The Arizona Department of Commerce dodged a bullet in this year’s session of the Arizona Legislature and will continue to perform its economic development activities as a separate entity under the budget plan approved by lawmakers this week.
The department had been threatened with extinction as the state faced a $1 billion shortfall in the upcoming fiscal year beginning July 1.
Republican Party leaders floated a plan in the House of Representatives to combine the department with the state Tourism Office, a move that Commerce officials said would have in effect killed the department because most of the money for the combined agency would have gone to tourism-promotion activities.
That plan failed in the Senate, however, as Democrats and a few Republicans combined to keep the two agencies separate and to fund both. That action was supported by Gov. Janet Napolitano, who said the state needs an economic development department to attract new businesses, especially to rural counties where local governments lack the resources to do their own economic development.
The budget approved by the legislature includes $3.6 million for the Department of Commerce, about $300,000 less than the agency received this fiscal year. The Tourism Office will get $9 million, about the same as this year.
"Clearly we have come back from the dead," said Joe Yuhas, deputy director of the Commerce Department. But he added the state will be spending far less on economic development than most of its rivals.
"As it stands, only five other states are spending less general fund dollars on economic development activities," he said. "This keeps us in the game, but it doesn’t make us competitive. . . . Unless we redouble our efforts to diversify our economy, these budget crises will become the norm."
Yuhas added the new budget also cuts in half a separate program that provides job training assistance to new and existing Arizona businesses. That cut will make it tougher for the state to attract companies that want to relocate, he said.
"We are not a state that is rich in incentives, and this takes a substantial portion of one we do have away," he said.
Rep. Russell Pearce, R-Mesa, chairman of the House Appropriations Committee and a supporter of merging commerce with tourism, said lawmakers have missed an opportunity to make state government more streamlined and efficient. Under the plan he proposed, the Department of Commerce would have continued to be funded until a special committee made recommendations on which of its programs, if any, should be retained.
"All of the good government reforms were taken out by Democrats in the Senate," he said. "This would have been just a little tweak, but it’s still disappointing when we miss these opportunities."
Pearce questioned if enough tax revenue will be available in the coming year to fund the Commerce Department, saying the lawmakers budgeted $500 million more in expenditures than the state is likely to receive. He predicted the legislature will have to retackle the shortfall in special sessions.
"We have avoided making the tough decisions," he said.
The budget is subject to approval by Napolitano, who has line-item veto power to reject elements she doesn’t like. Her aide, Pati Urias, said the governor planned to take a few days to study the budget before deciding what action to