Arizona state budget (2009-2010)

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The state sold off several state buildings — including the tower where the governor's office is located — for a $735 million upfront payment. The state would lease back the buildings, however, and over the next 20 years the deal would ultimately cost taxpayers an extra $400 million in interest.[1]

The Arizona legislature attempted to balance the state's FY 2010 budget in part by transferring funds from a variety of special accounts. Gov. Jan Brewer signed the legislation authorizing the fund transfers. The state transferred $4.7 million from a fund for injured workers into the state general fund. That move was found to be illegal by Maricopa County Superior Court Judge Larry Grant on June 21, 2010, who reasoned that the transferred money did not constitute public property but rather was private and held in trust by the state. When the lawsuit was first filed in 2009, an injunction kept the money where it was while the case made its way through the court system, so the state had not yet spent those funds.[2]

For FY 2010 the projected budget shortfall was $1.4 billion in January 2010, and the Joint Legislative Budget Committee's staff at the end of July projected that the $8.5 billion budget had a shortfall ranging from zero to $1 billion.[3][4] After the FY 2010 budget was passed, the state cut $120 million.

Arizona faced the largest budget shortfall as a percentage of total spending of any state in the United States in early 2009 according to the Center for Budget and Policy Priorities. The housing slowdown, rise of foreclosures, subprime-mortgage-induced credit crunches, overly optimistic state revenue projections, and increased state spending combined to create an estimated deficit of $1.6 billion (December 2009 estimate) for the end of FY 2009 after approximately $452 million in spending cuts during a November 2009 special session. According to January 2010 reports, a total $4.5 billion shortfall was projected for the next budget, which included FY 2010 and 2011. For FY 2010 the projected shortfall was $1.4 billion, whereas for FY 2011 the projected deficit was $3.2 billion.[5] The previous estimated cumulative shortfall was $3 billion.[6][7][8] The current debt per capita was $736.[9]

Proposed budget cuts

  • According to the governor's proposed budget plan, in an effort to eliminate the state's budget deficit, she recommended a mandatory 5 percent pay cut for state employees.[10]
  • In January 2010 an Arizona oversight board voted to close 13 state parks in an effort to ease the state's looming budget deficit. Since July 2009 the state legislature cut approximately 61% of the state parks budget.[11]
  • In order to avoid major budget cuts to Public Safety, the governor proposed using $20 million in federal stimulus dollars to "fund grants for local public safety to help cities and towns."[3]
  • Education funding, according to the proposed budget, would be reduced to the FY 2006 funding levels; however, Gov. Brewer emphasized that funding would not drop below the FY 2006 levels.[3]
  • Additional proposed reductions included: reducing Arizona Healthcare Cost Containment System by 25%; eliminating the KidsCare program; reducing mental health services; eliminating cash assistance for 10,000 families; placing a hard cap on day care assistance and eliminating services for more than 10,000 children of low-income working parents; closing the Department of Juvenile Corrections, transitioning the custody of minors to county detention centers and laying off an additional 900 state employees; reducing state employee pay by 5%; and redirecting Lottery revenue streams.[3]

New budget process

In January 2010 Arizona senators announced that they were going to try a different approach for balancing the state's budget. According to the new system, legislative budget analysts would present lawmakers with various budget options and the estimated impacts. According to reports, the process would be open to the public. Typically, budget proposals are not presented to the public until "they are deemed ready for formal action." Senate President Bob Burns said that the new process would not only increase transparency, but also "produce a wider range of ideas."[12]

General fund

General fund[13]

Category FY 2009 amount in millions - actual FY 2010 amount in millions - estimated
Beginning balance 1 -481
Revenues 6,966 6,341
Adjustments 1,307 2,004
Total resources 8,274 7,865
Expenditures 8,754 7,815
Adjustments 0 0
Ending balance -481 50
Budget stabilization fund 2 0


Budget background

See also: Arizona state budget

Arizona’s fiscal year runs from July 1 to June 30. FY 2009 general fund revenues were $8.44 billion, with $8.22 billion expected for FY 2010. General fund revenue sources for the fiscal year were 49% from sales and use tax, 34% from individual income tax, 7% from corporate income tax, and 10% other.[14]

A comparison of Arizona’s FY 2000 to FY 2010 appropriations shows[15]

FY 2000 FY 2010 % change
K-12 $2.3 billion $4.4 billion 87%
AZ Medicaid+ $494 million $1.2 billion 140%
Health services $248 million $458 million 85%

Overall, state general fund spending increased 8.7% from 2004 to 2009 compared to the 5.8% population/inflation increase for the same period.[16]

The governor releases a budget proposal shortly after each session of the legislature convenes (second Monday in January). The Joint Legislative Committee (JLBC) then releases its estimate of baseline spending.

Joint Legislative Committee

  • 8 members from each house.
  • Chairmanship rotates between two Appropriations Committee Chairmen.
  • Committee meets monthly – has 188 statutory responsibilities.
  • Publishes a monthly update on revenue collections and other fiscal issues.
  • Especially during the interim between sessions, the JLBC provides legislative oversight of state fiscal issues.
  • The Joint Committee on Capital Review is comparable committee for capital issues.

