Budget Deficits are Back!
The new Governor and legislature we elect on November 4 will face high expectations from voters and huge challenges from the state budget.
The Joint Legislative Budget Committee staff has released new revenue estimates which project the state will end the current fiscal year with a $520 million deficit, ballooning to $1 billion the following year. These projections include re-setting funding for K-12 district and charter schools by $330 million each year to meet the court order and the voter mandate for annual increases to keep up with inflation.
But the real shortfall could be higher. The projections include no other restorations of past budget cuts and no new funding for new needs.
The good news is that The Rainy Day fund has a balance of $460 million. The bad news is that we haven’t paid off the mortgage on our state capitol and we haven’t unraveled the other tricks we used to balance the budget during the recession.
The new projections are shaped by sluggish growth in state revenues – despite 20+ years of continuous tax cuts and promises from many legislators that they would supercharge our state economy. As Arizona families know, our economy is recovering very slowly from the recession. Arizona has regained only 62% of the jobs we lost compared to a full recovery and then some nationally.
Revenues from corporate income taxes are projected to decline because the legislature adopted cuts in corporate taxes that are still being phased in and because corporations are claiming higher tax credits. The amount claimed for tax credits like research and development and donations for private school scholarships can grow every year at the corporation’s decision. Tax credits don’t get the same scrutiny that state spending gets and aren’t subject to a new vote by the legislature every year like the budget.
The job description of our newly elected officials will clearly require scrutiny and a re-boot of priorities on both the spending side and the revenue side of the ledger to balance the budget. Ask the candidates before you vote how their budget plan will put kids front and center.