With only Republicans in support, the House Appropriations Committee adopted $2.8 billion in budget fixes Tuesday, including repeal of the state property tax, a maneuver to force schools to raise local taxes and at least two provisions likely to provoke lawsuits.
The vote came after the GOP majority defeated several amendments offered by Democrats to restore some of the dollars cut from various programs, including health care for the poor and special help for the developmentally disabled. Those proposals provoked derision from Rep. John Kavanagh, R-Fountain Hills.
"I guess it's great to be a Democrat in a situation like this," he said. "It plays great with all the constituencies. The problem is, the money's not there."
Overall, the plan includes $649 million in spending cuts. But that figure actually is slightly misleading because it follows about $580 million sliced just three months ago.
One way the plan saves money for the state is by freezing basic state aid to schools at the current per-pupil level of $3,202. But Panfilio Contreras, executive director of the Arizona School Boards Association, said that is illegal.
In a letter to lawmakers, he said a 0.6-cent sales tax hike approved by voters in 2000 to fund education also mandates that all components of state aid increase at the rate of inflation or 2 percent, whichever is less.
GOP legislative leaders, however, are relying on a far more limited reading of the law: They contend that the voter mandate is met by increasing any component of state aid, and the legislation would increase by 2 percent only the part of the formula of what the state provides for school bus transportation.
Contreras said that unless lawmakers boost the entire formula, his organization "will seek to enforce that position in court."
That's not the only threat.
Lawmakers also are taking $90 million held by the state's three universities in various special funds, ranging from bookstore accounts and residence hall fees to proceeds from the sale of bonds.
Jaime Molera, lobbyist for the Arizona Board of Regents, produced a legal memo calling it "an impermissible tax on universities." And Molera told lawmakers that if the raid on the funds becomes law, the regents would be "compelled" to sue.
Other controversial provisions include taking $255million from what legislative leaders say is illegally accumulated excess cash being held by school districts and seeking $210 million in "voluntary" contributions by cities from their accumulated development impact fees.
Tuesday's debate centered on what Arizona can afford.
Sales tax receipts, which make up more than 40 percent of state revenues, are down sharply as people spend less. Income taxes, which make up more than 30 percent of the state budget, also are off as layoffs continue and the state collects less in withholding from worker paychecks.
While $1 billion in stimulus funds helps, it doesn't plug the hole.
Rep. Rick Murphy, R-Glendale, expressed frustration with requests to restore funding for one favored program or another.
"Everybody's taking a cut," he said, citing the anticipated $3 billion deficit. "It's ridiculous to think there's some agencies somewhere that shouldn't."
But Rep. David Schapira, D-Tempe, said Republican lawmakers were looking at only one side of the equation. Worse yet, he said, they actually are giving up revenues by permanently repealing the state property tax.
That levy was suspended in 2006 when the state had a surplus. Absent legislative action, the tax, which would generate about $250 million a year, will return automatically later this year.
Schapira said there's nothing wrong with that. But Kavanagh called it an ill-timed tax increase.
"We're bleeding jobs desperately," he said, referring to the latest figures showing state unemployment at 7.8 percent. "When you simply pass on these expenses to the private sector and to the public who will have less money to spend in the private sector, you're going to wind up having more and more people out of work."
The GOP budget does include a tax hike of sorts: Lawmakers are altering the formula that determines local school-district tax rates. That saves money for the state and passes on $85 million in higher taxes to homeowners.
Rep. Kyrsten Sinema, D-Phoenix, said there wouldn't be the need to cut spending quite so much if lawmakers would restore $9.5 million they took from the Department of Revenue as part of the January budget cuts. The result, she said, was that agency laying off about 300 workers, a third of its staff, impairing the ability to find people who are not paying their taxes.
Kavanagh said that presumes there's money to be had.
"Even if you can find a lot of these people, they're not going to have any cash now ... because of the economic downturn," he said.
Despite Tuesday's committee action, some key elements of the package may be changed to get the 31 votes necessary in the full House for approval. And Senate President Bob Burns, R-Peoria, said his own chamber has some different ideas on how to balance the budget, though it has not yet scheduled hearings.
