Tucson CitizenTucson Citizen

Arizona fails to make ground on grim budget picture

PHOENIX — Gloomy economic news means recession-weary Arizona legislators are back where they started from before they made roughly $600 million in spending cuts in concert with Gov. Jan Brewer in January.

Legislative budget analysts on Tuesday projected the shortfall in the next fiscal year’s budget at over $2.9 billion. That’s close to what it was projected in January.

The assumption is that the budget for the year that starts July 1 will repeat those cuts, but the analysts said the economy has worsened to the point where reduced tax collections will eat up the savings.

Data points to state revenue being down 13 percent this fiscal year from the previous fiscal year — worse than the 9.7 percent drop projected in January. But legislators should assume a 14.5 percent drop because of the continuing downward trend, said Richard Stavneak, the Legislature’s budget director.

“A 13 percent decline is too optimistic,” Stavneak said. “Arizona economic indicators continue to hit on historic lows.”

Stavneak and his colleagues disclosed their revised shortfall estimate as some members of an advisory panel of private and government economists said the recession may have hit bottom in Arizona but that revenue forecasters shouldn’t expect conditions to start to significantly improve before late 2009.

“Hang in there. This is as bad as it gets,” said Marshall Vest, a University of Arizona economist. “We’re seeing the very worst of the numbers now.”

Said Pete Ewen of Arizona Public Service Co: “We’re pretty much in the worst of it at the moment.”

Commerce Department economist Dennis Doby said a rebound will be slow in coming.

“It’s going to be a u-shaped,” he said, referring to the shape of the economic trough. “We’re going to probably drag along the bottom for a while before we slowly climb uphill.”

House Appropriations Chairman Jon Kavanagh, R-Fountain Hills, said before and after the committee meeting that the grim situation means that lawmakers need to be serious about spending cuts. Federal stimulus dollars won’t be available after the next fiscal year to help maintain current programs, he said.

“It’s going to be Nightmare on Elm Street,” Kavanagh said. “We’ve got to knock that deficit down.”

Lawmakers and Brewer included use of $500 million in federal stimulus money in their January plan to close a $1.6 billion shortfall but the legislative budget staff now predicts an additional shortfall of approximately $500 million in the current budget.

Lawmakers anticipate using more stimulus money to cover that additional gap, but Stavneak said it’d be prudent to make changes totaling $650 million because of the possibility of a last-minute budget sag before the fiscal year ends June 30.

That’s because the state’s rainy day reserve and other budget maneuvers normally available have been used up in the January budget fix that include draining the reserve, he said.

However, Brewer budget director Eileen Klein later said Brewer is leery of using more than $1 billion of stimulus money just to prop up the current fiscal year. Some alternatives, such as rolling back some spending into the next fiscal year, may still be available, she said.

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