New budget would spend hundreds of millions from state surplus

The budget proposed by GOP leadership in the House and Senate dips into a massive budget surplus to make hundreds of millions of dollars in one-time expenses and millions in tax cuts, but makes few commitments to ongoing spending.

The $9.58 billion spending plan includes $469 million in one-time budget items, as lawmakers hope to take advantage of a projected $660 million surplus in revenues in fiscal year 2017. Only $74 million in spending above the baseline – funding increases required by state law and calculated by formula – will continue into the future, according to budget documents acquired by the Arizona Capitol Times.

Those ongoing funding commitments are offset by roughly $76 million in savings accounted for in the baseline, from the budgets for the Arizona Department of Education and the Arizona Health Care Cost Containment System. The reason for those savings is unclear.

Essentially, voluntary commitments to ongoing spending were only made if they could be matched by cuts elsewhere in the baseline.

Lawmakers continued to negotiate the budget behind closed doors on Tuesday afternoon, in hopes of introducing budget bills this week.

GOP leaders in the House and Senate have said they’re reluctant to commit to more spending in their quest to adopt a structurally balanced budget. The proposed budget for fiscal year 2017 is projected to end with a $2 million structural surplus and a $67 million cash balance.

Since October, the JLBC staff has also said lawmakers could spend up to $250 million in ongoing dollars without endangering the budget in the event revenues take a turn for the worse.

The budget also sets aside $26 million for a host of tax cuts, mostly for corporations, including a measure specifically designed to give Grand Canyon University, a private for-profit Christian university in Phoenix, a $350,000 tax break.

One-time expenditures in the budget include $232 million to eliminate a series of deferments for university funding, the Department of Economic Security and the Department of Child Safety – an accounting gimmick used to help settle the budget during the Great Recession – as well as funding for schools, Gov. Doug Ducey’s border security force, and $96 million for transportation infrastructure projects.

Of the $74 million in new ongoing funding, $29 million is for the restoration of funding to joint technical education districts. Lawmakers approved spending reductions at those schools in the previous legislative session, then acted quickly this session to reverse the budget cuts. The budget also includes $24 million in general fund dollars for DCS, $8 million for the governor’s Border Strike Force, and $13 million for higher education.

Of that ongoing funding for universities, $5 million goes to “economic freedom schools” research centers at the University of Arizona and Arizona State University that don’t produce degrees.