Arizona shortfall nears $1B

PHOENIX �” The Legislature’s budget staff now puts the state’s worsening shortfall at nearly $1 billion, aggravating an approaching confrontation between Democratic Gov. Janet Napolitano and the Republican-led Legislature on how to keep the treasury in the black.

The Joint Legislative Budget Committee staff, after considering new economic forecasts from government and private economists, now puts the shortfall at $970 million, or roughly 9 percent of the state’s $10.6 billion operating budget.

The size of the shortfall has been steadily growing in recent months because of the economy’s slowdown in general and the housing industry’s woes in particular. The shortfall estimate most recently stood at $800 million, up from $600 million previously.

The new projection was first reported Friday by the Arizona Capitol Times.

The shortfall is poised to pit Napolitano’s efforts to hold spending cuts to a minimum against Republican efforts cut deeper, borrow less and spend fewer reserves.

The budget staff’s executive director did not immediately return a call for comment, but the new projection was confirmed by a senior lawmaker, House Appropriations Chairman Russell Pearce, who was among lawmakers briefed on it.

Napolitano’s chief budget adviser, George Cunningham, said the $970 projection was “a little high but it’s in the ballpark” of the governor’s own current shortfall estimate. He declined to elaborate.

Napolitano has offered a $600 million plan to borrow, spend from the state’s rainy day reserve and temporarily reduce agency spending to protect funding for important programs, such as education and children’s services. She has said more recently she’ll present lawmakers with an $800 version next month but declined to preview its contents.

Many Republican lawmakers have balked at Napolitano’s proposed borrowing for school construction costs and instead called for deeper spending cuts. Some also have expressed reservations about the extent of her proposed reliance on the reserve fund.

Meanwhile, Democratic legislative leaders generally have endorsed Napolitano’s initial approach, with some also suggesting that lawmakers consider repealing or suspending previously approved tax cuts.

Senate Appropriations Chairman Bob Burns, R-Peoria, said he and Pearce are reviewing budget-balancing options as they prepare a proposal to start lawmakers’ budget discussions.

Burns and Pearce both said options on the table include sweeping dollars from special funds with cash balances, and Pearce also called for ending newly launched initiatives such as Napolitano-backed funding for research and innovation. Napolitano has defended that $25 million annual program as important for the state’s economic evolution.

“Great program? We can debate that but we can’t afford it. Cut it out,” said Pearce, R-Mesa.

They also said options they’re now considering don’t include Napolitano’s proposed borrowing, and Burns said they’re not discussing possible cuts in programs mandated by voters.

“We’re not going to leave that debt for our grandchildren to pay off,” Pearce said of the borrowing. “I’m not willing to go there at all.”

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