Arizona lawmakers will be dressed in their finest Monday as they convene this year’s legislative session at the state Capitol, but they’ll soon start paring Arizona down to its skivvies to balance a gaping midyear budget deficit.
Gov. Janet Napolitano will offer proposals on state lands, transportation, health care and education when she delivers her sixth State of the State address, vowing to move the state forward even in the face of brutal economic times.
“You make adjustments,” the governor said last week, “but you don’t lose sight of your overall goals and objectives.”
Behind the conciliatory talk and hopeful rhetoric, however, Republican legislators and the two-term Democratic governor are miles apart when it comes to closing the budget deficit, which is their first order of business.
For starters, legislative budget writers peg the deficit $100 million higher than the governor, at $970 million out of a $10.6 billion spending plan.
Republicans also predict a longer downturn and a slower turnaround, fueling their argument that current-year reductions need to be deep and permanent or things will only be worse next year. They’ve called for 10 percent across-the-board cuts at most agencies.
“We can’t continue the same old way,” House Speaker Jim Weiers, R-Phoenix, said last week. “We have a chance this time to look at the way government is run ... and retool it a little bit.”
The governor and Democrats are painting a rosier picture, with revenue starting to pick up midyear. They say this is no time to panic and start throwing people off health, welfare and education programs. Rather, they would use financing and funding reserves to close most of the budget gap.
At the end of the day, Napolitano may find a bipartisan solution in the Senate, as she did last year, with President Tim Bee, R-Tucson, a handful of moderate Republicans and the Democrats. If so, House Republicans will be all but frozen out of budget negotiations.
That gives Democrats more clout than they’ve had in years at the Legislature, with Senate Minority Leader Marsha Arzberger, D-Willcox, emerging as a key player. The plain-spoken rancher and pilot was elected in 2001 to the seat formerly held by her husband, Gus.
“Everybody’s been taking sides in the past like a football team, and that’s not what we are,” Arzberger said.
She said leaders from both parties and both chambers met last month and agreed to work cooperatively.
But in this election-year session, bipartisanship may be harder to come by. And the rancor during last week’s joint appropriations committee meetings didn’t bode well.
“If they’re out of the loop it will only be by their choice,” Arzberger said. “And that would be unfortunate.”
Election-year politics may strengthen the governor’s hand, however.
Bee won raves in southern Arizona for reaching across the aisle to Arzberger last session to get a budget deal, and on key pieces of legislation. He’s considering a run for Democratic Rep. Gabrielle Gifford’s seat in the 8th Congressional District, where he’ll need lots of Democratic support to stand a chance.
At an Arizona Chamber of Commerce luncheon last week, Bee praised the “wonderful cooperation” he’s enjoyed with Arzberger.
Because it’s an election year, he said, there’s conjecture that “people will be trying to use the session to pit one party against another.”
“We must place people ahead of politics,” Bee said.
In her annual address Monday, the governor will outline her plans to broaden health insurance, fund a statewide transportation plan, fix laws regarding state lands and illegal immigration, and invest in education, albeit without funding.
“We can still move forward. We may have to do things more slowly than I would have wished,” she said last week.
Napolitano is expected to continue her push to reduce the number of Arizonans without health insurance. Last year her plan to insure all Arizona children fell flat, but press aide Jeanine L’Ecuyer said the governor will propose new methods of providing health coverage to more people without state investment.
The governor has been meeting with lawmakers and business leaders to craft two growth-related ballot measures, on state lands and transportation.
The business community has complained that gridlock is strangling commerce and huge investments are needed to keep the state’s cars and trucks moving, and the governor has urged lawmakers to come up with a transportation plan that would reduce what she calls the “time tax.”
Some estimates suggest the state will need $20 billion over the next two decades to get that done, with funding coming from hikes in gasoline taxes, sales taxes, or both.
Plans include a truck bypass along Interstate 10 between Phoenix and Tucson, as well as public-private partnerships, which means toll roads. Napolitano has said toll roads could work, but only on new roadways.
Sen.CarolynAllen,R-Scottsdale, said Arizonans may have to get used to the idea of toll roads, which are commonplace in the East and Midwest. But she’s dubious whether anything remotely resembling a tax hike could fly in an election year, even if it’s a ballot measure.
“The governor has said we’re going to have some kind of transportation plan by this fall. But where are we going to get the money for it?” Allen said. “I don’t believe that there will be a tax coming out of this Legislature.”
On the flip side, some Republicans are looking to make permanent a temporary property tax cut that’s due to expire in 2009. The state equalization rate assessed homes and businesses 43 cents for every $100 of property value, with the proceeds going to local schools.
During a break from hearings on the budget deficit last week, Weiers and 20 other GOP lawmakers said passing the tax legislation should be among the first order of business. It’s the third straight year they’ve pushed to make the temporary repeal permanent, at the urging of business groups.
“It’s not fair in these economic times that we have to try to balance the budget on the backs of homeowners,” Weiers said.
