Considering the Alternative

House Democrats unveil their budget plan for Arizona

Rep. Steve Farley could hardly contain his excitement about the budget plan that House Democrats put forward earlier this week.

Farley, a self-described wonk who represents central Tucson, says the plan preserves vital educational, welfare and economic-development programs while creating a more progressive tax system.

"The money is coming from delinquent taxpayers and from people who can afford to pay it—people who earn more than $250,000 a year," Farley said. "It's coming from out-of-state people who buy power from our utilities. It's coming from a lot of different sources of people and entities who can afford to pay in order to restore things that will help the economy."

Unsurprisingly, GOP House leadership did not share Farley's enthusiasm about the Democratic budget plan. Within hours of the proposal's unveiling on Monday morning, Republicans responded with a press release that blasted the proposal as irresponsible.

"The size of state government is simply too large compared with our ability to pay for it," said House Speaker Kirk Adams. "The House minority proposal actually restores government cuts needed to balance the budget. Not only does it fall short of a balanced budget; it actually makes our budget problem worse."

In comparison, a draft GOP proposal relies on deeper cuts in state spending rather than tax increases. Agencies that were already slashed in January to balance the current year's budget would see even less money in the fiscal year that begins July 1. The Department of Education would be cut by nearly $330 million; universities would be cut by $40 million; the Department of Economic Security would be cut by nearly $100 million; the Department of Health Services would be cut by more than $45 million; and the Department of Corrections would be cut by more than $38 million.

But that plan is complicated by federal requirements that could force the Legislature to restore some previously cut funding in order to qualify for stimulus dollars, unless the state can get a waiver from the feds. In addition, Republican Gov. Jan Brewer has said she wants lawmakers to temporarily increase taxes by $1 billion rather than simply cutting to bridge an estimated $3 billion shortfall in the next fiscal year.

The Democratic plan uses some financial tricks—such as delaying $217 million in bills into the next fiscal year—and includes $293 million in spending cuts.

But the biggest political challenge for Democrats is persuading Republicans to accept a package of tax hikes. The plan estimates, for example, that the state could bring in $80 million by increasing income taxes on Arizonans who earn more than $250,000 annually back to the level they were paying in 2005.

The Democratic plan would raise $250 million with the return of a statewide property tax that has been suspended for the last three years. The GOP caucus has been pushing for the permanent repeal of that property tax.

The Democrats also want to raise $233 million in new taxes on utilities that generate energy using nonrenewable resources. Farley says a significant percentage of that tax will be paid by people who live outside of Arizona; he adds that it will also encourage energy companies to invest in solar and other renewable-energy projects.

Those tax hikes were immediately dismissed in the GOP's written response to the Democratic plan.

"The House minority budget proposal clearly demonstrates they want to lead the state in the wrong direction," said Rep. Steve Yarbrough of Mesa. "Instead of reducing unaffordable expenditures to bring them into alignment with revenues like every other household, business and local government is doing, the House minority wants to take more from Arizonans. We must expand our economic base and create jobs, and we accomplish that by attracting business and innovation to Arizona, not by raising taxes."

Farley says he's not surprised that GOP House leaders oppose the Democratic plan. However, he suggests that Democrats may be able to work with some Republicans and Brewer to come up with a budget plan in a manner similar to how former Gov. Janet Napolitano sometimes got her budgets passed in spite of opposition from GOP legislative leaders.

But without a two-thirds majority in both chambers of the Legislature, any plan that raises taxes would have to go before voters for approval.

"We're letting the public know there are other solutions out there," Farley says. "We don't have to just cut, cut, chop, chop. We can do something that would only cost the average Arizona family $80 to $100 a year. This is a very small price to pay to have an economically strong state that can take care of its own."

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