Arizona state budget (2008-2009)
From Sunshine Review
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Labeled as one of the "worst budget deficits in the U.S." [1] Arizona was projected to have a $1.6 billion shortfall for the fiscal year than ended June 2009. This projected shortfall represented 16 percent of the $9.9 billion state budget. The budget shortfall was caused by a combination of declining revenues due to declining tax revenues, and a budget process that estimated tax revenues for the fiscal year using a revenue estimate that turned out to be unreliable.[2] Estimates put the gap for FY 2010 at anywhere from $2.4 billion to more than $3 billion, even after that $580 million in cuts for FY 2009. [3]
Despite the state's budget crisis in March 2009, Gov. Jan Brewer requested lawmakers restore funding to the FY 2009 budget. On March 11 lawmakers vowed to restore a $40 million cut to health care programs and allow the state to qualify for federal stimulus money for child care programs and health care in rural areas. The fund sweeps were part of budget cuts in early 2009. [4] However, in order to reduce the state's deficit Gov. Brewer proposed temporarily raising taxes. State officials estimate the tax would increase state revenue by $1 billion per year. Additionally Brewer called for overall structural budget reform and said that she would like to reform the state's tax structure. [4]
“It’s astonishing that our latest budgets were built on the most optimistic revenue projections at a time when nearly every economic forecaster was predicting a downturn,” said Brewer. “The FY2009 revenues needed to grow by 8 percent to meet the budget, but instead declined by 12 percent.” [4]
[edit] Impact of budget woes
- In February 2009 the Governor requested all agency chiefs to prepare to cut spending up to another 20 percent on top of the cuts already made to their budgets. Legislators approved $580 million in spending cuts in order to bridge a $1.6 billion deficit for FY 2009. The balance was made up with cash taken from various special funds and an anticipated $500 million in federal stimulus dollars. However, the 20 percent budget cuts have not yet been approved.[3]
- on March 10,2009 legislators considered a $1 million reduction in funding ear-marked for safety equipment for police officers in the upcoming fiscal year. Lawmakers already removed $125,000 from that fund in January when they fixed the fiscal 2009 budget. The Department of Public Safety is facing an approximately $12 million cut. The department is expected to receive $347 million in funds this year. [5]
- Facing $37 million in cuts next school year, the Peoria Unified School District may lay off as many as 700 employees. The district is looking at cutting contracted employees, including teachers, who have less than two years of service. Funds from the federal stimulus could help alleviate the district's budget woes, said officials. [6] Various other districts too are looking at the possibility of laying off several hundred employees. Like most school districts, Scottsdale spends about 90 percent of its $169 million operating budget on salaries and benefits. [7]
- The Arizona State Library, Archives and Public Records has closed regular public access to the $38 million Polly Rosenbaum State Archives and History Building, which opened last fall and was dedicated in mid-January. The building will remain closed until the end of FY 2009. The closure came in light of a $1.45 million cut from its remaining $2 million budget for FY 2009. [8]
- The Department of Economic Security's announced on February 12,2009 furloughs for approximately 9,000 out of its 11,000 employees. Department programs range from unemployment insurance and food stamps to Child Protective Services and developmental disabilities. Furlough days for affected employees will vary but range up to nine for top managers said state officials. [9]
[edit] Budget background
The Arizona state budget is a combination of one and two-year budgets. The fiscal year begins July 1st and ends June 30th of the next year.
Every year, the Legislature adopts a one-year budget for 15-25 of the largest state agencies. In odd-numbered years, however, the Legislature adopts a two-year budget for all other agencies. In 2009 however, the Legislature will adopt only a one-year budget because of the state's budget crisis. In January and February the Appropriations Committee of both the House and the Senate hold hearings for individual agency budgets. Once passed by both branches the budget passes back to the Governor for final approval. [10]
Every month the Joint Legislative Budget Committee publishes an updated report on the state's revenue collections and results of individual agency reports. [10]
- FY 2009 budget draws 91 percent of its revenue from three sources: 47 percent from sales and use tax, 37 percent from individual income tax and 7 percent from corporate income tax.[10]
- 6 state agencies account for 91 percent of state spending: K-12 education 42 percent, Medicaid program 14 percent, universities 11 percent, corrections 10 percent, department of economic security 8 percent, department of health services 6 percent, and other 9 percent. [10]
- General fund spending has grown 8.7 percent annually.[10]
- Population/inflation has grown 5.8 percent annually. [10]
[edit] Budget figures
The following table provides a history of Arizona's expenditures and gross domestic product (GDP).
