February 2 , 2009

By now you've read that the Legislature has passed a "fix" for the 2008-09 budget.  It was not fun, it was not pretty, but we did accomplish the necessary work within three weeks of coming into session.

Very broadly, here are the numbers:

$584M in spending reductions
$597M in fund transfers
$500M in federal assistance
$1.68B in total deficit reduction measures

One of the most commonly asked questions was, "Why did you cut anything from education?"  I'll try to explain:

K-12 spending is over 40% of the General Fund Budget, and even with the current reduction (of $133M) totals over four billion dollars.  Nearly 1/2 of that amount is "voter protected" by initiative, along with $1.4B in AHCCCS (health care for the poor) spending.  The latter is further complicated by the matching funds we receive from the federal government, which would be lost if we made drastic changes in eligibility or coverage.  So, out of a $10.2B General Fund budget, only 2/3 can be considered for spending reductions.

I think it's important to note that over the past five years, spending for K-12 has increased by 40%.  The current reduction amounts to a 3.2% cut, and actually provides as much money as in the 2008 fiscal year.  The percentage cut was one of the smallest made, and after making reductions of varying amounts to the largest agencies, all other General Fund spending was cut by 13%.

We reluctantly relied  on an arbitrary figure of $500M coming from the federal "stimulus" plan.  The Democrats wanted us to use $1B, saying that this money was sure to be approved and we would have it by the end of February, so there was no need to make ANY cuts to education.  Well, we've seen that this plan has been delayed by the Senate; and I was told today that even if the bill as passed by the House were enacted, the amount contemplated for aid to education would not be available until July 1st -- the beginning of the state's new fiscal year -- which does not help this year's out of balance budget.  I am hopeful that the Senate will make some necessary adjustments to remove the specific "pork" projects but that they will at some point agree to help the states with funding for education and health care.  But we have to keep in mind that any assistance will be temporary.  We cannot build permanent programs requiring additional money that simply will not be there.

There was a last minute request by Gov. Jan Brewer to put back some health and welfare spending to the tune of $18M.  This was financed by additional fund sweeps.  I am happy to report that my name was invoked by those negotiating with the Governor's office to avoid any additional cuts to the SLIF (State Lake Improvement Fund), which is so important to our river communities.  And for the same reason, a proposed $1M sweep of the Law Enforcement Boating Safety Fund was reduced by 50% to $500M.  I have been an advocate for these funds during my entire tenure here, and it paid off in this instance.

Now comes the truly hard work, as we begin crafting the 2010 budget.  All the easy fixes are gone:  no more money in the "rainy day" fund; dedicated funds swept; and painful cuts have been made.  Revenue projections continue to fall, with no end in sight.  Even the federal money, which comes with many strings and requirements, will not be enough to cover the deficit for next year.  It is truly a desperate situation.  I'll know more as we continue to be updated by JLBC and learn additional details on what to expect from the feds.

This is all very complicated, but I didn't want to go into too much detail here.  If any of you have questions, please feel free to call me at (602) 926-5051 or e-mail to nmclain@azleg.gov .  I'm always happy to take your calls or e-mail questions.