how to balance the budget and yet meet the federal mandate. He said that is going to have to come from Washington.
“The federal government created this mess, they’re going to have to fix it,’’ Senseman said. “There is not a state solution.’’
Senseman also noted that Brewer is party to a lawsuit against the federal government seeking to overturn the law and its requirements.
Health care isn’t the only target.
Rep. John Kavanagh, R-Fountain Hills, who chairs the House Appropriations Committee, said he believes the universities will have to give up some money, if not this year then certainly the next, where the gap between revenues and expenses is already estimated at $1.4 billion. He said the universities have escaped the budget woes relatively unscathed, taking cuts that over three years totaled only 5.3 percent.
Pearce agreed that the universities need to take a hit.
“We’ve not asked higher ed to sacrifice anything,’’ he said. “And I think everybody’s got to pony up this time.’’
That also includes K-12 education, he said, where Pearce believes the state could save by forcing districts to cut what they spend outside the classroom — everything from administration to utilities and transportation — without trimming expenses for teachers and supplies.
But Pearce already has declared public safety spending, including the state prison system, off limits to cuts.
The problem of how to balance the budget goes beyond whether the state can get out from under the “maintenance of effort’’ provisions of the federal aid. Legislators have been reticent to make further cuts to state aid to education beyond what they already have taken.
That, then, leaves the same kind of budget maneuvers lawmakers have used in the past to balance the books: borrowing, raiding special funds and accounting maneuvers to defray certain expenses.
Burns said if the two ballot measures fail it would make the most sense to have a special session — even one involving lame-duck legislators who are not coming back in January — rather than wait until next year. He said the longer lawmakers wait to cut spending or enact other budget maneuvers, the more difficult it will be to accomplish.
Brewer brushed aside questions of whether it was responsible for lawmakers to approve — and for her to sign — a budget built on an assumption that voters will approve diverting the funds from the two programs.
“The bottom line is the budget is based on projections going into the future,’’ the governor said.
“We’re projecting that people will look and take real consideration in determining if they want to support those propositions or not,’’ she continued. “If not, then they will have spoken and we will have to make the adjustments accordingly.’’
Pearce said there are some bright spots in the budget report presented Wednesday to lawmakers.
For example, he said the state has saved about $350 million since 2007 in state aid to education. He credited that to lower enrollment than anticipated — and some of that to changes in state laws designed to convince illegal immigrants to leave the state.
paul1966 posted at 6:19 pm on Wed, Sep 29, 2010.
I'm sorry but I don't regard education as a "socialist program" or a part of a "welfare state". And any economist will happily point out that there are two strategies to be used in trying to get out of a recession of this scale - true, there have to be spending cuts, but revenues also have to be increased. You can't do it all with one or the other. And I think the so-called legislators (I use that phrase since I don't think much of the "legislation" they've written to date...) are being disingenuous when they say that education has "escaped the budget woes ... unscathed" - anyone who has kids in AZ public schools KNOWS that BS - class sizes are way up, all kinds of things have been cut across the board. There are many less teachers, and yes, less administrators. How far into the bone are we expected to cut - to the point where the whole system stops working?? I think this may be another Washington monument maneuver...
abimopectore posted at 7:46 pm on Wed, Sep 29, 2010.
As long as the state of Arizona keeps electing these unqualified lawmakers, we're going to be in the hole and it's only going to get deeper. Any legislator who advocates cuts in education, not only jeopardizes Arizona's future but creates an environment where economic development will not succeed either now nor into the future. I hope the voters start waking up because the people who are leading the state houses have a narrow focus and an interpretation of the facts on the ground that is misguided. It truly makes me wonder about the education they've supposedly obtained through the years.
retired03 posted at 11:57 am on Thu, Sep 30, 2010.
biggest copout by state legislatures... gets tiresome too. BLAME THE FEDS for your incompetence.
Haddie Nuff posted at 2:55 pm on Thu, Sep 30, 2010.
Thank you, Retired! I was thinking the same thing.
Until we get leadership that can see beyond tomorrow we're going to be in this situation. We're economically unstable. We've just had our credit rating downgraded again, we're number two in poverty, and we're on the bottom of the list for education funding. What business is going to be interested in moving here under those circumstances?
We have leaders who want to talk about being the kidnapping capitol of the US, headless bodies in the desert, daily gun battles in the streets of our cities, and intentional accidents on the freeways. This is especially egregious considering none of it is true. What business is going to be interested in moving here under those circumstances? Why not talk about the good points of living in Arizona?
We don't spend the money we have wisely, and the answers to our problems are to sell the state buildings, then lease them back? Take money from the state parks accounts, then close them, even though the parks were self supporting and got no money from the general fund? Close rest areas? Budget money that can't be touched for the general fund without voter approval?
Perhaps it's time everything came up on the budget chopping block, even those pet projects that our legislators make a profit from? Instead the only thing targeted is health care and education.
We need leadership, not excuses.
Rich posted at 5:41 pm on Thu, Sep 30, 2010.
It's not real hard. Don't elect incumbents, if the problems aren't solved in two years, they will be in four. When you continue to accept incompetence, all you get is incompetence. The thing is, that doesn't happen. The contest is, simply 'can you produce results?' No one currently in office can, they've had a shot, didn't make the grade. If you actually allow them to continue, then, ultimately, it's your own fault. Two years ago you decided to change, the diaper needs to be changed again. As voters, that's your role. The partisanship, the 'issues,' it's all crapola. The people in office now haven't produced. Don't get fooled. Unfortunately, we will.
tededitedit posted at 9:07 pm on Thu, Sep 30, 2010.
It would be nice if our business leaders would stop cheating and put U.S. citizens to work in Arizona. It would be great if our government would stop providing free education, school lunches, and medical care to illegal aliens. Unfortunately, the underground economy in the private and government sectors is too strong for that to happen. What's probably going to happen is more tax increases on the ballot. If you take government workers, teachers, first responders, their families, and the workers of private companies that depend on government contracts, they can swing any ballot measure in their favor now to keep their jobs.
omakone posted at 12:07 am on Sat, Oct 2, 2010.
This is such a joke. The money is not there to keep funding everything for everyone. Nothing should be off limits to budget cuts, including the sacred cow "education". Every year we throw more money at education and get less for the effort. There is so much waste in the public education system it should make every citizen in this state sick. Instead the politicians in the education system tell everyone how the teachers are buying supplies to get through the year. This is a flat out lie. As an example the high school my daughter attends has a vice principal of home economics who makes into the six figure range of salary and the school cut the home economics program out of the school three years ago.
Also, I have been hearing every where that attendance is down in the public schools anywhere from 7% to 15% depending on who you listen to, due to the immigration bill. If that is the case, cut the public education budget by 10% and there is a quick $360 million of the short fall.
It is about time we get rid of all these bleeding heart cowards and get some people in office who will make the tough decisions and actually balance the budget, rather than rely on creative book keeping like the last couple of governors.