Calling it unnecessary and fiscally unsound, House Republican leaders last week rejected a proposal by Gov. Janet Napolitano to borrow $300 million to plug the hole in the state’s budget.
House Majority Whip John McComish said members of his caucus believe they can meet their constitutional mandate to balance the budget without spending money now that would have to be paid back, with interest, in the future.
Instead, McComish said the goal is to identify about $300 million that actually can be eliminated from the state’s $10.6 billion budget. He admitted, though, neither he nor anyone in leadership has even a clue at this point what can be cut.
McComish said most Republicans are conceding there is no way to make up the entire deficit, currently anticipated at about $600 million, strictly through trimming.
He said that’s why GOP leaders believe the balance should come by tapping the state’s “rainy day” fund, currently with a balance of about $700 million.
On Wednesday, legislative budget staffers reported state tax collections are continuing to fall behind the estimates lawmakers used when they adopted that $10.6 billion spending plan in May. After just the first three months of the fiscal year, revenue was $148 million below projections.
Napolitano is drafting her own plan to make up the difference.
But her goal is $100 million in spending cuts, $200 million from the rainy day fund — and borrowing $300 million for school construction rather than paying cash.
McComish said the consensus of House Republicans makes that a nonstarter.
“While we have money in the bank, it doesn’t make any sense to charge on the credit card,” he said. McComish said that simply delays the spending and puts taxpayers in the position of paying interest rather than actually dealing with the problem.
That stance puts the House Republicans — and a good many of their Senate colleagues — on a collision course with the governor. She wants to borrow to avoid making deep cuts in state spending.
Gubernatorial press aide Jeanine L’Ecuyer said there’s nothing wrong with borrowing for capital improvements like schools. “It’s simply a smart way to manage money,” she said.
Despite the rhetoric, neither side actually has yet identified a single program or service that would be trimmed.
That task could prove more daunting than it seems on paper. That’s because there really isn’t $10.6 billion on the table.
The largest chunk of the state budget is $4.4 billion in state aid to education. Virtually all of that is off-limits to budget tinkering because lawmakers cannot alter a funding formula approved by voters.
Similarly, legislators cannot alter eligibility standards for the Arizona Health Care Cost Containment System, the state’s Medicaid program, also because of a voter mandate. That agency gets close to $1.3 billion of state funds a year.
Napolitano has declared higher education funding — $1.1 billion for universities and $168 million for community colleges — off-limits. And McComish said he doubts lawmakers would touch the $910 million for the Department of Corrections.
That leaves less than $3 billion up for grabs to save $100 million or $300 million, depending on whose plan is adopted. But the cuts actually have to be twice as deep on an annual basis, as half the budget year will be gone — and half of each agency’s money already spent — by the time lawmakers convene to address the problem in January.
Despite that, McComish said there is little interest among lawmakers in convening a special legislative session before that.