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Covert, bipartisan budget plan unveiled   

Secret plotting to balance Arizona’s wildly out-of-whack budget got started in an east Phoenix restaurant best described as a hole-in-the- wall.

What better place than a hole-in-the-wall to work on a budget full of holes?

One evening late last summer, the plotters, a handful of frustrated Republican and Democratic lawmakers, met for dinner at that out-of-the- way joint in the Phoenix Arcadia neighborhood. They concentrated on comfort food – pizza, pasta, tacos – and uncomfortable problems, passing up political wrangling the way dieters wave off dessert. Their goal was to see how much progress they could make in crafting a budget proposal that members of both parties would support.

Driven by the futility of Republican legislative leaders and Gov. Jan Brewer, a rotating cast of House lawmakers and stakeholders met secretly during the fall and winter.

Needing a rendezvous where they wouldn’t be discovered, the plotters met most often away from the Capitol complex in an uptown office building. There, they were free to toss ideas back and forth away from the leery eye of legislative leadership and to negotiate in depth rather than in superficial duels of partisan slogans.

And the furtive meetings were not the only elements of intrigue. Once the plotters reached agreement, they shipped their ideas to an out-of- state economist who turned them into a budget plan.

The result of the undercover meetings was a 33-page document that balances the fiscal 2010 and fiscal 2011 budgets, while avoiding further cuts to education and health care. It also uses a combination of loan repayments and short-term borrowing to balance the budget for the next two years, while setting a course to pay off all state debt by 2018.

The unsponsored plan calls for raising both sales and property taxes – some temporarily and some permanently – as well as unspecified cuts in state spending. At the same time, it creates economic development tools, cuts some business taxes and builds up the state’s reserve fund.
Until last week, the lawmakers who drafted the document stayed in the shadows. In fact some of them wouldn’t talk about their involvement unless they were allowed to remain anonymous.

But the failure of legislative leaders to end the budget gridlock has lured several of them into the open. Those who talked about it openly – Republican Reps. Bill Konopnicki and Lucy Mason and Democratic Reps.

Chad Campbell, Matt Heinz and David Lujan – are now angling for an open hearing on the proposal in the House Appropriations Committee.

“So far, this is the first plan I’ve seen that solves this budget crisis we’re facing in 2010 and 2011,” Campbell said.

The reason everything was kept secret: They knew legislative leaders had other plans for the budget. Republicans who control both the House and the Senate were working on a proposal and had asked Democrats to do the same. Hashing out an agreement together wasn’t their objective.
When lawmakers in charge of the budget hearings found out about the bipartisan coalition’s meetings, they weren’t pleased.

Rep. John Kavanagh, chairman of the House Appropriations Committee, said it’s “absurd” that an outside group would draft a proposal in secret and expect a hearing on it, especially when the people responsible for the plan don’t want to be identified.

“They’re coming up with a finished product without any public input? That’s not transparent,” Kavanagh said. “This could be the Illuminati, for all I know.”

Kavanagh said he has no plans to hear budget bills that weren’t formed by one of the House caucuses.

House Speaker Kirk Adams had promised last year to hear any budget bills brought forward by members. But he said there’s no reason to discuss the coalition’s proposal until it’s written as a bill and has a sponsor.

“There really isn’t a point in having a discussion about what hypothetically might happen. It’s difficult to discuss something that isn’t real,” Adams said.

That might change, however, because Konopnicki said he has agreed to sponsor the proposal. Heinz said he, too, would put his name on it.

Neither expects the bill to be passed without changes. The goal is to start negotiations that involve both parties and the governor.

“This budget isn’t going to be the budget that passes out (of the Legislature). Everyone knows that,” Konopnicki said.

They also want to talk about how previous budget decisions have affected the state, Konopnicki said.

For instance, Konopnicki said, nobody has taken a close look at how cuts to health care would change the delivery of services at hospitals, how borrowing $1 billion would affect future state budgets, or how local governments would manage if the state shifts more financial burdens onto counties and cities.

“They all need to be talked about, and they have not been vetted,” Konopnicki said. “People need to understand what the consequences of this stuff are.”

Mason, a Prescott Republican, said the immediate need is to talk about how proposals from Republican Gov. Jan Brewer and Republican lawmakers, along with what already has been done, will affect the state. Those talks are already overdue, Mason said.

“It’s all been about politics, not the citizens we represent,” she said.

The group of lawmakers who met in secret to solve the state’s fiscal 2010 and fiscal 2011 budget problems created a 33-page document that includes the following options:

Fiscal 2010 solutions:
Additional money needed – $1.52B
Deficit remaining – $1.4B
New tax auditors and collectors – $15M
No K-12 or State Parks cuts – $38M
Higher base spending – $69M
Additional money available – $1.54B
Borrow on temporary sales tax hike – $1B
Rollover K-12, university funding – $350M
Fund transfers – $20M
One-time savings, unspent allocations – $166M
Year-end balance – $19M

Note: The plan does not sweep Arizona Lottery money ($30 million) or implement state employee salary reductions ($15 million), both of which were proposed in the governor’s budget.

Fiscal 2011 solutions:
Additional money needed – $3.22B
Deficit remaining – $3.17B
Previously enacted cuts – ($443M)
Repay FY10 K-12, university rollover – $350M
Interest on borrowing – $109M
Economic development programs – $30M
Additional money available – $3.29B
Higher baseline tax collections – $278M
Temporary 1-cent sales tax increase – $746M
Extend sales tax to food – $632M
Tax credit to offset sales tax burden on low-income residents – ($250M)
Permanent state property tax – $250M
Phase out homeowners’ tax rebate – $212M
Increased tax collections – $55M
Eliminate sales tax collection credit – $22M
New borrowing – $1.165B
• Lottery – $540M
• Vehicle License Tax – $275M
• Short-term bonding – $350M
Fund transfers – $184M

Note: The plan does not include additional cuts to K-12 ($458 million) and health and welfare programs ($490 million), employee salary reductions ($60 million) and the elimination of Department of Juvenile Corrections ($68 million) that were included in the governor’s budget proposal.

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