When it comes to coping with the budget shortfall, the only thing policy-makers can bank on is knowing that everything can change at a moment’s notice.
Lawmakers experienced that firsthand Feb. 14, when a surprise plan to pass a budget was abandoned minutes before the committee was to begin.
Similarly, Gov. Janet Napolitano did an about-face. She changed course on a month-old budget plan after continued worsening of the economy led her office to conclude the deficit in the current fiscal year could reach nearly $1.2 billion, up from estimates of about $870 million.
In the House of Representatives, leaders called off a special committee hearing to approve five budget bills less than a day after the hearing was announced and only about 30 minutes before the committee was scheduled to convene.
House Appropriations Committee Chairman Russell Pearce, a Mesa Republican, said the decision was made to cancel the meeting because the committee members needed more time to review the spending plan. The committee will vote on the bills at its regularly scheduled Feb. 20 meeting, he added.
The quick action by the committee is welcome news, said Gilbert Republican Andy Biggs, who last month used a procedural move to end a committee hearing because Republican leaders were negotiating a budget compact with Democrats behind closed doors.
“I think the Appropriations Committee in the House needs to do something immediately,” he said. “Then we have something formalized that everybody can work with. Right now it’s just — everybody’s just talking. It’s just ideas.”
Pearce also said he supports allowing the committee to do the bulk of the work on the budget, which legislative analysts said will be marked by a $970 million shortfall.
“The Appropriations Committee is the place where the work is supposed to be done,” he said. “I’ve been upset from day one that that committee has been out of the loop. It’s unfair to them. That’s their job.”
But House Minority Leader Phil Lopes said the push to pass a budget while Republican and Democrat leaders continue to meet does nothing to help the situation.
“I think it’s totally disrespectful of the process and the members,” he said. “It’s going to be the budget that the chairmen want. It’s not going to be something that’s going to have any bipartisan wrinkle on it.”
Pearce, though, said the committee’s actions will serve to prod negotiators into moving more quickly.
“Sometimes you have to push people, yes. That’s my job. I’m the Appropriations chair. I’ve got to get a budget out,” he said.
The proposal is expected to use a combination of methods to balance the fiscal 2008 budget. In addition to cutting state agency spending, the plan will use money from the state’s rainy day fund, as well as sweeping excess monies in funds with dedicated revenue streams into the general fund.
Pearce said it’s unlikely he will be able to coax Democrats on the committee to support the plan, even though he said he has tried to make concessions to garner support from them. But that won’t dissuade him from pushing on with the vote.
“I would hope the Dems join us. If the don’t, too bad — we’re putting out a budget,” he said.
Napolitano’s outlook gets gloomier
Also on Feb. 14, Gov. Napolitano revised her budget outlook based on figures that show the national economy is headed for a recession. It was a much gloomier than what her office expected only a month ago.
George Cunningham, the governor’s deputy chief of staff for finance, said the U.S. economy has nose-dived and joblessness has risen since Napolitano announced her budget projections in January.
“A lot has happened in that one month,” he said.
Instead of a decrease in total revenues of less than one-half of a percent, Napolitano now expects revenues for the current year to slip nearly 3.6 percent.
As a result, the governor now predicts the state will face a nearly $1.2 billion shortfall in the current fiscal year, up from an estimate of $870 million. In the 2009 fiscal year, which begins in July, she is predicting a $1.7 billion shortfall, about $450 million more than she was expecting last month.
Napolitano also revised her plan to address the shortfalls in the two fiscal years. For the current year, she has recommended state agency spending reductions of $151.6 million, roughly double the amount she suggested last month. Her new plan would also dip into the state’s rainy day fund to the tune of about $323 million, about $60 million more than earlier planned. It also includes nearly $300 million in fund sweeps, up from an earlier recommendation of $138.5 million.
Fund sweeps take money from program-specific funds with dedicated revenue streams and deposit it into the state’s general fund.
In the 2009 fiscal year, state agency spending would be reduced by nearly $125 million, nearly five times more than called for in the previous plan. Additionally, the original plan did not call for any fund sweeps in 2009, but the revision includes $100.5 million in sweeps, as well as doubling the K-12 rollover, a budgeting maneuver in which the state delays the payment of some school funding from one fiscal year into the next.
Although the immediate future is dark, Cunningham said Arizona’s economy is cyclical and it will turn around soon.
“We think it will definitely start to improve sometime by the end of calendar year 2008, and possibly by this summer,” he said, adding that he expects the economy to “start leveling off” soon. ?