State government is likely to have lots of extra money to spend in future years if the national economy doesn’t collapse.
New reports last week from the staff of the Joint Legislative Budget Committee show that revenues in the fiscal year that ended June 30 were 10 percent above predictions.
All that should mean the state will have $694 million unspent when this budget year ends next June 30 on top of the current $11.8 billion budget – money that could be allocated for the next fiscal year.
But Richard Stavneak, the agency’s director, warned lawmakers against spending it all, particularly in creating new and expanded programs.
He figures perhaps just $170 million of that is likely to be what legislators should be able to count on it year after year.
Stavneak said it would be prudent to hold back $50 million in reserve.
The remaining $475 million? Stavneak said he and his team of economists are unwilling to predict that is any more than a one-time bubble. And that, he said, means the most prudent way to spend those dollars would be on one-time expenses.
Budget staffers told lawmakers the numbers have some uncertainty built in.
Stavneak also said some of the predicted revenues are based on assumptions of how much Arizona will be able to collect from out-of-state retailers. A law requiring some larger retailers to collect the state tax kicked two weeks ago.
Stavneak also pointed out that a survey of economists by the Wall Street Journal found 77 percent were predicting a recession by 2021. And all that could make the predictions go out the window.
Economist Elliott Pollack, a member of the state’s Finance Advisory Committee, said Arizona population growth is running above the national average.
But he said that, unlike the pre-recession increases of 3.5 percent a year, the state should instead look to year-over-year changes of less than 2 percent.
One factor? Changing demographics, including a sharp decline in birth rates.
“While baby boomers are doing the job of dying, millennials aren’t doing their job of creating new population,’’ Pollack said.
There are other issues complicating the economy. One of those, he said, is student loans.
“Many young people have been lured into large amounts of student loan debt that their qualifications have not equipped them to repay,’’ Pollack said.a
“In other words, they didn’t receive the commensurate increase in skills to justify the debt,’’ he continued. “It was a bad investment.’’
And if people are still paying off student debt, they’re less likely to be able to buy a home.
Pollack also worried openly about the effect of politics and the election next year. “If that gets too crazy, that could destroy confidence,’’ he said.
Still, Pollack said, he thinks that even if there is a financial slowdown, Arizona is in a relatively good position to weather it.
“I’d rather be here than almost any place else,’’ he said.
Stavneak said there are plenty of ways the state can allocate that $475 million in one-time dollars, those that he does not believe are likely to keep coming in future years.
One big priority, he said, could be giving cash to public schools to pay for needed repairs.
The state at one time had a formula that provided regular amounts to schools. That, however, was scrapped during the recession.