Gov. Jan Brewer tells a joint session of the Legislature that a tax increase should be part of the mix in solving the state’s budget woes.

Forty-two days after taking office, Gov. Jan Brewer laid out the framework of a five-point budget-reduction plan that includes slashing state spending by $1 billion and temporarily raising taxes to generate another $1 billion dollars.

The Republican governor addressed a joint session of the Legislature March 4, speaking in broad terms and largely ignoring details, such as what type of taxes she wants lawmakers or voters to raise. Even though the speech included very little in terms of specific policy direction, it was the first  public indication that the governor plans to close a budget shortfall estimated at $3 billion using a combination of spending cuts and tax increases.

Brewer urged cooperation among conservatives and liberals, but made it clear the budget would represent the values of Arizonans, not any particular political ideology.

"All of us, Republicans and Democrats alike, must set aside our differences in this time of crisis. All of us have to make sacrifices, and only by working together can we build a better Arizona," she said.

The most controversial aspect of Brewer's plan is the suggestion that tax increases are necessary to bridge an estimated $3 billion budget deficit next year and potential billions more in the following year. Prior to the speech, many Republicans made it clear they would oppose any effort to raise taxes during tough economic times.

"I encourage Gov. Brewer to roll up her sleeves and work with the Legislature to make the tough choices necessary to restore some semblance of fiscal sanity to our state budget without increasing taxes," Sen. Ron Gould, a Republican from Lake Havasu, stated in a press release. "No one is saying it won't be painful. However, we cannot forget that increasing taxes in this economic environment will prove to be even more painful to many Arizona families."

But Brewer defended her decision to recommend a tax increase, saying additional revenue was needed to protect education, public safety and public health services, even though she has a long record of opposing tax increases.

"But as a very last resort, after considering every other option, and after doing a truthful and honest assessment of our economic situation, we must be willing to consider the passage of a temporary tax increase – approved by you and signed by me – or approved by the voters at a special election…" she said. "I do not propose these steps lightly, and you would not hear me utter these words if I did not firmly and confidently believe that it is absolutely necessary."

Republican legislative leaders said the prospective tax increase would further harm an already struggling economy. Senate President Bob Burns said lawmakers would work with Brewer, but majority Republicans have not yet considered any proposal that would raise taxes.

"I'm not in favor of a tax increase and I'm not prepared to vote for one," he said, adding that differences in budget proposals between lawmakers and governors are part of the process.

Senate Majority Leader Chuck Gray was more emphatic in his opposition to any tax hike, invoking a famous quote from former President George H. W. Bush.

"Read my lips: no new taxes. I'm not voting for any taxes and I don't think that any of the caucus members – or a majority of Republicans – are going to vote for new taxes," he said.

Rather than raise taxes, Burns and Gray said the state could look at other ways to generate revenue, like selling state property or doing away with tenure for university professors.

When Brewer broached the subject of a tax increase, a pair of lawmakers – Gould and Rep. Carl Seel, a Republican from Anthem – walked off of the House floor. Gould said he did so because he was "disappointed and dismayed that the governor would start talking (about) tax increases" so soon in the process.

"There's no reason for use to be even talking (about) tax increases right now," he said.

Gould speculated the matter was dead on arrival in the Legislature, because the majority Republicans would not back the proposal.

"You've got to get somebody to sponsor this toad," he said. "Who actually is going to want to put their name on this thing≠"

Drastic steps are needed, Brewer explained, because of the enormous size of the budgetary hole the state has found itself in. Even with already-enacted cuts and federal stimulus aid, today's rate of spending is not sustainable, she said.

"The truth is, we cannot afford the size of government we now have, and even a slowly recovering economy will not fix the problem…" she said. "We have to make the hard decisions to match revenues with spending. They have to balance and we have to strike that balance."

The governor did not say where the state should cut funding, but said she is asking her cabinet members to evaluate the impacts of cuts that could be as high as 20 percent for some state agencies.

Brewer also called for a special election to ask voters to loosen constitutional restrictions on what state funding lawmakers can cut. Billions of dollars of state spending, for things like education and healthcare, are off-limits from budget cuts because they were approved by voters and are protected by a constitutional amendment approved in 1998.

The governor wants lawmakers to schedule a special election to ask voters to give lawmakers the ability to access those funds during fiscal downturns.

Other components of the governor's plan would double the size of the state's rainy day fund to lessen the impact of future budget shortfalls, limit the use of fund sweeps, reform the budget process with a focus on longer-term needs and resources and change Arizona's tax code to attract businesses and create more jobs.

Brewer said reductions in taxes beginning in 2012 are needed.

"Arizona's economic recovery won't happen overnight, but tax reform is the only way that is sure to support and grow our Arizona employers who have stuck it out with us," she said. "It also brings new ones from other states and countries and it must be our highest priority for the future."

Brewer also laid the blame for the state's current budget situation at the feet of former Gov. Janet Napolitano, who resigned in January to take a job in President Obama's administration. The budgets in the past two years had unrealistic revenue projections.

"It's astonishing that our latest budgets were built on the most optimistic revenue projections at a time when nearly every economic forecaster was predicting a downturn," she said. "Why were they ignored≠ Because it's easier to build two years of spending on flawed revenue projections than it is to make tough decisions."