Brewer budget surfaces — finally; GOP lawmakers not receptive 

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Nearly four months after she said she planned on releasing a detailed budget, Gov. Jan Brewer has done so. Her plan aims to bridge an estimated $4-billion deficit by increasing the sales and property taxes, borrowing against future Lottery revenue, mortgaging some state buildings and cutting state spending.
It stands in stark contrast to the most recent budget proposal backed by Republican legislative leaders, which includes no tax increases, doesn’t borrow against future Lottery proceeds and cuts spending by about $100 million more. The legislative proposal also aims to shift millions of dollars in costs to cities and counties and sweeps nearly twice as much from dedicated funds.
And Republican leaders say Brewer should have been more proactive, as they have been asking her for budget details for months.
“Realistically, we believe we should have had this detailed information weeks ago,” House Speaker Kirk Adams said
Brewer told legislators March 4 that she wanted a temporary tax increase of $1 billion to be included in the fiscal 2010 budget and laid out the framework for her budget plan, but offered no details. Since then, GOP lawmakers have made every effort to craft a budget that avoids tax increases and have criticized the Republican governor for wanting to raise taxes.
Brewer’s proposal estimates Arizona could generate an additional $1 billion a year by raising the state’s sales tax rate to 6.6 percent from 5.6 percent. Doing so would require a two-thirds approval in each legislative chamber, which may make legislating a tax increase politically impossible.
However, it takes only a simple majority in the House and Senate to send a tax-hike proposal to the ballot for a special election later this year. The measure could be sent to the ballot in time for an election in November, though an official with the Governor’s Office said there is an outside chance of a late-October election.
The sales-tax increase in Brewer’s budget plan would last only three years.
But GOP leaders at the Capitol don’t think Brewer’s tax-increase proposal makes sense. Adams called it “funny math” and said legislative analysis is that raising the sales tax by a penny would generate only $700 million in new revenue.
And House Majority Leader John McComish said that, were the ballot measure to fail, lawmakers would be scrambling to cut $1 billion out of the budget with only half of the fiscal year remaining.
“It would make this past January look like a tea party,” he said, referring to the cuts lawmakers made to the current year’s budget several months ago.
It also isn’t clear if there is enough support in the Legislature to place a sales tax proposal on the ballot. Most Republicans have voiced strident opposition to the idea and legislative Democrats have said they feel it would disproportionately harm middle-class families.
Last month, voters in California rejected a number of ballot measures aimed at closing that state’s budget deficit through tax increases and borrowing. An official from Brewer’s office said there was no contingency plan in the governor’s proposal, though one would be contemplated during negotiations with legislative leaders.
The Governor’s Office crafted the budget using a deficit figure that is larger than the one presented by lawmakers. Lawmakers estimate a deficit of $3 billion, assuming changes made to the fiscal 2009 budget would carry over into fiscal 2010. Brewer’s proposed budget, however, indicates those previous reductions have yet to be continued for another year.
The governor’s proposal also would allow the state equalization tax to go back on the books. The property tax was suspended three years ago and is slated to come back this year. However, Brewer would like to phase out the tax — and the $250 million it would generate — during the next three years, beginning immediately. Her budget plan would allow the state to collect an estimated $166 million, or two-thirds of the full tax amount, in fiscal 2010. The state would collect about $83 million in fiscal 2011, and the tax would be repealed permanently the following year.
Additional revenue would be generated by using future state Lottery proceeds as collateral for a $450-million loan. Essentially, the state would borrow the money now, then use the annual $45 million of Lottery money that goes into the general fund to repay the loan during the next 10 years.
Another $200 million would be created by mortgaging some state property, including prisons. The move, known as a lease-back, would require the state to sell the buildings, then enter into an agreement to lease them back over a number of years.
The governor’s budget also makes $560 million in new spending reductions, which come on top of about $360 million in cuts made to the fiscal 2009 budget in January as part of an emergency fix.
Another $199 million would be added to the general fund under Brewer’s plan by raiding specialized funds.
In addition to a potential special election on a sales-tax increase later this year, Brewer’s budget proposal also calls for a 2010 ballot measure that would reform a constitutional amendment approved by voters in 1998 that prohibits the Legislature from making major changes to voter-approved programs.
Much of the state’s future financial problems will arise from mandated general fund spending in education and public health care that was approved by voters, said Eileen Klein, Brewer’s budget director. The governor’s budget would ask voters in 2010 to require any initiative that was approved between 1998 and 2004 and uses general fund money be re-affirmed by voters in 2012 and use a dedicated funding source.
Items that would need to be approved by voters include 2000’s Proposition 204, which expanded state-run health care, and Proposition 301, which mandates annual growth in education funding.
If voters do not approve the programs with new funding sources, then lawmakers would be authorized to amend the programs as they see fit.
Brewer’s proposal comes on the heels of a publicity campaign designed by one of her closest political allies and aimed at persuading lawmakers to support her budget plan that was leaked last week and first reported by the Yellow Sheet Report, an online sister publication of Arizona Capitol Times.
Adams also called on Brewer to publicly denounce the $225,000 media blitz designed by Building a Better Arizona 2012, a coalition of business groups created by political consultant Chuck Coughlin.
“It’s not productive to producing a compromise agreement to balance the budget by June 30… The governor should repudiate any efforts to campaign against Republican legislators,” Adams said.
Although the Arizona Constitution requires governors to present a budget every January, Brewer did not become governor until after the deadline had passed. Instead, former Gov. Janet Napolitano released the executive branch’s annual budget plan.
In early February, just two weeks after taking office, Brewer said she planned to release a budget proposal of her own, saying she hoped it would be “developed in the near future and presented sometime quickly.” Since then she has provided few details, and over the subsequent months her office said she may not craft a budget proposal of her own.
— Reporter Jeremy Duda contributed to this story.]
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