| Fiscal Year | Expenditures (billions) | GDP (billions) |
|---|---|---|
| 2000 | $27.3 [11] | $158.5 [11] |
| 2001 | $29.6 [11] | $165.4 [11] |
| 2002 | $31.9 [11] | $171.9 [11] |
| 2003 | $34.0 [11] | $182.0 [11] |
| 2004 | $36.1 [11] | $193.4 [11] |
| 2005 | $39.3 [11] | $215.8 [11] |
| 2006 | $42.7 [11] | $237.4 [11] |
| 2007 | $46.5 [11] | $247.0 [11] |
| 2008 | $50.6 [11] | $257.1 [11] |
| 2009 | $55.0* [11] | $267.5* [11] |
- NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
[edit] Projected budget gap
| Fiscal Year | Gap | Percentage of current general fund |
|---|---|---|
| 2008-2009 | $1.6 billion [12] | 15.9% [12] |
| 2009-2010 | $3.0 billion [12] | 29.8% [12] |
[edit] Ideas about why the crisis exists
- According to state reports January 2009's General Fund revenue collections were $662.5 million, or 21.9 percent below January 2008. The collection was also $81.8 million below the January revised budget forecast. In 2008 collections were 14.4 percent below January 2007's revenue. According to state officials January marked the 13th month of declining revenue. [13]
- January 2009 individual income tax collections were down 30.8 percent compared to January 2008 and were $57.7 million below the forecast. January’s withholding tax collection decrease of 14.7 percent was the largest decline since 1983. [13]
- Building permitting activity in 2008 reached its lowest level since 1975. Air passenger traffic at Sky Harbor International Airport fell by 5.4 percent in 2008, the steepest decline since 1980. The median price of a single family home in Phoenix in January 2009 was 44.0 percent below the level in January 2008.[13]
- There are roughly 50,000 surplus housing units in Phoenix. Building permits have slowed significantly in 2009 but once supply and demand is stabilized the Arizona government predicts 12 to 18 months for permits to pick up again. [10]
[edit] Proposed actions
[edit] Governor Jan Brewer
Gov. Brewer's tax increase proposal |
On March 4,2009 Gov. Brewer presented a 5-point long-term solution plan for how to address the state's budget crisis. Brewer called for structural budget reform to increase the state's "rainy day fund" and a commitment to a fair and honest revenue estimation process. Additionally Brewer suggested the improvement of "the voter protection act" which would create what she called "fiscal flexibility during extraordinary times of crisis." [4]The Governor also suggested additional spending cuts in light of the FY 2010 budget deficit, estimated to be at $3 billion. The cuts are estimated to be approximately $1 billion reduction in the General Fund. The fourth point was to "reform and modernize" the state tax structure. “We need a tax structure that promotes job growth, job sustainability, investment in Arizona and revenue stability,” said Brewer. And lastly because of the decline in state revenue Brewer suggested a temporary tax increase that officials estimated would increase state revenue by $1 billion per year. [14]
Former Gov. Janet Napolitano had proposed using debt financing to pay for school construction instead of the usual state practice of paying for cash. She also proposed putting traffic surveillance cameras on state highways and bring in $90 million in extra revenue from speeding fines. Napolitano resigned in January 2009 to become Secretary of Homeland Security under President Barack Obama. Gov. Brewer has been in office for approximately six weeks as of March 4,2009. [1]
[edit] Republicans
In January 2009 Arizona Republicans proposed cutting $1.5 billion from education budgets over the next year and a half. And although their plan was met with resistance Rep. John Kavanagh, chairman of the House Appropriations Committee said he welcomed alternative ideas but noted, "There's not much left to cut unless we really want to get draconian." For the current-budget year, university spending cuts would be the largest contributor to the budget solution: 16 percent of the total. Next to face a cut would be the state's Medicaid program and then the state's department of correction. Republicans Kavanagh and Senator Russell Pearce made the Republican proposal at the end of former Gov. Napolitano's term in 2009. [15] Pearce said one reason the state is now in financial trouble is that Napolitano insisted on growing the budget even when there were clear signs in the last two years that state tax collections were decreasing. The only way the current budget was "balanced," he said, was through both borrowing and various accounting "gimmicks." In addition Pearce noted that tax hikes are not what Arizona needs to stimulate the state's economy, in fact they will do just the opposite. However, not all state Republicans agreed with Pearce and Kavanagh's budget proposal. Rep. Rich Crandall said such sharp cuts to public education are politically unacceptable to many party members. [16]
