opinion

Robb: 3 big issues lawmakers won't solve in Gov. Doug Ducey's budget

The Arizona Legislature should approach Gov. Doug Ducey’s proposed budget with caution and skepticism.

According to the governor, the state will have a carryforward of $43 million when this fiscal year ends in June. And that’s after a supplemental appropriation to the School Facilities Board of $10 million for major school repairs.

Ducey says that his proposed budget for the next fiscal year, which begins in July, has a surplus of $67 million. And that’s after paying for his new spending initiatives, particularly for K-12 education.

The legislative budget staff’s outlook is bleaker. According to it, the state will end this year with a $20 million deficit. And it projects a deficit for next year of $108 million to $200 million without any new spending initiatives.

Ducey is somewhat more optimistic about increases in tax collections than is the legislative budget staff. But that’s not the big difference between running a surplus with new spending initiatives and facing a deficit without them.

Maneuver 1: Rack up debt for services

The executive budget only assumes revenue growth of a bit more than 3 percent this year and next. So, this isn’t a matter of the infamous rosy scenario that haunts so many budget discussions.

Instead, the difference is mainly explained by three fiscal maneuvers in Ducey’s budget.

Ducey isn’t a pay-as-you-go governor. Last year, he browbeat legislators into approving $1 billion in debt financing for university capital projects, with the debt to be serviced through general fund expenditures.

This year, he proposes $88 million in debt financing for new K-12 schools.

I’m not opposed to debt financing for major capital projects, although I’ve never understood how it can be squared with the constitutional debt limit of just $350,000.

However, to cope with the recession, the state borrowed big, not to build things, but to keep the lights on. The state general fund is still on the hook for $1.9 billion in residual debt. Debt service on that for next year is expected to be $321 million.

Maneuver 2: Rely on budget transfers

The second fiscal maneuver is a return to heavy reliance on fund transfers.

State government has scores of accounts other than the general fund, which gets all the attention. These accounts collect money to be used for specific purposes and are often supported by user fees.

To get through the recession, the Legislature swept money from many of these accounts to soften the blow to programs supported by the general fund. In the recovery, the Legislature has weaned itself off the practice, since it’s an unreliable source of funding. Ducey proposes $129 million in fund transfers to make his proposed general fund spending balance.

Maneuver 3: Collect $55m more taxes

The third fiscal maneuver is to assume $55 million in additional revenue from beefed up tax enforcement.

The governor’s budget also assumes lower Medicaid caseloads and school enrollment than the Legislature’s budgeteers. There is no way of knowing which estimate is better regarding this and state revenues. The differences result from small deviations in assumptions about large numbers. Only time will tell.

The fiscal maneuvers, however, are policy choices that come, or should come, with some questions.

Questions they should ask (but won't)

How much debt is it prudent to impose on the general fund? To what extent should general fund spending be supported by transfers from other accounts? Should money projected to be collected from tougher enforcement be spent in advance, or should the state wait until enhanced enforcement actually produces the money before spending it?

DUCEY: My education plan restores $371 million to K-12 schools

I don’t have much confidence that the Legislature will actually grapple with these questions or force the governor to explain why reliance on these fiscal maneuvers is a prudent course of action for a state budget still struggling to obtain sustainability.

There are no counterweights to the governor on budget matters in the Legislature. What Ducey wants from the budget, he gets. And this year, he wants his multiyear commitment to restore K-12 funding, which pretty much requires these fiscal maneuvers to execute.

They are questions that should be asked and grappled with, nonetheless.

Reach Robb at robert.robb@arizonarepublic.com.

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