Monday, April 27, 2009

A State Budget Emerges?

Posted By on Mon, Apr 27, 2009 at 5:05 PM

It appears that Republicans may have finally crafted a budget deal that preserves spending while avoiding a tax increase. A document released this afternoon shows that they've filled in a $2.775 billion shortfall with $670 million in spending cuts (including $175 million for school districts and $5 million for charter schools), a healthy helping of $989 million in federal stimulus dollars and $394 million in fund transfers.

The big grab is a sweep of money that local governments have in reserve. The GOP plan takes $300 million from school districts, $210 million for cities and towns and $55 million from counties.

That seems kinda gimmicky to us. What will Gov. Jan Brewer think?

UPDATE: I'm still trying to get a solid read on it, but I've heard from a couple of background sources that the $210 million that the budget takes from cities is impact-fee dollars. Essentially, the state would let the cities spend the impact-fee dollars on whatever they want and would then reduce the amount of money it sends to the cities. Can the state retroactively change the use of impact-fee dollars that was collected for specific infrastructure improvements? Any lawyers out there want to weigh in?

UPDATE 2: Rep. Steve Farley tells me that the school districts don't actually have $300 million that's available to be swept. AP has details on the proposal.

UPDATE 2.5: It appears that Republican Rep. Rich Crandall, head of the House Education Committee, doesn't much like that $300 million sweep either. Crandall posted this on his blog yesterday:


With regards to ending fund balances of school districts being swept, certain legislators are discovering there is no such thing as "free cash" available for the taking. Any cash swept this year would most likely be made up next year by a local levy. This means those folks pushing to take $300 - $400 million of school balances are actually pushing for a large property tax hike next year. There are a dozen reasons why this is a bad idea, but three of the biggest are these:

1) Those districts who planned for the future (i.e. the end of excess utilities funding, lower sales tax collections, etc.) are the very districts now being punished. Great way to reward competence.

2) Investment banking firms who place bonds for Arizona districts are able to negotiate lower interest rates when there is a positive cash balance, as opposed to a zero, or negative cash balance, as has been proposed.

3) Sweeping ending balances is the most inequitable way of solving a budget crisis. Lots of districts have no ending cash balance, or a negative balance. This will drive up property taxes for some and not for others.


UPDATE 3: Just guessing here, but the projected shortfall seems optimistic. We'll know more about where the state numbers are in a few days, when the next JLBC end-of-the-month report is due, but we're hearing rumblings that the numbers are still getting worse.

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