Lawmakers will be facing quite the conundrum in 2010 - how to raise more revenue for the cash-strapped state without raising taxes. The Republican-led Legislature stymied attempts by Gov. Jan Brewer to put a sales tax increase on the ballot, and outright rejected the idea of passing a tax increase itself.

States closed $142.6 billion in budget gaps for fiscal 2010 and could face more shortfalls in the next two budget years, according to a report released Monday (July 20). The National Conference of State Legislatures issued the report on state budgets and taxes as it opened its annual legislative summit in Philadelphia.

Legislative leaders from the two parties hunkered down July 8 to restart budget negotiations, marking the first meeting since the Legislature unanimously passed four budget bills two days before.

Tax increases. Prison privatization. Lottery securitization. Fund sweeps. Deep spending cuts. Numerous points of contention exist between Gov. Jan Brewer and the Legislature regarding the budget. But before the two sides can sort out those disagreements, they will have to determine exactly how big the fiscal 2010 deficit is.

Even if the national recession ends this year as many predict, state budgets will likely be in the red for the next two years, with budget gaps topping $230 billion as tax collections of sales, personal and corporate income lag, two new reports show.

Rapid increases in government spending, permanent tax cuts for individuals and woefully inadequate levels of savings have put Arizona on a treacherous financial path during the past 15 years. Now, lawmakers are trying to detangle the state’s twisted finances and unwind one of the biggest budget knots in state history.

Democrats have tried nearly every conceivable strategy in the past four months and have, at times, sounded like a broken record as they seek an invitation from Republicans to negotiate the fiscal 2010 budget.

Now that the fiscal 2009 budget gap has been readjusted — hopefully for the last time — leaders will hunker down and try once more to hammer out a deal on the fiscal 2010 budget. “We got a lot to do on (fiscal 2010) yet,” Senate President Bob Burns said May 13, the day the Legislature fixed a $650-million hole in the fiscal 2009 budget.