[edit] Democrats
Democrats said that the state economy and education is at the top of their priority list, however, in early 2009 lawmakers passed a series of budget cuts in order to balance the FY 2009 budget. Included in the cuts were approximately $1 billion cuts in education. "Republicans ignored reasonable and responsible alternatives to balancing the budget, and now Arizona children are bearing the biggest burden," said Democratic lawmakers. [17] As an alternative solution to the budget crisis Democrats suggested $496 million in tax increases. Senate Democrats proposed eliminating $168 million worth of individual state tax credits and write-offs and $81 million worth of business tax breaks and credits. The plan also calls for borrowing $500 million against state lottery funds and putting more state prisoners under house arrest. [18] [19] In response to Gov. Brewer's 5-point plan for revitalizing the state's budget Democrats said that Brewer presented nothing more than a political outline that contained few details on how to revive our economy, defend education, and protect vital services for Arizona families. “Perhaps the Governor didn’t hear the thousands of teachers gathered outside, a detailed plan needs to be presented that defends funding for our schools and universities,” said Harriet Young, Chair of the Arizona Democratic Party. [20]
[edit] Economic Stimulus Package
Arizona is expected to receive $4.4 billion of the $787 billion dollar economic stimulus package. [21] [22] However, Gov. Brewer said that she might turn down the funds because she said she is skeptical about the unemployment funds. The funds would help extend benefits for people who been out of work for longer periods of time, however, some lawmakers said that they are worried the provision could leave the state paying for benefits long after the stimulus money runs out. [23] According to White House officials the package is expected to create approximately 70,000 jobs. [24]
According to preliminary reports Arizona is expected to receive: [25]
- $100.6 million for public transit [26]
- $522.0 million for highway funding
- $55.8 million for the Drinking Water State Revolving fund
- $32.4 million for home funding (community-based affordable-housing block grants)
- $26.9 million for the Clean Water State Revolving Fund
- $22.2 million for the Homelessness Prevention Fund
- $12.1 million for the Public Housing Capital Fund
- $246.2 million for Title I education for the disadvantaged
- $178.5 million for special education Part B state grants
- $18.5 million for dislocated workers state grants
- $18.0 million for the Department of Labor’s youth state grants
- $11.6 million toward education technology
- $10.3 million toward vocational rehabilitation
- $7.7 million for the Department of Labor’s adult state grants
- $6.9 million for State Employment Service grants
[edit] Budget transparency
Arizona currently has no statewide, official spending database online. However, a database will be placed online on or before January 1, 2011.[27]
[edit] Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.[28]
- It is estimated that Arizona will receive at least $3 billion in federal funding.[29]
- The economic recovery website for Arizona is available here.
[edit] Legislation
Legislation recently passed to create an online spending database.[30] The database will be placed online on or before January 1, 2011.[31]
Until that time, however, Arizona does have a website that details how the Office of the Treasurer distributes state monies. That website is accessible here. The Arizona Department of Administration also publishes a website that provides a database of statewide contracts for state agencies and over 400 colleges and universities, counties, cities, school districts, and qualified not-for-profit organizations. Users can view bids as well as closed contracts and pending solicitations. The site is available here.
[edit] Government tools
This table can be used to evaluate the level of transparency provided by a state spending and transparency database:
| State Database | Searchability | Grants | Contracts | Line Item Expenditures | Dept/Agency Budgets | Public Employee Salary | Exemption Level |
|---|---|---|---|---|---|---|---|
| None | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
[edit] Limitations and Suggestions
[edit] Support for creation of the database
Arizona Senate Bill 1235 (2008) was signed by Governor Janet Napolitano.