Lawmakers who oppose the plan say the state can’t afford it now, but they could be tagged with supporting a tax increase. Allen, a moderate who’s often at odds with her GOP colleagues, said it’s “nothing but campaign fodder for an election year.”
“We’re piling on another deficit problem,” she said. “The MO will be to make those of us who don’t support it out as big spenders.”
The governor called the tax proposal “untimely” and “irresponsible” given the size of the budget deficit. And she questioned whether there are enough votes for passage.
“We’ll see if they can actually get it to my desk,” she said.
The House and Senate appropriations committees met last week to go over their chairmen’s budget-cutting proposals. Napolitano has her own plan, and there are few similarities beyond tapping into the state’s $685 million rainyday fund.
One of the key issues will be whether to finance school construction instead of paying cash, which according to the governor’s plan would fill nearly half of a $870 million deficit.
The question, according to some, isn’t whether the GOP will agree to capital financing, it’s when.
“It may not be ideal, but it’s probably better than other options,” said Rep. Mark Anderson, R-Mesa.
Other options in the GOP plan include eliminating a litany of programs for children, the poor and the elderly, as well as lump sum cuts at agencies, including $23.8 million from the Department of Health Services, $47 million from the Department of Economic Security and $41.7 million from Arizona State University. Some of those cuts would mean the loss of millions in federal matching funds as well.
In all, agency budget cuts in the GOP plan total $630 million, compared with the governor’s $214 million in spending cuts.
“Some Republicans have the philosophy that there should be no government,” Arzberger said. “But our government has certain essential services that it’s supposed to provide.”
Of those who are willing to cut such services, she said, “their mothers ought to be ashamed of them.”
In addition to their general belief that government is too fat, Republicans come back to budget projections that show an even tougher budget next year, with the deficit pegged at $1.7 billion for fiscal 2008-09.
So the central question becomes, how long will this downturn last?
“The whole debate is about when do we go back to quasinormal,” said Dennis Hoffman, professor of economics at ASU.
“This fiscal year is the worst I’ve seen in a long time,” he said. “But I see better conditions next fiscal year.”
Hoffman is under contract with the governor’s budget office, and his projections are largely responsible for the governor’s economic optimism.
But Republican lawmakers are banking on a more dire consensus forecast from economists who advise the Joint Legislative Budget Committee, their budget-writing arm.
The budget woes may leave lawmakers with little to take home to constituents when they campaign for re-election, unless their pet programs are pulled off the table.
“Every single member, except maybe me, has their programs that they like,” said Sen. Karen Johnson, R-Mesa. “But there’s just some real serious cuts that need to be made.”
Still, the governor is unlikely to sign a budget or legislation that cuts too deeply. When she directed agencies to start cutting back in September, she exempted kindergarten through 12th-grade schools and higher education, as well as programs and services affecting Arizona’s children and vulnerable adults.
“We don’t just shut the doors and say we’re going home,” Napolitano said. “We’re not going to balance this budget on the backs of Arizona children.”
How to fix the state budget?
Democratic Gov. Janet Napolitano and Republican legislators have very different approaches to plugging the hole in this fiscal year’s budget. They don’t even agree on the size of the deficit.
Total deficit: $870 million
-- Cuts from state agencies: $85.8 million
-- Transfer money from special funds: $128.2 million
-- Borrow money to build new schools: $393 million
-- Money from rainy day fund: $263 million
Examples of spending reductions and deferrals:
-- Department of Corrections: fewer Arizona inmates housed in Indiana and Oklahoma: $16.3 million
-- Universities: finance design costs for biomedical campus buildings: $10.5 million
-- Department of Economic Security: savings from reduced caseload in cash assistance program: $4 million
-- Department of Education: unspent disabled pupil scholarship: $2.5 million
-- Commission for Postsecondary Education: reduce grant program: $5.3 million
Total deficit: $970 million
-- Cuts from state agencies: $630 million
-- Money from rainy day fund: $350 million
Examples of spending reductions and deferrals:
-- State Facilities Board: Delay new school construction: $42 million
-- AHCCCS: Reduce eligibility for Kids Care: $1.2 million
-- Department of Commerce: delay matching funds for 21st Century Fund for research: $25 million
-- Community Colleges: Suspend funding for building maintenance and repair: $20 million
-- Arizona State University: lump-sum reduction: $41.7 million
-- Department of Economic Security: Reduce funding for community health centers: $4.5 million
Gov. Janet Napolitano ultimately signs the budget, but these are the people who will decide what gets to her desk. They’ll have to cut the current $10.6 billion spending plan by at least $900 million before moving on to next year’s plan.
George Cunningham: Napolitano’s deputy chief of staff for finance and budget. A former Tucson lawmaker, he oversees the governor’s Office of Strategic Planning and Budgeting and is a key negotiator.
