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Arizona impact fee to fix budget is in limbo

PHOENIX – A new element of Republican legislative leaders’ developing proposal to help balance the state budget appeared in limbo Tuesday, with the House’s budget-writer saying the idea needs more study because it’s not clear it would work.

The $2.7 billion budget-balancing proposal released late Monday would get $210 million of its savings and other changes by indirectly tapping money that cities collect from impact fees paid on development, including construction of homes.

“We don’t know if this is viable at all,” said Appropriations Chairman John Kavanagh, R-Fountain Hills. “We’re not going to present this as an option in the budget at this point.”

Under the leaders’ draft proposal, the state would save by reducing municipal revenue-sharing by $210 million. Affected cities would make up that lost revenue needed for operations by tapping development impact fees collected for infrastructure improvements.

Other major elements of the leaders’ draft proposal include spending cuts, raids on special-purpose funds and use of federal stimulus money.

Another recently added provision would sweep $300 million from “excess balances” in school districts’ reserve accounts, though Kavanagh acknowledged that school officials question whether that money is available.

Kavanagh and his Senate counterpart canceled a planned Tuesday afternoon joint committee hearing on the impact-fee idea.

Kavanagh said the hearing was canceled because questions were raised about whether the idea would work and because the idea’s chief proponent, a Phoenix-area homebuilders group, wasn’t ready to make a presentation, Kavanagh said.

The Home Builders Association of Central Arizona has long argued that impact fees are a costly burden that dampen home sales, and the group recently called for a moratorium on impact fees to help sales of new homes recover.

The association’s lobbyist declined to comment on the budget-balancing proposal when contacted by The Associated Press on Monday.

Meanwhile, the League of Arizona Cities and Towns has criticized the indirect grab of impact fees, saying much of the money eyed by lawmakers actually has been spent or is already committed to various projects.

The idea has “practical, fiscal and legal problems,” league Executive Director Ken Strobeck said Tuesday.

“Impact fees are not general taxes,” Strobeck said. “They are fees for specific items and are required by law to be spent on necessary public infrastructure that benefits the development from which they are collected.”

Kavanagh referred to the impact-fee proposal as an “option.” He said an alternative would be a “rollover” — a delay of some spending for health care and education into the following fiscal year.

The shortfall in the budget for the fiscal year starting July 1 has recently been tabbed at approximately $3 billion, but the leaders’ proposal uses a $2.7 billion figure. The proposal reduces some projected spending because of factors that include stable school enrollment, the legislative budget director said.

Senate Appropriations Chairman Russell Pearce, R-Mesa, called the impact fee idea “a viable option,” and he and House Speaker Kirk Adams said separately that it’s not unreasonable for the state to seek budget help from its local governments.

“They’re still a political subdivision of the state. We’re all in it together, and we’re not going to hurt essential services,” Pearce said.

Adams said the legislation was still being written but that the affected impact fees would not involve funding for streets or projects involving police and fire protection.

“We are in a major fiscal crisis,” Adams said. “If there are savings accounts or rainy day funds that could be legitimately used before resorting to borrowing or before resorting to a tax increases, then it’s incumbent on us to find out what they actually are and if they can actually be utilized.”

House Democrats criticized the Republicans’ proposal, saying the impact-fee idea amounts to stealing from cities and towns.

“Instead of taking responsibility, they are absolving themselves from real, comprehensive policy and forcing cities, towns and schools to balance their budget at the expense of taxpayers,” said Rep. Chad Campbell, D-Phoenix.

Rep. Bill Konopnicki, R-Safford, said he and some other Republicans oppose the spending cuts included in the proposal.

The Legislature should consider policy changes, such as putting some nonviolent prisoners to home arrest, to save money, he said.

The leaders’ proposal represents an effort “to push the budget forward,” Konopnicki said. “They’ve done a lot of work … but it’s definitely not the end product.”


Highlights of GOP budget proposal

SHORTFALL: Puts the total for the 2009-2010 fiscal year starting July 1 at $2.7 billion. That’s below a $2.9 billion estimate made in March by the legislative budget staff and below the “north of $3 billion” description used by Gov. Jan Brewer’s staff.

STIMULUS, PART 1: Use $497 million to close the latest shortfall for the current fiscal year’s budget. That’s on top of $500 million that lawmakers previously planned to use to close an earlier shortfall in the current budget.

STIMULUS, PART 2: Use $989 million of stimulus money to help balance the 2009-2010 budget. The legislative budget director said that would leave $400 million of stimulus money available for the 2010-2011 fiscal year.

SPENDING CUTS: New ones total $670 million, below the $840 million proposed in March. Reductions for most agencies and programs include continuations of midyear cuts approved in January, as well as new lump sum cuts and specific reductions.

PROGRAMS: Lump-sum cuts for K-12 school districts at $175 million, down from $257 million in March. A $40 million lump-sum cut for universities. Add $33.3 million to Department of Corrections for additional provisional beds. Keep the KidsCare health care program for children but eliminate affiliated program for adults. Restore $17.8 million of Department of Economic Security child care subsidies.

FUND TRANSFERS: $394 million from raiding special-purpose funds. These include approximately $90 million from universities.

SCHOOL BALANCES: Take $300 million from school districts’ accounts said to exceed the limit set by state law.

IMPACT FEES: “Municipal rebates” would decrease state revenue sharing with cities and towns by $210 million. Affected municipalities could make up the loss to their operating budgets by tapping dollars collected from impact fees on development.

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