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Arizona faces $1 billion deficit by next fiscal year

BudgetHoleshadow

Republican gubernatorial candidate Doug Ducey sat quietly at the table, pouring over papers and absorbing one piece of bad news after another.

The current state treasurer was attending a meeting of financial advisors and policymakers on Tuesday afternoon, and state budget analysts were dishing out unpleasant predictions.

Arizona could be looking at a $520 million deficit in the current fiscal year and $1 billion in the next fiscal year, the analysts said.

That’s not the worst news.

Richard Stavneak, director of the Joint Budget Legislative Committee, said the $1 billion budget gap in fiscal 2016 assumes that this year’s shortfall will be solved with one-time solutions.

If not, that problem grows to roughly $1.5 billon.

His message is clear – without concrete action to resolve the current year’s potential deficit, next year’s fiscal problem will only deepen.

That’s the potential crisis that Ducey or his opponent, Democratic nominee Fred DuVal, would have to solve as governor.

Stavneak began his presentation by noting that even the original budget had anticipated a decent deficit – $237 million – by FY16.

But two events this summer exacerbated that problem, he said.

“Revenue growth has slowed considerably in the interim,” he said, noting that revenues have fallen below forecast for six consecutive months.

The other significant event was the court’s order to the state to reset the K-12 inflationary funding level and pay schools roughly $336 million more starting this year.

“You end up with 500 million dollar problem in the current fiscal year and a billion dollar problem in the next fiscal year,” Stavneak said.

In fact, one the options that might bring down the deficit is a settlement with the schools over the inflationary payments.

Budget analysts have not factored in the money withheld from the schools during the recessionary years, which would add another $1.3 billion to the state’s obligations if that payment is also ordered by the courts.

Settling with the schools potentially could avoid the back payments.

Sen. Steve Pierce, R-Prescott, told the Arizona Capitol Times that lawmakers “ought to look hard” at a settlement.

 

 

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