Richard Stavneak: Director of the Joint Legislative Budget Committee, the budget-writing arm of the Legislature. He’s been delivering dour economic projections to legislators since summer and predicts a $1.7 billion shortfall for fiscal 2008-09.
Rep. Russell Pearce, R-Mesa: Chairman of the House Appropriations Committee. An advocate of limited government, Pearce and his Senate counterpart want state agencies to cut spending by 10 percent.
Sen. Bob Burns, R-Peoria: Chairman of the Senate Appropriations Committee. Burns advocates permanent cuts now to ease the pain next year and says the current shortfall is an opportunity to streamline state government.
Sen. Tim Bee, R-Tucson: The Senate president won raves for working with Democrats last session to craft a budget deal the governor would sign. He’s considering a run for Democratic U.S. Rep. Gabrielle Gifford’s seat in the 8th District and is expected to continue his bipartisan ways.
Sen. Marsha Arzberger, D-Willcox: Senate minority leader. She played a key role last session as Democrats joined with moderate Republicans in the Senate to negotiate a budget deal with Napolitano.
Key issues facing ’08 Legislature
Rep. Russell Pearce, R-Mesa, will introduce a raft of measures addressing illegal immigration, including bills to deny regular birth certificates to babies born in Arizona unless at least one parent proves citizenship, deny workers’ compensation benefits to undocumented workers hurt on the job and prohibit cities from having policies prohibiting police from checking immigration status. The architect of Arizona’s employer sanctions law also wants a law to make clear that employers who pay workers’ under the table aren’t exempt and could lose their license. Gov. Janet Napolitano also is expected to address illegal immigration and push for clarification of the employer sanctions law, including a measure that would ensure it’s enforced fairly.
Cities will work hard to save their 15 percent cut of income tax collected by the state and divvied up between cities as state-shared revenue. Local leaders also want to protect money for road maintenance and construction, dollars that lawmakers have already targeted to offset other problems. Cities also want to maintain local control and intend to fight any legislation that seeks to usurp that.
Most education programs are linked to funding and no new funding will be available this year, so educators and legislators say no new kindergarten through 12th grade school programs will likely be created this session. Budget cuts may even include suspension of all new school construction, and big issues to schools — such as payment for excess utilities costs — will not be resolved. Renewal of a policy that allows students to graduate if they fail Arizona’s Instrument to Measure Standards, but still meet a set of academic requirements, may be addressed. Legislators also must figure out how to pay for an English language learners lawsuit settlement.
Universities and community colleges are facing more than $100 million in potential budget cuts but have a champion in Napolitano who does not want to reduce such spending . One lawmaker says he will introduce legislation to require that significant tuition increases be approved by a two-thirds vote of the Arizona Board of Regents. For the third straight year, the Legislature will consider creating an agency to oversee the state’s 10 community college districts. Arizona is the only state that does not regulate its community colleges.
Budget cuts will limit the amount of health-related legislation this session, but look for Napolitano to propose insuring more Arizonans without new state funding. That’s even as some Republican lawmakers are taking aim at KidsCare, now providing health insurance for about 64,000 children with a 3-1 federal-state match, as well as a program that insures their parents. Hospitals will try to fend off cuts to rural facilities while luring doctors and nurses, create a statewide infection control plan to stem the spread of drug-resistant staph and get some relief in emergency departments.
The governor wants lawmakers to put a comprehensive transportation plan on the ballot in 2008 or in a special election in 2009. Funding is the key, and business groups have been meeting to consider sales and gas tax increases, along with the potential for public-private deals for new toll roads. If lawmakers can’t get anything passed, look for a petition drive. The governor also has been meeting with lawmakers about state trust land reform. Expect a ballot measure that makes it easier for local governments, such as Scottsdale, to buy land for conservation at fair-market value, rather than going to auction and having the prices jacked up by developers.
From a bill to a law (or not)
Deadline? What deadline?
April 26: Deadline for adjourning (Saturday the week of the 100th
day, counting Saturdays and Sundays)
1994: Last time Legislature met the deadline
1,434: Number of bills introduced last session
452: Number of bills approved last session
295: Bills signed by Gov. Janet Napolitano
2: Bills allowed to go into law without her signature
22: Number of bills vetoed by the governor
The 48th Legislature’s second regular session convenes at noon Monday at the state Capitol, 1700 W. Washington St., Phoenix.
At 1:30 p.m., Gov. Janet Napolitano will deliver her sixth State of the State address to a joint House-Senate session on the House floor.
Watch the proceedings live on Arizona Capitol Television, Cox Channel 123, or go online to www.azleg.gov.
The governor’s speech will be posted on her Web site, www.azgovernor.gov, once she begins speaking. Audio of the address will be available on her Web site later Monday.
For information about the Legislature, go to www.azleg.gov or call the information desk in the House at (602) 926-4221, or Senate, (602) 926-3559.
164: Number of days of last year’s session
173: Number of days of the longest session, in 1988
Howard Fischer of Capitol Media Services contributed to this report.