State budget solutions eluding lawmakers

No one thought fixing the state’s budget would be easy. But no one thought it would be virtually impossible, which is where things stand today, with a $1.6 billion deficit for this fiscal year, which ends June 30, and a projected $2 billion deficit for next year.

“It is difficult and it’s a reflection of what’s going on in the economy,” said Rep. John McComish (R-Ahwatukee Foothills).

“We reflect the people’s wishes and people want us to cut, but they don’t want us to reduce services, and they don’t want us to increase taxes. The legislature gets mixed signals from the people and that’s what we are reflecting,” said McComish who is also the GOP majority leader in the House.

Experts believe that state revenues will fall by $1.5 - $2 billion a year for the next four to five years, making a balanced budget virtually impossible.

“This state has a real problem that we are in denial with,” said Lee McPheters, an economist at Arizona State University’s W.P Carey School of Business.

The problem is that 90 percent of Arizona’s general fund comes from sales taxes, plus individual and corporate income taxes, all of which have plummeted in the past two years and aren’t expected to rebound for years.

Democrats have been excluded from most budget discussions, partly because they have been lobbying for changes to the tax system that could include things like expanding services that are taxable while decreasing the sales tax rate.

“We do need to fix the revenue system,” said Rep. Rae Waters (D-Ahwatukee Foothills). “We do need to find ways to pay for what is important to Arizona citizens. From a personal perspective there has to be a comprehensive solution.”

But for many conservative Republicans, any change to the tax system that could be construed as an increase is unacceptable.

But desperate times might result in desperate actions.

“I believe we will eventually have to have more bipartisan talks and I think that will be part of the solution,” said McComish.

Plus, he said, “The one cent sales tax referral that (Brewer) has been pushing for months is still on the table. The idea is still alive and I believe it will be part of an eventual solution.”

But, McComish warned, even if a one cent temporary sales tax is approved, and other revenue enhancements including increased borrowing are found, there will still have to be more cuts to services and the cuts will be deep.

Lawmakers are expected to go back into another special session in a couple weeks to take another bite out of the deficit, before they return in January for the regular legislative session that will have to deal with next year’s deficit.