Calling the governor’s revenue projections too rosy, Republican budget crafters said Tuesday they want a much smaller spending plan than she proposed last week.
Rep. John Kavanagh, R-Fountain Hills, who chairs the House Appropriations Committee, said he believes the state can afford only about $200 million in new programs this coming fiscal year. That is slightly more than half of what Gov. Jan Brewer is asking, above and beyond mandated increases.
Potentially more significant, Kavanagh and Sen. Don Shooter, R-Yuma, his Senate counterpart, say virtually all new spending should be on one-time projects as opposed to permanent expansion of anything the state does now. They said that provides the wiggle room if the national economy tanks again.
That sentiment, if it gains the support of the Republican majority in the House and Senate, most immediately endangers an additional $59 million that Brewer wants for the state’s three universities. It also means somewhat less new money for K-12 education as well as construction of needed new schools.
It also would mean a 5 percent pay cut for state employees who got a one-time boost last year in exchange for giving up their protections under the state personnel system. Brewer proposes to make that bonus permanent plus add funding for merit increases; the legislative budget is built on no new money for worker pay.
Kavanagh called pay hikes — even just maintaining the current levels of pay with the bonus — a “non-starter with the Republican caucus.”
Richard Stavneak, staff director for the Joint Legislative Budget Committee, said the basic problem comes down to the fact that state expenses are outrunning tax collections.
Arizona managed to balance this year’s budget with revenues from the temporary one-cent sales tax hike approved by voters in 2010. But that tax dissolves at the end of May, taking with it $924 million a year.
In addition, $283 million in tax cuts approved in prior years begin to kick in starting next year.
Stavneak said the state can still get by next year because it is projected to end this fiscal year on June 30 with an extra $651 million. That is above and beyond the $450 million in the state’s “rainy day” fund.
But Stavneak said just maintaining state services next year at current levels will cost $8.7 billion; tax collections are projected at $8.3 billion.
With this year’s surplus, that still leaves extra money. But Stavneak said even with an improving economy-- and improved tax collections — that surplus will dry up in 2016, leaving the state $70 million in the red.
Brewer, however, is building her budget plan for next year and its increased spending on revenue projections that are $261 million higher than legislative numbers.
Kavanagh said if lawmakers were to adopt Brewer’s plan and keep up that level of spending, the state would end up $500 million in the hole by the end of 2016.
“That’s a massive chasm,” Kavanagh quipped. “But we are the Grand Canyon state.”
But it’s worse than that.
Last week the Court of Appeals ruled the state has to fully fund a formula that increases state aid to education every year to account for inflation. Kavanagh said adding that to the mix puts the 2016 deficit at $750 million.
All that, said Kavanagh, means legislators must exercise caution when seeking money for new and expanded programs.
“You have to be willing to gamble that revenues will be higher than we’re anticipating to eat that up,” he told colleagues. “And you have to have in your mind a break, a way to pull back from those increases, if we don’t see revenues increasing.”
Still, Kavanagh recognizes there is a need for some risk, perhaps to the tune of $200 million, above mandated spending increases for things like more students in public schools.
A top priority, he said, will be funding for Child Protective Services. Brewer wants $14.8 million immediately to hire new staffers, with an additional nearly $66 million in services for children next year.
“That’s a real need,” Kavanagh said, while declining to say how much he and other GOP legislators are likely to support. And he said the state needs to put some money into school repair and renovation.
The different revenue projections set the stage for what could be contentious battle between the two branches of government.
“The governor has a vision for the state,” Shooter said.
“We’re going to try to work with her to help build that vision,” he continued. “But we’re going to have to do it within the bounds of fiscal reality.”