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Passing the buck: Local governments’ worst budget fears 

Like nervous tourists in a crowded train station, Arizona’s cities and counties are on high alert, dreading that at any moment, they will feel a hand tugging at their wallets. But no matter how vigilant they are, they may soon reach down and realize their pockets have been picked.

Local government is usually the last place the Legislature looks to find extra money, but the state budget deficit has forced lawmakers to take desperate steps. This year and last, cities and counties have been forced to pay bills that historically have been the state’s responsibility.

“The thing that aggravates me is that the state seems to approach this as if they’re in a unique situation, when every state in the country and every city in the state is going through the same stuff,” Flagstaff City Manager Kevin Burke said. “So why do they think it’s OK to just transfer this problem and exacerbate the city’s problems?”

During the past year, lawmakers have taken money that was intended to pay for local services, limited cities’ ability to collect fees, and hoisted new burdens onto the shoulders of city officials who are trying to overcome the same economic conditions that ravaged two consecutive state budgets.

And the worst might be yet to come.

A budget proposal by Gov. Jan Brewer would divert money from local governments, then simultaneously require them to pay for a host of new responsibilities. The Joint Legislative Budget Committee followed with a separate list of options to help the state save money while pillaging the budgets of cities and counties.

To deal with their budget shortfalls over the past two years, cities have had to take some unpleasant steps.

Maricopa County has laid off about 1,400 employees over the past two years. Phoenix has reduced hours at libraries and public swimming pools, and is running fewer city buses. Flagstaff is under a hiring freeze that has prevented it from filling 13 vacant police officer positions. Pinal County has cut back its health department’s monitoring of tuberculosis and sexually transmitted diseases.

So far, most local governments have been able to avoid laying off police officers and firefighters, whose departments make up the majority of most municipal budgets. But public safety might be next in line for personnel reductions.

For example, Phoenix’s proposed budget for fiscal 2011 includes layoffs of nearly 300 officers and 130 firefighters. The City Council avoided further cuts to public safety by passing a 2 percent tax on food sales. Tucson also may have to lay off police and firefighters.

The problem, local government officials said, is that revenues are declining for every level of government, and on top of that, the state is pushing the problem off on cities and counties. Last year, the state took $95 million in vehicle license taxes from cities to pay for
K-12 education, and it took millions more from a fund that helps local governments pay for road repairs and maintenance.

Adding to their frustration, many local governments years ago started taking steps to prepare for the oncoming recession. Some, such as Mohave County and Coconino County, imposed hiring freezes in 2007, and began planning for a financial downturn years before then. Officials in those counties said the state is punishing them because it did not have the foresight to take similar precautions.

“Unlike the state, we are not borrowing to keep up our services, and we cannot steal from other governing agencies,” Mohave County Manger Ron Walker said. “Without being financially mugged by the state, we will survive. We’ve been planning for the last almost nine years during my tenure, to be able to handle a downturn.”

Brewer’s budget plan is the only comprehensive proposal on paper, and local governments, especially counties, are worried. Her proposal would take money counties rely on for highway maintenance and other transportation-related costs, drastically increase their obligations of paying for prisoners housed at the Arizona State Hospital, eliminate state assistance for immigration enforcement and, for six counties, bill them for Medicaid services that traditionally have been covered by the state.

But the most worrisome idea that has been floated at the Capitol is a proposal by the governor to eliminate the Arizona Department of Juvenile Corrections. That would save the state about $63 million a year, but it would require the counties to supervise 1,065 juvenile inmates and parolees. Even for counties that have the facilities in place to take on the new prisoners – and few say they do – most lack substance-abuse treatment, psychological counseling, sex-offender treatment and other programs offered in the state’s juvenile corrections system.

“We have so few details about the agency, about what we would be called upon to do, about what we would need to do, how we would handle it,” said Diane Sikokis, the chief lobbyist for Maricopa County. “It’s almost impossible to estimate, but the state is estimating a
$63 million savings to them. I don’t know what our costs would be. It would be at least that.”

Because the Department of Juvenile Corrections’ primary detention facility – Adobe Mountain on the northern outskirts of Phoenix – is on state trust land, it cannot be bequeathed to the county. Many county officials said it will be difficult to find a place for their new wards. Maricopa County would get most of the juvenile offenders; 237 of the 411 inmates and 307 of the 488 parolees would be transferred there.

Additional health care costs would fall on local government, especially on six counties that have special agreements for the state to cover expenses from a massive expansion of AHCCCS approved by voters in 2000. Those six counties – Graham, Greenlee, La Paz, Pima, Santa Cruz and Yavapai – have a contract with the state, known as County Hold Harmless, as part of Proposition 204.

Under Brewer’s proposal, however, that agreement would go away, leaving the six counties
paying a combined $4.8 million in AHCCCS costs. Even the nine counties that will not incur those new costs will have to pay a greater share of the AHCCCS long-term care program for the elderly and disabled.

The proposals coming out of the Governor’s Office and the Joint Legislative Budget Committee are not the first that seek to balance the budget at the expense of local government. Last year the state swept the Highway User Revenue Fund, a shared pool that helps counties pay for highway maintenance. The shift cost Maricopa County
$6 million, according to Sikokis.

Last year, cities lost the ability to charge new impact fees, which are paid by developers and builders to cover the costs of infrastructure such as new roads and water lines. And while newer proposals would increase the counties’ costs to incarcerate sexually violent offenders and other inmates at the state hospital – 50 to 100 percent, depending on which proposal is adopted – the counties already took on 25 percent of the cost in 2009.

Yuma County Administrator Robert Pickels said cities and counties won’t be able to relax until structural problems with the state budget have been eliminated.

“The concern that we’ve had all along is sort of the fear of the unknown,” he said. “The unknown, the ideas that people haven’t shared publicly, are the ones that really concern us.”

Click here to read sidebar “Local governments against changes to shared-revenue formula”

Click here to read column “Changes to revenue-sharing system would devastate cities”

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