Gov. Jan Brewer speaks proudly of her role in lifting the state out of the massive deficit she inherited in 2009. And with her final budget proposal, she seems intent on making sure her successor doesn’t have to say the same thing.
The governor’s budget defied expectations that she would use her final year in office to significantly increase spending for K-12 schools, higher education and other areas. Instead, Brewer took a more modest approach intended to keep new spending relatively low so the state’s budget will be structurally balanced by fiscal year 2016.
Brewer’s $9.31 billion budget proposal for fiscal year 2015 would increase spending by about a half billion dollars. But only about half of that increase is ongoing spending, while much of the rest amounts to one-time expenditures.
A sizeable chunk of the new spending, about $39 million, goes to the state’s troubled Child Protective Services, which is being reorganized in the midst of a crisis following revelations that about 6,500 reports of child abuse and neglect went uninvestigated. K-12 schools and higher education get some new funding as well, though it’s far from what they wanted. And Brewer’s budget does not end annual sweeps of the Highway User Revenue Fund, which would further deprive the state of around $120 million.
John Arnold, director of Office of Strategic Planning and Budgeting, the governor’s budget office, said the governor’s goal is to be prudent and cautious.
“The one-cent sales tax expired. That’s $960 million in revenue that left the state,” Arnold said during a briefing with reporters. “That puts us in a position where we need to be fiscally prudent still for a couple of years while we come back out of this structural deficit.”
Brewer touted her proposal as a budget free of “fiscal bridges and temporary measures.”
“For the past five years, Arizona has walked a narrow budget path, maintaining funding for critical areas of government while addressing a structural budget deficit brought on by years of mismanagement and the devastating impacts of the Great Recession,” Brewer said in an open letter to lawmakers. “Maintaining a high level of discipline has not been easy, but it has paid off, and it must continue to serve as a hallmark of State Government.”
Education advocates groused about what they deemed meager funding in Brewer’s budget. Andrew Morrill, president of the Arizona Education Association, decried the elimination of about $239 million in capital funding for K-12 schools, while Arizona Board of Regents President Eileen Klein, Brewer’s former chief of staff, criticized the minimal amount of additional state funding for universities.
“We’re asking for a little more patience from our K-12 communities, our higher ed communities,” Arnold said.
While some GOP lawmakers still have issues with the amount of new spending in Brewer’s budget and dispute her claim that it will soon be structurally balanced — the Ninth Floor and the Joint Legislative Budget Committee are hundreds of millions of dollars apart on revenue projections — some fiscal conservatives say there is little to fight about in the governor’s proposal.
“I read her budget proposal and that’s right out of the conservative Republican guidebook,” said Sen. Chester Crandell, R-Heber. “We’ve got to protect the budget. We’ve got to make sure it’s balanced. I wish we would’ve started that when I first came down here.”
Rep. John Kavanagh, chairman of the House Appropriations Committee, said Brewer’s desire not to increase spending by too much will probably lead to fewer budget battles between the Ninth Floor and the Legislature this year. He praised Brewer for not trying to “break the bank” and looking instead at the state’s long-term fiscal health.
“I’m sure as the executive she feels a responsibility to adequately take care of some long-term problems and deficiencies in government agencies. But she’s also a conservative realist and she realizes that there are great limitations right now on those bills. And I’m glad that we’re on similar paths in that regard,” said Kavanagh, R-Fountain Hills.
Cruel and unusual
Sen. Al Melvin, R-SaddleBrooke, said he expected Brewer to push for more education spending, and was pleased that she isn’t looking to spend too much more than last year. Melvin said he hopes Brewer is trying to avoid putting Arizona in the same situation she found it in when she took office in 2009, where a massive recession coupled with years of spending increases led to massive budget cuts.
“I don’t think anyone on any side wants to go through that again. It was cruel and unusual,” Melvin said. “Hopefully she wants to be a good steward for the remaining months and have as good a legacy as she can get for herself.”
That doesn’t mean there won’t be disagreements over the budget. The biggest point of contention may be Brewer’s claim that the budget will be structurally balanced in FY 2016, which stems largely from differing projections on state revenue.
JLBC’s revenue estimates are generally lower than those of the Governor’s Office, and this year is no different.
