Arizona ends budget year with $266 million surplus

Arizona is closing out its budget books with a $266 million surplus — a nearly $400 million turnaround from the hole the state thought it would be in at this point.

Lawmakers built the current-year budget on the belief that they’d have to first work their way out of a $132 million deficit. But higher-than-expected collections from the income tax, primarily from capital gains on investments, have resulted in a $266 million surplus, according to a report released Monday by the Joint Legislative Budget Committee.

Add to that the $460 million in the state’s rainy-day fund, and that amounts to nearly three-quarters of a billion dollars that’s essentially sitting in the bank.

House Democratic Leader Eric Meyer said the figures make the case for spending some of that money on “things that will improve our economy, and that is essentially universities and schools.”

The money would be enough to help settle a long-running lawsuit over K-12 funding, said Meyer, D-Paradise Valley. The schools have won, but lawmakers have appealed and the parties have been in closed-door negotiations since January on a settlement.

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But leaders of the GOP-controlled Legislature aren’t ready to loosen the purse strings. They have indicated they want to focus on debt reduction for the next budget cycle.

On Monday, Senate Appropriations Chairman Don Shooter laughed when asked if the report is a signal that the state could spend a little money on programs that took cuts.

“You crack me up,” Shooter, R-Yuma, said.

The cuts included a $99 million reduction in university funding, less money for small charter schools and reductions in additional aid for school districts.

Shooter called the report good news and said a positive fund balance probably means there won’t be a need for cuts next year.

“I don’t know if we’re going to be restoring anything; it’s too early in the process to say that,” he said.

The JLBC report cautioned that the figure could change as more accounts are settled and could be complicated by the launch at the beginning of July of the state’s new accounting system. But a month ago, the state was looking at a $250 million ending balance, a figure that has grown more than $10 million in a month.

Reach the reporter at maryjo.pitzl@arizonarepublic.com or at 602-444-8963.