The two sides have been discussing the proposal since late last year.
“There are a number of legal and administrative issues that we’re still exploring related to it, but we have indicated that we are amenable to exploring it,” said Rhian Evans Allvin, executive director of the Early Childhood Development and Health Board, which is popularly known as First Things First.
Allvin said the agency views the offer not as a traditional loan but as an investment. The agency, created in 2006 by the voters, is allowed to invest its money.
The temporary shift of the $330 million, part of Gov. Jan Brewer’s plan to balance the budget, is “an investment vehicle, basically,” Allvin said. “It’s a temporary transfer of funds, which makes me a little bit more optimistic that it’s possible.”
At issue is whether the agency can lend its money, which is generated through a tax on tobacco, to the state government without asking the public’s approval.
Under Brewer’s budget plan, the state will take out the loan for a day and then pay it back with interest, an accounting maneuver that would help policymakers meet their constitutional requirement to balance the budget.
This is not the first attempt by the state to use the agency’s money to balance the budget.
But it’s the first offer that both sides are considering in more cordial terms.
In fact, the Legislature had eyed the agency’s stockpile of funds since the financial crisis began. In 2009, lawmakers swept interest earnings from the agency’s funds as part of the budget fix last year, but First Things First sued in court and won.
In its lawsuit, the agency argued that the legislative action violated the constitutional protection for voter-approved programs because it diverted funds without furthering the purpose of the early childhood initiative, and it was not approved by a three-fourths vote of the Legislature as the Constitution required.
Failing to sweep the interest earnings, the Legislature decided to ask voters to dismantle First Things First and redirect its revenue to the state’s coffers. Voters rejected that proposal last November.
The agency’s position on Brewer’s current proposal also reflects an effort to repair the strained relationship between the state government and the early childhood agency.
“To me what happened from a political perspective at this point is water under the bridge. It is a new day. It’s time to once again try to work together to find a solution to what’s going on with the state’s budget crisis,” Allvin said.