Well, we did it.  We finally passed the 2008 budget revisions that will keep the State from going bankrupt.  No one was entirely pleased with the end result, but it was a product that could pass both the House and the Senate and get the Governor's signature.

Briefly, here are the components:

Fund Sweeps/Shifts        $300 million
K-12 Rollover                    272
Rainy Day Fund               487
Agency Reductions          311

Total                       $1.370 billion

The fund shifts include $4.1 million (approximately 25%) from the State Lake Improvement Fund, which is a highly sensitive issue among our river communities.  Jim Weiers, Speaker of the House, met with a group including the mayors of Kingman, Bullhead City and Lake Havasu City and assured them that no current projects would be affected.  What happens next year is another matter, as we try to bridge a $1.9 billion gap.  But it's important to remember that few, if any, funds were exempt from these sweeps.

The K-12 Rollover is the one that most upsets me.  It is truly a "gimmick," in that instead of making a payment due June 15th, the State simply makes the payment in July, thus moving it to the next fiscal year. This was used previously, and I was among those who fought hard to be sure that when we had adequate funds that the rollover was repaid; that is, we made 13 payments instead of 12 in fiscal year 2007.

But the real victory was that the Governor changed her position on capital financing for schools -- we will not depend on bonding, with the subsequent debt payments, for this year.  I'm not sure what caused this shift, but I hope her budget analysts came to the same conclusion that ours did.  We simply do not have the resources to make more loan payments, even when our economy improves.

For 2009, I am hopeful that we can declare a moratorium on new school construction.  Many school districts are experiencing declining enrollment due a number of factors, including the implementation of the employer sanctions law.  Let's see what happens in the next year before we decide we need to build more schools.  I was informed by the Speaker in a conversation today that this will not result in as much of a savings as I had previously thought.  Instead of the $400 million we will spend this year, a moratorium next year would produce savings of "only" $144 million -- still a significant amount, so I'm hoping we can include that in our negotiations.

We are using more than 2/3 of the Rainy Day Fund for 2008, which means we will have less than $200 million to consider for 2009.  We will be pushing for major reductions in agency spending -- there is no alternative, but there will be major objections from all sides. 

As I stated at the beginning, no one is perfectly pleased with what we wound up with for this year.  As with every budget, this is not the one that I would have designed.  But "just saying no" doesn't get us anywhere.   If everyone held out for their "perfect" spending plan, then there would never be agreement and we would be looking at a stalemate.  Getting the best deal you possible can is, to me, that best way to proceed.

Now comes the real battle for the 2009 plan.

Until next week,

Nancy