State constitution

While Arizona is viewed as having a balanced budget provision, the Arizona Constitution allows shortfalls to carry over to the next fiscal year.

Article 9, sections 4 and 5 read:

“The fiscal year shall commence on the first day of July in each year. An accurate statement of the receipts and expenditures of the public money shall be published annually, in such manner as shall be provided by law. Whenever the expenses of any fiscal year shall exceed the income, the legislature may provide for levying a tax for the ensuing fiscal year sufficient, with other sources of income, to pay the deficiency, as well as the estimated expenses of the ensuing fiscal year.”[17]
“The state may contract debts to supply the casual deficits or failures in revenues, or to meet expenses not otherwise provided for; but the aggregate amount of such debts, direct and contingent, whether contracted by virtue of one or more laws, or at different periods of time, shall never exceed the sum of three hundred and fifty thousand dollars; and the money arising from the creation of such debts shall be applied to the purpose for which it was obtained or to repay the debts so contracted, and to no other purpose. In addition to the above limited power to contract debts the state may borrow money to repel invasion, suppress insurrection, or defend the state in time of war; but the money thus raised shall be applied exclusively to the object for which the loan shall have been authorized or to the repayment of the debt thereby created. No money shall be paid out of the state treasury, except in the manner provided by law.”[18]

Accounting principles

See also: Arizona government accounting principles

The Joint Legislative Audit Committee, which oversees all audit functions of the Arizona legislature, provides direction for the Auditor General’s Office. Subject to approval by a majority vote of both legislative houses, the Committee also appoints the Auditor General for a five-year renewable term. The Auditor General’s Office publishes online its audits and must:

  • ascertain whether public entities are making wise use of their resources—public money, personnel, property, equipment, and space;
  • determine whether public entities are complying with applicable laws, regulations, and governmental accounting and financial and reporting standards;
  • define standards and establish procedures for accounting and budgeting, as the Legislature requires; and
  • provide technical assistance to state and local governmental entities.[19]

Arizona Revised Statutes §41-1279 established the Joint Legislative Audit Committee (JLAC). Among other duties, it is charged to:

  • oversee all audit functions of the legislature and state agencies, including sunset, performance, special and financial audits, special research requests and the preparation and introduction of legislation resulting from audit report findings.
  • appoint an auditor general subject to approval by a concurrent resolution of the legislature and direct the auditor general to perform all sunset, performance, special and financial audits and investigations.
  • require state agencies to comply with findings and directions of the committee regarding sunset, performance, special and financial audits.[20]


Credit rating Fitch Moody's S&P
Arizona[21] NR Aa1 AA+

The Institute for Truth in Accounting (IFTA) rated Arizona “worst” in filing the state’s Comprehensive Annual Financial Report (CAFR) – the annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA did not consider Arizona’s CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis did not include significant liabilities for the pension plans and for other post employment benefits, such as health care.[22] Arizona’s Department of Administration, General Accounting Office, under the state comptroller, is responsible for filing the CAFR, which are published on the department website.[23]

Economic stimulus package

Arizona was expected to receive $4.4 billion of the $787 billion dollar economic stimulus package.[24][25] However, Gov. Brewer said that she might turn down the funds because she was skeptical about the unemployment funds. The funds would help extend benefits for people who had been out of work for longer periods of time; however, some lawmakers said that they were worried the provision could leave the state paying for benefits long after the stimulus money ran out.[26] According to White House officials, the package was expected to create approximately 70,000 jobs.[27]

According to preliminary reports, Arizona was expected to receive:[28]

  • $100.6 million for public transit[29]
  • $522.0 million for highway funding
  • $55.8 million for the Drinking Water State Revolving fund
  • $32.4 million for home funding (community-based affordable-housing block grants)
  • $26.9 million for the Clean Water State Revolving Fund
  • $22.2 million for the Homelessness Prevention Fund
  • $12.1 million for the Public Housing Capital Fund
  • $246.2 million for Title I education for the disadvantaged
  • $178.5 million for special education Part B state grants
  • $18.5 million for dislocated workers state grants
  • $18.0 million for the Department of Labor’s youth state grants
  • $11.6 million toward education technology
  • $10.3 million toward vocational rehabilitation
  • $7.7 million for the Department of Labor’s adult state grants
  • $6.9 million for State Employment Service grants

One Arizona project was noted in Senator Coburn's and Senator McCain's "Summertime Blues, 100 stimulus projects that give taxpayers the blues" report. Researchers at the University of Arizona received over $300,000 in stimulus funds to study computer simulations to follow the formation of galaxies through the period 1-2 billion years after the Big Bang, as well as create a course in astronomy for non-astronomy majors at the University of Cape Coast in Ghana. As of August 2010, the project had created one-quarter of a job, according to reporting by the school.[30]

Budget transparency

See also: Evaluation of Arizona state website

As of 2009, Arizona had no statewide, official spending database online. However, a database would be placed online on or before January 1, 2011.[31]