Legislative budget staffers predict that the state will bring in $8.71 billion in revenue in FY15, with a year-end balance of $327 million, while OSPB estimates a little more than $8.9 billion with a balance of $664 million at the end of the fiscal year.
The gap gets wider in fiscal year 2017, when JLBC estimates that Arizona will be in the red by about $593 million, compared to OSPB’s projection that the state will carry forward $1.34 billion. That amounts to a difference of about $3.2 billion over the next three years.
Senate President Andy Biggs, R-Gilbert, found the disparity concerning, and said the Legislature’s revenue estimates have been closer to the mark in the past few years. Biggs said spending proposed by Brewer isn’t excessive, but he still thought it was too high.
“I don’t know if I would say she’s pedal to the metal, but she’s going 80 in a 65 zone,” Biggs said.
Funding a gimmick
Kevin McCarthy, president of the Arizona Tax Research Association, said he prefers the more conservative revenue estimates, though he “wouldn’t characterize (Brewer’s) revenue estimates as being rosy.”
McCarthy said Brewer didn’t account for future costs of allowing school districts to sponsor their own charter schools, which JLBC pegged at $33 million above projections in FY15, $61 million in FY16 and $122 million in FY17, and said the Legislature should decline to fund the “gimmick” in those years.
He also warned of the potentially greater impact in the court’s order that the state retroactively pay for inflationary funding increases that K-12 schools should have received in recent years, a figure that could be as high as $1.26 billion.
“It’s more important really in the near term to focus on specific issues that could blow up this budget, or where left unaddressed, are significant issues more than the slight variants in revenue estimates,” McCarthy said.
One of the few areas of disagreement that has popped up between Brewer and GOP lawmakers so far is an area where legislators want more spending, not less.
House Speaker Andy Tobin, House Minority Leader Chad Campbell and numerous others are urging the governor to end the HURF sweeps that have continued since the depths of the fiscal crisis several years ago. However, while Brewer is supportive of ending those sweeps, Arnold said it can’t be done right now without sacrificing the long-term integrity of the budget.
“This should be a priority in future years,” Arnold said.
Sen. Don Shooter, chairman of the Senate Appropriations Committee, said the governor and Legislature are aligned on many important aspects of the budget. But lawmakers still want to see action on HURF, he said.
“I think there’s support in the Legislature to do something on HURF, so we’re going to have to work on that,” said Shooter, R-Yuma. “But I think in general, I personally am very pleased by the governor’s budget.”
Some, such as Crandell, suspect that Brewer may be saving HURF to use as a bargaining chip for budget negotiations with the Legislature. Of course, if that’s the case, even the relatively modest spending that Brewer proposed is going to have to come down somewhere else.
“I’m not sure if she’s really that dead set against … or if she’s willing to accept that and say, ‘Yeah, OK, I’m willing to kind of deal on that at the expense of something else,’” Crandell said of the HURF sweeps.
— Luige Del Puerto and Ben Giles contributed to this article.
Brewer’s Budget
• $21.5 million for 212 new caseworkers and 120 other support staff at Child Protective Services, as well as $10 million to replace the software program used by CPS to track cases, and $8.6 million to add 93 positions to the Office of Child Welfare Investigations.
• $25 million to help transition CPS into the new Division of Child Safety of Family Services.
• $70 million in new inflation-based funding increases for K-12 schools, which is required by statute.
• $40 million for Student Success Funding, Brewer’s proposed performance-based funding plan for K-12 schools.
• $31.5 million to eliminate and replace small school weights for K-12 schools, which will now make funding available to all charter schools.
• $27.4 million to Arizona State University, ASU Polytechnic and Northern Arizona University, which will replace the final three years of a five-year university parity funding plan.
• $15 million to the Translational Genomics Research Institute, which will be funded through the University of Arizona.
• $54 million in one-time infrastructure, building maintenance and other capital projects at the Arizona Department of Administration, Department of Corrections and Arizona Board of Regents.
• $9.2 million for the construction of a new Arizona Veterans’ Home in Yuma.
• $50 million into the state’s rainy day fund.
• $15 million for broadband infrastructure at K-12 schools, which will be funded through a $15 per-pupil fee paid by the schools.
• $33.7 million in one-time monies to replace funds that the Department of Economic Security is losing.