[edit] Independent transparency sites
[edit] Public employee salaries
Information about Arizona's state employee salaries, current as of July 2008, is available here, thanks to the work of www.tulsaworld.com.
The website www.azcentral.com has a public employee salary website available. Its data is current as of July 2007. It is available here.
[edit] See Also
Arizona taxpayer-funded lobbying
[edit] External links
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- The Goldwater Institute
- Arizona state budget, joint legislative budget committee
- Arizona state and local spending
- Arizona Office of the State Treasurer, Distributions
- Arizona Department of Administration, SPIRIT Automated eProcurement System
- Arizona Treasury Revenue Distributions database
[edit] Additional reading
- Budget information for Arizona's Maricopa Community College system is available here.
- The Arizona Republic,"Schools prepare for worst-case budget scenario," March 7,2009
- Arizona Capitol Times,"State, federal cigarette taxes to hit $3 per pack on April 1," March 11,2009
[edit] References
- ↑ 1.0 1.1 Phoenix Business Journal,"Arizona budget deficit labeled country's worst," February 28,2009
- ↑ Arizona Republic, "State's budget ax to cut deeply", January 11, 2009
- ↑ 3.0 3.1 East Valley Tribune,"Brewer not revealing proposed budget cuts," March 11,2009
- ↑ 4.0 4.1 4.2 4.3 Arizona Capitol Times,"Legislature to restore funding to '09," March 11,2009
- ↑ Arizona Capitol Times,"Budget options include $12M in cuts to DPS," March 10,2009
- ↑ The Arizona Republic,"District may cut 700 staffers," March 10,2009
- ↑ The Arizona Republic,"Schools prepare for worst-case budget scenario," March 7,2009
- ↑ The Arizona Republic,"Months-old state archives facility closes," March 4,2009
- ↑ Fox11AZ,"Arizona DES orders workers to take unpaid time off," February 13,2009
- ↑ 10.0 10.1 10.2 10.3 10.4 10.5 10.6 State of Arizona,"The Legislative Budget Process," December 10,2008
- ↑ 11.00 11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17 11.18 11.19 US Government Spending,"Arizona State and Local spending," retrieved March 11,2009
- ↑ 12.0 12.1 12.2 12.3 Center on Budget and Policy Priorities,"STATE BUDGET TROUBLES WORSEN," retrieved March 11,2009
- ↑ 13.0 13.1 13.2 Arizona Joint Legislative Budget Committee,"Monthly fiscal highlights - February 2009," retrieved March 11,2009
- ↑ The Arizona Republic,"Brewer lists steps to keep state afloat," March 5,2009
- ↑ The Arizona Republic,"GOP budget proposal slashes funds," January 16,2009
- ↑ East Valley Tribune,"GOP budget cuts would hit education hard," January 15,2009
- ↑ Arizona Democratic Party,"GOP axes schools, public safety - but keeps their slush fund," February 1,2009
- ↑ Phoenix Business Journal,"Arizona Democrats push for tax increases to balance budget, avoid cuts," February 24,2009
- ↑ Associated Press,"Arizona Senate Democrats' budget strategies," February 24,2009
- ↑ Arizona Democratic Party,"Brewer lacks a real plan for Arizona," March 5,2009
- ↑ The Arizona Republic,"Schools to receive stimulus by April," March 10,2009
- ↑ Arizona State Legislature,"Federal assistance to Arizona," February 19,2009
- ↑ ABC15,"Why Arizona could decide to turn down stimulus money," March 9,2009
- ↑ American Recovery and Reinvestment Act,"Estimated job effect," retrieved March 11,2009
- ↑ Phoenix Business Journal,"Arizona Stimulus Dollars," March 6,2009
- ↑ American Recovery and Reinvestment Act,"$8.4 Billion for Public Transit," March 5,2009
- ↑ Arizona Senate Bill 1235 (2008)
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ Wall Street Journal, "Stimulus Spending by State"
- ↑ Goldwater Institute, "Piercing the Fog: A Call for Greater Transparency in State and Local Government" executive summary, July 29, 2008
- ↑ Arizona Senate Bill 1235 (2008)
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