State universities want a $203 million budget increase while other big agencies, such as the Department of Economic Security and the state’s Medicaid program, are asking for hundreds of millions of dollars in additional funding.
The move is expected. Agencies typically submit requests that contain much bigger amounts than what they eventually get, but their proposals help the governor pinpoint her administration’s priorities.
Still, the budget increases reflect people’s optimism about Arizona’s economy, which is sluggish but is nonetheless growing at a steady pace.
The agencies want to use the additional money on permanent programs as well as one-time expenses. The Department of Economic Security seeks to hire hundreds of Child Protective Services investigators and caseworkers. The universities have their own wish list: money for fire code upgrades, for acquiring research equipment and for an exchange program with schools in Western part of the U.S.
Their budget request is the opening salvo of what’s likely to be a drawn-out battle over how to appropriate the state’s limited resources.
That battle, which will be mostly fought in the Legislature, is shaping up against the backdrop of another potential budget shortfall by the middle of this decade, the result of the expiration of a temporary sales tax increase that has propped up the state during the worst of the recession.
The three-year tax increase has been producing roughly $1 billion annually — money that will evaporate next year.
As expected, some agencies are seeking modest increases, but others have asked for a lot more.
Already, some legislators, many of whom are veterans of the years-long struggle to save the state from a festering fiscal crisis, are wary of spending more than the current $8.57 billion budget.
Even the chairman of the Senate Appropriations Committee called some of the funding requests “delusional.”
With only a few weeks to go before the 51st Legislature officially opens, the fight over the shape of the state’s budget has arrived in earnest.
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For state agencies, the first leg of that battle is to convince Brewer that that their budget request is necessary, and perhaps more significantly, feasible.
John Arnold, who heads the governor’s Office of Strategic Planning and Budgeting, said he has advised agencies to submit a proposal based on their needs, and to let the governor evaluate their request.
The governor and her staff are in the middle of drafting her budget recommendation to the Legislature. She is expected to announce her proposal early next year.
“We’re having conversations on what the larger picture looks like in terms of revenues and available resources and starting that prioritization process,” he said.
But the obvious question, he said, is whether there’s a wiggle room — and how much — to grant those requests.
From his view, the budget now is “effectively balanced,” Arnold said.
The governor’s budget chief noted that the economy produced some “surplus” revenue in the last fiscal year. The state had collected $397 million more than the revenue that was assumed in the fiscal 2012 budget.
In addition, lawmakers and the governor also set aside $450 million in a “rainy day” account.
Those funds, along with the natural growth in the economy, would likely be enough to cover the loss of revenues when the 1-cent sales tax increase expires nextyear, and to pay for the cost of any changes brought about by the federal health care law, Arnold said.
“We think we’re about balanced, and so then the question is: Well, does that leave any room for new spending?” he said.
“We have a little surplus money now, but if you convert that into ongoing spending, that’s going to throw the budget out of balance,” he said.
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If agencies managed to persuade the governor to advocate for spending increases, the battle then shifts to the Legislature.
But already, influential lawmakers cautioned agencies against expecting a lot. Some Capitol observers dismissed the big-ticket requests as nothing more than pre-session “positioning.” That is, they speculate that the agencies are asking for a lot in order to at least get something.
Sen. Don Shooter, R-Yuma, chairman of the Appropriations Committee, bluntly said some of the requests are “ridiculous.”
Shooter was mostly reacting to state universities’ request for a 29 percent hike in their budget, which translates to roughly $203 million more.
He initially laughed off the funding requests.
“At a certain point, I’m going to start getting mad,” he added when the Arizona Capitol Times cited the universities’ and agencies’ budget proposals.
“Do they have any idea that the economy is flat at best?” Shooter said, adding, “They must be delusional because we don’t have any money.”
Shooter said the agencies would be “lucky” to get what they received in the last budget go-round given the tepid economy and the fiscal challenges ahead.
“Which businesses do you know that have their sales increase by 29 percent? What person do you know that had their salary increase by 29 percent?” he said.
Kevin McCarthy, president of the conservative think tank Arizona Tax Research Association, expects lawmakers to push back against spending increases and to craft a budget that takes a longer view of the budget situation.
Like others, he warned against spending the state’s cash surplus and “rainy day” fund on ongoing programs.
“(Policymakers) deserve a lot of credit for the multi-year budgeting approach that they employed last year to try to make sure that everybody was mindful of the temporary sales tax going away,” he said. “That will be the same approach, I think, that you’ll see when the budgets come out in January.”
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But while Shooter and others are dismissive, the agencies and the chairman of the state’s university system vigorously defended their funding proposal.
Arizona Board of Regents chairman Rick Myers said the universities are aware of the economy’s slow recovery and maintained they didn’t put together their budget request in a vacuum.
He also readily acknowledged that not everything they asked for would be funded.
But Myers said they wanted to give the governor a better sense of the universities’ needs, and so instead of just focusing on a few items, they laid out their priorities on the table.
“I don’t want people to think that we’re sitting here in a vacuum and don’t recognize that the state continues to have some economic problems and that we’re saying that we’re more important than everyone else. That’s not the case,” Myers said. “The case is we wanted to present high-priority items and show what those are.”
The universities are asking for $81.9 million in permanent spending and another $120.9 million in one-time expenditures, which included money for renovating a library at ASU and funding a study to create a new model of educating veterinarians.
Among the big agencies, the universities’ funding request of $203 million topped the list.
But Myers said that money also reflects their desire to contribute to Arizona’s success.
“It’s an attitude of ‘we want to help the state be even stronger’ and these are opportunities to help fund universities (and help them) achieve that goal for the state,” he said.
Assuming they won’t get all of it, Myers said the priority is $15.3 million to address funding parity for Arizona State University and Northern Arizona University, and $8 million for University of Arizona’s College of Medicine campus in Phoenix.
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Among the agencies, the Department of Economic Security appears to have the easier path to getting additional funding.
The agency is asking for another $85 million, which its director said would be spent mostly to prop up the state’s Child Protective Services.
DES Director Clarence Carter said the reason is straightforward: Reports to CPS grew by 17 percent in FY2012 and he expects the caseload to increase by 10 percent in the next two years.
Those reports must be investigated promptly, and the agency is asking for 200 more CPS investigators and caseworkers.
Carter explained that the issue is children’s health and safety, which cannot be compromised.
“We understand that our request exists in the context of many other requests, but we certainly believe that the benefits, goods and services that we provide that help sustain and maintain safe and healthy communities is something that has got to be very high in that priority list,” he said.
Rep. John Kavanagh, chairman of the House Appropriations Committee, expects DES to get some additional money. He added that the population growth in the Arizona Health Care Cost Containment System, the state’s Medicaid, and K-12 schools would also be funded.
“But beyond that, people are going to have to make a very good case,” he said, adding even then, any spending increase will be limited because of the looming deficit in fiscal 2014.
Arizona budget for FY2012: $8.57 billion
Permanent cuts from FY2008 to FY2012: $3.3 billion
Anticipated shortfall in FY2016: $67 million
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