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By Anonymous Mike, pseudonymously.

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Sunday, December 16, 2007
Pulling the String

Espresso Pundit has a great post on the exploding state budget deficit. If you read his post, what's in the news, and the Financial Advisory Council's (FAC) presentation slides this is what you get for a picture:

1) The State's budget deficit for FY2008 (current) is now pegged at $970 million. This is out of budget of about $10 billion which if you do the math seems to be a deficit just short of 10%.

2) The FAC projects that revenue growth will not reach the current budgeted rate until about 2011.

3) The ongoing deficit means that this year's shortfall may almost double to $1.8 billion in FY2009 unless steps are taken to resolve the difference between what is budgeted and what is actually collected. No projection on how large the deficit will grow by 2011.

That means within 12 to 18 months we may be looking at a budget deficit of 15 to 20%.

The Governor has proposed doing some one-time shifting. Tapping the rainy day fund for a few hundred million, borrowing for school construction... all reminiscent of how she handled the budget crunch in 2003 when she avoid spending cuts or tax hikes by combining one-times with fund sweeps and a little accounting gimmericky. The problem is that back then the economy sharply rebounded so that the State didn't have to resolve to any further drastic measures while there seems to be consensus at JLBC that this budget problem will last for years.

Make no mistake, Governor Napolitano's political fortunes were not only helped by the last few years of economic good times which enabled her to appeal to both to her base with large amounts of new spending and to voters at large with lower taxes. She was also helped by the shortness of the budget crisis in 2003 because the magic she used to avoid deep spending cuts or tax hikes wouldn't have lasted much longer.

Does anyone doubt that Napolitano hopes for a political career after she leaves office in 2010? The question is which one. If she runs for senator, say for McCain's seat if he doesn't run again in 2010, she will have to face the Arizona voters again. I seriously doubt she would want to have to do that after some of the tough fiscal choices that are coming... the economic good times have allowed her to be the perfect political moderate, Janus-like in her ability to appeal to diverse constituencies. Bad budgetary times will puncture that illusion, after all she wouldn't be the first western governor to have her political future crushed by bad fiscal times (see Grey Davis.)

However I see another path for her.

First I believe she will kick the fiscal can down the road as much as possible to 2009 through a combination of one-time financial maneuvers or by blaming the the Republican legislature. She'll be helped in both tactics by an acquiescent media.

By the time her political and fiscal bag of tricks run out, or maybe even after, it will be Autumn 2008, election time. Who would be a better choice for a President Clinton or Obama to make for Attorney General than a former state AG, two-time Governor, who enjoys a moderate reputation and comes from a state trending in national politics from red to purple?

Let Jan Brewer sort it out