Trim would be less than earlier option; Brewer calls special session
PHOENIX – Arizona legislators are scheduled Thursday to begin considering a Republican plan to close the state’s big budget shortfall.
Majority Republicans reached agreement on the plan Wednesday evening, prompting Gov. Jan Brewer to immediately call a special session concurrent with the regular session.
Legislative committees are scheduled to consider each chamber’s version of the plan Thursday afternoon, with action by each chamber expected later.
The $9.9 billion budget has a shortfall of nearly $1.6 billion.
The plan is built on more than $600 million in cuts, $582 million in collections of unused monies in various state coffers, and $500 million in anticipated aid from a federal stimulus bill.
It includes a $142 million cut to the state university system, $133 million in cuts to K-12 education and $44 million in reductions to the state’s health-care system for the indigent.
Many of the cuts outlined in the proposal are smaller than those contained in the budget chairmen’s “options” plan, which was released two weeks ago, triggering panic and protests that have drawn thousands of people to the Capitol in recent days.
But the cut to public schools is higher than the $103 million in that original proposal, which would have taken the cut exclusively from the schools’ “soft capital” budgets, which pay for such things as textbooks, computers and transportation.
The deal calls for a $21 million cut in those categories, but it would be accompanied by an agreement to not renew a program that lets schools exceed a limit on their budgets. That translates into a $98 million budget cut, though school districts with enrollments of less than 600 students would be exempt.
In addition, charter-school budgets would be cut $4 million, and the state Department of Education would take an $8 million reduction.
A special session on the budget is expected to run through Friday, which would meet lawmakers’ self-imposed deadline of making a budget fix by the end of the month.
House Speaker Kirk Adams, R-Mesa, said he couldn’t predict if the plan would force layoffs or furloughs of state workers.
“That’s a decision that local management (of state agencies) get to make,” he said, adding the deal was designed to give directors as much flexibility as possible.
The plan would not affect two health-insurance programs for lower-income families. KidsCare and KidsCare Parents had been proposed for elimination.
A key sticking point in the budget negotiations was university budgets. GOP lawmakers propose a $142 million reduction – the universities have said they can only afford $100 million – but it is accompanied by permission to borrow $70 million for building maintenance that had been blocked by Senate Appropriations Chairman Russell Pearce, R-Mesa.
The community colleges are targeted for a smaller cut than initially proposed: $9 million, down from $12 million.
On Wednesday, more than 1,700 university students and supporters of higher education rallied within earshot of lawmakers to protest proposed cuts to university budgets.
Hours later, Arizona State University President Michael Crow announced that the school would require its 12,000 employees to take 10 to 15 days off without pay before July to save the university $24 million. The unpaid leave will be staggered.
Lawmakers are expected to review and act on the deficit-reduction proposal in budget hearings this afternoon. Legislative leaders say they hope to have the budget resolution passed and signed by Gov. Jan Brewer by the weekend.
The quick action would save the state about $160 million because some spending would be curtailed before another month of expenditures started, Senate President Bob Burns said.
Brewer called the lawmakers into a special session at 9:26 p.m. Wednesday. Her call came after agreement between Republicans in the House and Senate, who had struggled for several days to reconcile competing plans on how deep the budget cuts should be as well as how they should be structured.
Democrats, who are in the minority, have not been involved in the budget negotiations.
The action on the state budget deficit comes as the U.S. House of Representatives approved a federal stimulus plan that would send about $1 billion to Arizona for this fiscal year. But state GOP leaders were counting on only $500 million in a federal boost.
The federal plan still has to be acted on by the U.S. Senate, and work is expected to be finished by mid-February.
State Senate Minority Leader Jorge Garcia, D-Tucson, said Democrats urged their Republican counterparts to hold off on deep budget cuts, noting that federal aid might spare the budget ax.
“I made the pitch,” Garcia said, “but it fell on deaf ears.”
Pearce said there are good reasons to look askance at the federal dollars: They could have strings attached that would require more spending by the state, and they could promote programs the state isn’t interested in.
Most importantly, Pearce said, the federal stimulus plan still needs Senate action, and it would be foolish to wait because every day that the Legislature delays action increases the deficit about $30 million.
After lawmakers resolve the current-year budget, they have another deficit to wrestle: The shortfall for the 2009-10 budget could be as big as $3 billion.
The state’s budget woes mounted when tax collections fell short of projections, driven largely by the downturn in the housing market.
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Arizona Legislature: http://www.azleg.gov
Key points of a proposal under consideration by Arizona lawmakers to eliminate a shortfall in Arizona’s current budget:
— Lump-sum cuts and salary reductions for state programs and agencies. To find the personnel savings, agencies have discretion to decide whether to use layoffs, furloughs or vacancy savings. Biggest lump-sum cuts for agencies: Department of Economic Security, $89.4 million, and Department of Health Services, $36.5 million.
— University funding. Cut by $130 million (by the House) or $145 million (by the Senate). Cut is smaller than an early $243 million set of options that included sweeps from special-purpose funds and larger than $100 million offered by Board of Regents and university presidents.
— Stimulus money. The package anticipates the state receiving $500 million in federal economic stimulus money, chiefly in increased federal Medicaid reimbursements to the Arizona Health Care Cost Containment System, known as AHCCCS, for health care for the poor.
— Health care. Make AHCCCS enrollees pay new monthly premiums. No change to existing KidsCare program for health care for children or a smaller program for parents, both of which had been proposed for elimination.
— K-12 public schools. Funding to districts and charter schools would be cut by approximately $130 million. Major elements include a $21 million cut of annual funding to districts for computers and other equipment and a $98 million reduction accomplished by not overriding a constitutional spending limit for districts. Neither reductions apply to small-enrollment districts. Districts get new discretion to spend their remaining equipment dollars either for that purpose or regular operations.
— Transfers. Sweep money from special-purpose funds into the General Fund, including $130 million from the budget stabilization fund, which is a rainy day reserve. Other examples: $17.5 million from the housing trust fund, $10.1 million from the state lake improvement fund, $20.8 million from the job training fund and $5 million from the arts endowment fund.
— Building projects. Delay and cancel some projects. Examples: Postpone a $10 million expenditure for a southern Arizona veterans home by one year. Withdraw $1.2 million which had been appropriated to renovate the old state health lab. Withdraw $3.2 million which had been appropriated for replacing prison cell doors and locks.
— Miscellaneous. Eliminate the General Assistance welfare program. Authorize the Department of Revenue to establish a tax amnesty program for May 1 to June 1. Increase monthly offender probation fees to $65 from $50. Increase monthly juvenile probation fees for parents to $100 from $50.
SOURCE: Briefing by Arizona House leaders, bill summaries by legislative staff.