Arizona’s economy has been so bad for so long that economists now say conditions that would have been alarming in the past are now seen as good news.
That means single-digit revenue declines in each of the first three months of this year are seen as signs the state’s economy is picking up, if only because the double-digit revenue slips appear to be a thing of the past.
“Things are so lousy that anything that happens to us is going to look positive,” said John Lucking, president of Phoenix-based economic consulting firm ECON-LINC.
March marks the 17th consecutive month that tax collections were less than the same month in the prior year.
Other members of the Legislature’s Finance Advisory Committee shared Lucking’s sentiments, and the idea that things are still bad, but not as bad, was the general theme of the group’s April 13 meeting.
One by one, the economists who meet three times a year to give lawmakers revenue forecasts said the recession was over and, even though Arizona is still in sorry shape, things are slowly improving.
“It’s going to take a long time to get back to where we were, but at least it’s not getting any worse,” said Marshall Vest, an economist at the University of Arizona.
Richard Stavneak, director of the Joint Legislative Budget Committee, said there isn’t any truly good news for the state’s immediate economic situation, but there are bright spots – like the single-digit losses.
“It just shows how far we’ve come, that our gauge of success is that we only had a single-digit loss,” he said. “The less-bad news is that the rate of decline is slowing.”
The group’s consensus forecast is that state revenues for the current fiscal year will come in as much as $200 million less than lawmakers expected when they approved an emergency fix to state spending earlier this year.
Part of that potential deficit will be absorbed by a $49 million surplus included in the budget fix.
Additionally, some approved spending may not be needed, which would return the money to the state’s general fund.
The panel’s forecast for the upcoming fiscal year, which begins in July, was also less rosy than the spending plan adopted by lawmakers and approved by Gov. Jan Brewer in March. While the budget assumes revenue growth of 4.2 percent, the FAC estimates tax collections will only grow by 3.4 percent over the current year.
That, combined with possible further deficits in the current year, makes it likely that the Legislature will have to fix the fiscal 2011 budget midway through the year.
And even though the recession is over, state revenues and the economy aren’t expected to rebound quickly: Tax collections aren’t expected to hit the 2007 peak – though they will come close – until 2015.
But Arizona is at least out of the woods, said Scottsdale economist Elliott Pollack, and its housing and job markets will continue to improve, if slowly.
“You’ve got to consider the glass half-full,” he said. “The next two years are likely to be a heck of a lot better than the last two, even though they won’t be great.”