The state’s budget shortfall is growing by nearly $1 million a day, and that pace could pick up before the Legislature and Gov. Janet Napolitano act to stem the losses.
State agencies are on track to spend $360 million more than will be collected in tax revenue this fiscal year, even after 14 months of budgetcutting battles at the Capitol. In fact, the Legislature’s ability to match spending with income seems to be getting worse instead of better, according to a Tribune analysis of revenue reports since January 2001.
There has plenty of talk at the Capitol about a "budget crisis" that requires "urgent action." But some veteran lawmakers said it appears officials are speaking when they should be acting.
"Somebody is holding us up," said Rep. Russell Pearce, R-Mesa. "We’re not moving forward. The longer we go, it makes the bad decisions easier because they feel painless at the time and ignore the future."
Since the new Legislature came into office Jan. 13, most of the attention has been on how lawmakers will deal with a possible billion-dollar gap in the 2003-04 budget. But the shortfall is only theoretical because no budget has been adopted and the fiscal year doesn’t start until July 1.
Meanwhile, revenue reports and a review of this year’s budget shows the state already is in a deficit of more than $200 million from July to December, the first six months of fiscal year 2002-03. That translates into overspending by $990,000 a day, despite a Nov. 25 special session that adjusted the state’s General Fund by $215 million and ordered the elimination of 1,700 state jobs.
Staff members of the Joint Legislative Budget Committee are predicting the deficit could reach $360 million if no action is taken before the current fiscal year ends on June 30.
The year can’t end with a deficit as the state constitution requires a balanced budget. Napolitano’s ability to work with Republican leaders of the Senate and House will determine their success in addressing the 2003-04 budget in the coming months.
"It really does matter that the alligator of 2003 is decided early on so we can start concentrating on the much larger and more treacherous dinosaur," said George Cunningham, the governor’s deputy chief of staff for finance.
Napolitano wants to protect agencies from any further cuts this year, using a variety of special funds and accounting tricks to cover the shortfall. Pearce, the House appropriations chairman, and his Senate counterpart want lump-sum reductions of 3 percent to most state agencies and 5 percent cuts to universities and community colleges.
The clash of proposals means there won’t be any budget action before late February. Several officials said that’s the best anyone could expect with a new governor and new lawmakers in many key leadership positions.
"I’d like to address the problem now," said Sen. Jim Waring, R-Phoenix, whose district includes western Scottsdale, Cave Creek and Carefree. "But I didn’t have an office until three weeks ago. It’s part of the process of getting settled in and making informed decisions."
But economists and private business managers agree that the Legislature’s task only becomes more difficult as the days roll by.
"Government is like most service industries, as personnel is the biggest part of the budget," said Tracy Clark, associate director of Bank One Economic Outlook Center at Arizona State University. "The longer you wait to enact the cuts, the more likely the cut is going to have to be a job cut."
Pearce said the deficit could get even worse. The last fiscal year ended with a $75 million deficit after lawmakers voted on that budget three different times, forcing the state to completely drain its rainy day fund.
"Our optimism has not proven accurate," Pearce said. "Let’s be honest. Let’s make the tough cuts that need to be made. You can’t deal honestly with ’04 until you deal with ’03. Every day hurts us."