Brewer, lawmakers starting to grapple with $450 million budget deficit - East Valley Tribune: Arizona

Brewer, lawmakers starting to grapple with $450 million budget deficit

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Posted: Wednesday, November 3, 2010 5:29 pm | Updated: 8:49 pm, Sun Nov 7, 2010.

Tuesday's defeat of Propositions 301 and 302 knocked a $450 million hole in the state budget and has the outgoing Senate president calling for a special session, and soon, to plug it.

Bob Burns, R-Peoria, said other problems already had the state more than $400 million in the red. The unwillingness of voters to let lawmakers take control of two other funds just added to the problems.

Burns said time is running out.

"At some point, I'm afraid we run out of cash and start issuing warrants," essentially IOUs to those the state owes money, he said. "The people are going to be up in arms about it."

By wide margins, voters refused to kill the First Things First early childhood development program and let lawmakers take the proceeds from the 80-cent-a-pack tax on cigarettes that funds it. Together with unspent revenues, Proposition 302 would have provided $325 million.

Proposition 301 would have taken the last of money voters mandated be set aside to preserve open space and would have generated $124 million.

Lawmakers built the $9.1 billion spending plan on the assumption both would pass.

Incoming Senate President Russell Pearce, R-Mesa, prefers to wait until January - when he is in charge - to deal with the problem.

From his perspective, the solution is to just keep cutting expenses until they match revenues. That makes state aid to education and health care, the biggest items in the budget, the prime targets.

Pearce acknowledged trimming the Arizona Health Care Cost Containment System, the state's Medicaid program, would put the state out of compliance with the new federal health care law. It says states that reduce eligibility lose all of their federal health aid.

But Pearce said he's ready to tell the feds what they can do with their $7 billion.

"If we're saving (state) money, the fact we lose some federal money means nothing," he said. "If you can't afford Dillards, even though they're having a great sale, you can't afford Dillards."

Pearce said he is unconcerned that the loss of all federal dollars will leave Arizona unable to fund what's left of its AHCCCS program.

"Church, community, family's got to provide," he said.

Gov. Jan Brewer, who would have to call lawmakers - some of whom were defeated Tuesday - back to the Capitol before January said it is premature to make that decision.

"We're working on our budget," she said. "We can discuss that in the next couple of weeks."

Brewer also wants to trim AHCCCS, but not in a way that would endanger federal funding.

She said the state could save $1 billion a year by curtailing eligibility. In fact, lawmakers voted to do just that last spring, eliminating coverage for about 330,000 Arizonans.

That, however, was before the president signed the new law, forcing lawmakers to reverse course.

Brewer said the new Congress may give states some flexibility to alter their own programs.

In the interim, the governor is hoping First Things First - the program lawmakers hoped voters would kill - will now agree to lend some money to the state. In fact, Brewer had made such a proposal last spring as an alternative to doing away with the program, a suggestion lawmakers ignored.

"I don't know if it's still open or not," the governor said. "We will move forward and deal with whatever cards we are dealt."

Steve Lynn, director of the Arizona Early Childhood Education and Health Board, which oversees the program, said that offer was based on lawmakers not trying to take the money instead. Despite that, Lynn said it is "possible" the board will consider a new request.

One issue, he said, is to find a way to ensure it truly is a loan. "We have an obligation to make sure that the money is paid back, on whatever schedule is agreed to," he said.

Lynn said, though, the amount of cash available now is something less than the $300 million offered in the spring, though Lynn said he did not have an exact figure.

The plan by the Democrats left in the Legislature after Tuesday's vote is instead to raise more money. Sen. Linda Lopez, D-Tucson, said the state's tax system is chock full of loopholes. Closing them, she said, would ensure that further spending cuts, which she believes are inevitable "won't be quite so deep."

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