Economic stimulus transparency

  • The American Recovery and Reinvestment Plan of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[32]
  • It was estimated that Arizona would receive at least $3 billion in federal funding.[33]

Error in ARRP

On November 16 and 17, 2009, many errors were found in the $747 billion plan that showed the plan set aside money for congressional districts that do not exist. According to Recovery.gov, funds would go to 884 congressional districts, though there are only 435.[34][35]

ARRP sent up to $84 million to 14 phantom districts in Arizona.[36]

Legislation

  • Arizona Senate Bill 1235 (2008)

Legislation passed to create an online spending database.[37] The database was to be placed online on or before January 1, 2011.[38]

Government tools

This table can be used to evaluate the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State database Searchability Grants Contracts Line item expenditures Dept./agency budgets Public employee salary Exemption level
None n/a n/a n/a n/a n/a n/a n/a

Arizona checkbook register

In February 2010 the state began posting its checkbook register online, dubbing the website AZCheckbook. The checkbook shows a snapshot of the daily total deposits and withdrawals from the State's Operating Account.[39] State Treasurer Dean Martin launched the website, wanting it to be a searchable, user-friendly website that disclosed all revenues and expenditures for Arizona state government.[40]

Support for creation of the database

Arizona Senate Bill 1235 (2008) was signed by Governor Janet Napolitano.

Public employee salaries

See also: Arizona state government salary

See also

External links

Additional reading

References

  1. The New York Times "Mounting Debts by States Stoke Fear of Crisis" Dec. 4, 2010
  2. Businessweek "Ariz. judge rules against state on fund raid" June 21, 2010
  3. 3.0 3.1 3.2 3.3 State of Arizona, "Governor Jan Brewer Proposes Decisive, Balanced State Budget Plan," January 15, 2010
  4. Bloomberg Businessweek "Expected Arizona budget gap expected to be smaller" July 29, 2010
  5. The Arizona Republic, "Few options left for fixing Arizona budget," January 11, 2010
  6. Associated Press, "Arizona Legislature sets ballot measures aside as special session on budget crisis narrows," December 17, 2009
  7. Phoenix Business Journal, "Arizona budget deficit labeled country's worst," February 28,2009
  8. Center on Budget and Policy Priorities, "Policy Points: Recession Still Causing Trouble for States," November 19, 2009
  9. New Mexico Watchdog, Aug. 3, 2010
  10. Howe Street, "Arizona Tax Hikes and So-Called "Balanced Budget" Proposals," accessed January 23, 2010
  11. Associated Press, "Ariz. to close 13 parks by June due to budget woes," January 15, 2010
  12. Associated Press, "Arizona Senate Trying New Process for Budget Work," January 13, 2010
  13. Cite error: Invalid <ref> tag; no text was provided for refs named survey
  14. Arizona Joint Legislative Budget Committee, “FY 2010 Appropriation Report, Budget Highlights 2010,” September 25, 2009
  15. Arizona Joint Legislative Budget Committee, “FY 2010 Appropriation Report, Budget Highlights 2010,” September 25, 2009
  16. State of Arizona, “New Legislator Orientation,” December 12, 2008
  17. Arizona Constitution
  18. Arizona Constitution
  19. State of Arizona, Office of the Auditor General Web site, accessed October 8, 2009
  20. State of Arizona, Office of the Auditor General Web site, accessed October 8, 2009
  21. "State of Indiana," “State Credit Ratings-as of June 24, 2009
  22. Institute for Truth in Accounting, “The Truth About Balanced Budgets—A Fifty State Study,” Page 35
  23. Arizona Department of Administration Leadership Staff Web site, accessed October 8, 2009
  24. The Arizona Republic, "Schools to receive stimulus by April," March 10,2009
  25. Arizona State Legislature, "Federal assistance to Arizona," February 19,2009
  26. ABC15, "Why Arizona could decide to turn down stimulus money," March 9,2009
  27. American Recovery and Reinvestment Act, "Estimated job effect," accessed March 11,2009
  28. Phoenix Business Journal, "Arizona Stimulus Dollars," March 6,2009
  29. American Recovery and Reinvestment Act,"$8.4 Billion for Public Transit," March 5,2009
  30. "Summertime Blues, 100 stimulus projects that give taxpayers the blues" August 2010
  31. Arizona Senate Bill 1235 (2008)
  32. National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
  33. Wall Street Journal, "Stimulus Spending by State"
  34. $6.4 Billion Stimulus goes to Phantom Districts, Watchdog.org, November 17, 2009
  35. Stimulus Creates Jobs in Non-Existent Congressional Districts, Watchdog.org, November 16, 2009
  36. Arizona, Watchdog.org, November 17, 2009
  37. Goldwater Institute, "Piercing the Fog: A Call for Greater Transparency in State and Local Government" executive summary, July 29, 2008
  38. Arizona Senate Bill 1235 (2008)
  39. Arizona Checkbook.com
  40. ABC News, New website shows how Arizona is spending your tax dollars, February 16, 2009