The Skinny

Budget Hole

Arizona's finances are a hot mess

The Arizona Legislature has a long list of topics that lawmakers are likely to tackle when they get back to work next week. You can expect Republicans to make another run at expanding credits for private and religious schools while undermining funding for the public schools. The election statutes are a mess, particularly when it comes to disclosure of the sources of campaign funding. Transportation needs are growing. And illegal immigration is a perennial topic; one freshman GOP lawmaker has already proposed having the word "Non-Citizen" stamped on driver's licenses for the DREAMers who won a legal battle overturning former Gov. Jan Brewer's executive order banning them from legally driving in Arizona. (While they're at it, maybe lawmakers should consider stamping the driver's licenses of same-sex couples who wed with the word "GAY!")

But the biggest issue facing lawmakers is also one of the most complex: The state budget.

While it sounds like the kind of boring thing that only the guys with green eyeshades care about, the budget is deeply connected to many of the issues that lawmakers face, if only because when you don't have money to spend, you can't do much to improve your roads, provide a safety net or keep your air and water clean.

Financially speaking, the state has hit the fiscal rapids and is headed for the falls. The accountants on the Joint Legislative Budget Committee predict that—assuming lawmakers make good on a court's order to pay $317 million in illegally withheld education dollars in the current fiscal year—the state is facing a $520 million shortfall in the fiscal year that ends in June. It gets worse: The projected shortfall for the next fiscal year is $1 billion.

Exactly how Republicans will fix that spending gap remains to be seen, but it doesn't seem like newly inaugurated Gov. Doug Ducey's campaign promise to reduce the income tax will help bridge the gap.

The budget gap will also be exacerbated by corporate income-tax cuts that were set up to be phased in a few years ago. JLBC forecasters suggest that the cuts will mean the state will collect about $73 million less in the current fiscal year; that grows to $157 million in the upcoming fiscal year, $225 million in the year after that and $285 million by fiscal year 2018.

Incidentally, the state's economy has not boomed since those tax cuts were created. In fact, growth has been lower than anticipated in the current year, which is one reason that the budget shortfall is growing.

Sick and Twisted

AZ Supreme Court says GOP lawmakers can pursue lawsuit to roll back Medicaid expansion.

Another big budget problem could be on the horizon. Last week, the Arizona Supreme Court ruled that state lawmakers could pursue their legal case against the Brewer administration over whether the 2013 expansion of Medicaid was legal.

The expansion was the biggest fight of the 2013 session, with nearly all the GOP lawmakers opposed the idea of expanding state-subsidized health insurance to anyone below 138 percent of the federal poverty line. A handful of GOP lawmakers crossed party lines to vote with the Democrats to deliver the expansion to Gov. Jan Brewer, who pushed for it—along with the business community—in order to bring more federal dollars to Arizona and strengthen Arizona's hospitals and other healthcare providers.

GOP lawmakers sued, saying that because the expansion included a new fee that hospitals had to pay, it was tantamount to a tax increase and required support from two-thirds of the Legislature, not just a simple majority. Team Brewer argued that it was an assessment that was not subject to the two-thirds majority requirement and besides, lawmakers didn't have standing to sue because they were not affected by the new fee.

The Arizona Supreme Court ruled last week that the lawmakers did indeed have standing, which means that the larger question of whether the assessment is a tax will be decided by the courts.

If the courts rule in favor of the GOP lawmakers, the Legislature will have a choice: It could either pay for the expansion itself without federal dollars or it could eliminate health-insurance coverage for an estimated 250,000 Arizonans.

State Sen. Steve Farley, a Democrat who represents central Tucson and the Catalina Foothills, says the estimated cost to the state to provide that additional insurance for low-income Arizonans would be roughly $245 million, although state budget wonks are still working out the numbers.

Another potential wrinkle: Newly inaugurated Gov. Doug Ducey, who said on the campaign trail that he opposed the Medicaid expansion but wouldn't try to reverse it, has to decide if he wants to continue defending the lawsuit or just fold.

"That's the big questions about Ducey," Farley said. "Will he up being the business Republican the Chamber hopes he will be, or will he run for reelection from a Tea Party perspective? I think the odds are that he's going to be more of a pragmatic, business-friendly conservative because he wants to go higher up."

State Rep. Bruce Wheeler, a Democrat who represents central and eastside Tucson, told The Skinny that he believes the expansion will hold up in court.

"There are plenty of legal precedents in Arizona where this has been done over and over again," Wheeler said. "In the event that it is overturned, then you're talking about a lot of money or cutting the rolls again."

Bye, George

Former Mayor Miller dies at Age 92

As a result of our early deadlines for the holiday season, we're late in offering our condolences to the family and friends of George Miller the former Tucson mayor and city councilman who passed away on Christmas day at age 92. Miller, who earned a Purple Heart in WWII, remained engaged in local politics long after he gave up his office atop City Hall's 10th floor after two terms in 1999. He will be missed by many.

"Zona Politics with Jim Nintzel" airs every Sunday at 9:30 a.m. on KGUN-9.