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By Anonymous Mike, pseudonymously.

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Friday, March 21, 2008
Budget Follies, The Tolling Bell

Well the good news is that the State of Arizona will not run of money by late May as I have written earlier.

The bad news is that with tax revenue continuing to fall, the State may run out as soon as late April.

That's 6 weeks from now. That means the FY2008 budget is going to fall short by 1/6 of its planned year

Now as everyone knows, that doesn't necessarily mean the State will be completely out of money by then. With legislative approval, the State can tap cash reserves like the Rainy Day fund and do a sweep of other special monies. It could also pull some of the usual accounting tricks, such as pushing off the June payment for K-12 schools to July which means it would fall in FY2009 (robbing Peter to pay Paul) We may, and I emphasize may because I don't have the exact numbers, get through this fiscal year.

However as I have written before this isn't just about this fiscal year because the next one, FY2009, is projected to have an larger budget gap. Ideally you would plan to deal with both budget deficits at the same time through a mix of budget cuts, cash taps, and yes some creative accounting. However 6 weeks or so of spending left in this year, which is what Treasurer Martin is essentially saying, means that options for cutting for FY2008 are dissipating. The more you tap the cash reserves this year means the less you can use them next year. Even if you finance all of school construction for FY2009, you are still left with a budget deficit approaching $1.5 billion.

What is that? A deficit of about 12%?

Now what is the Governor's plan to deal with this? The State is prohibited from borrowing, yes I know financing school construction is borrowing but that's a fiction used for capital costs not the operational deficit. So you either raise taxes, cut spending, or pray that the local economy performs far better than anyone is predicting. To raise taxes or cut spending to meet a 12% budget deficit is going to be a bloodbath.

Well first she has vetoed legislation which would have frozen state spending, calling it "piecemeal." This is despite the fact that she has presented no public budget plan for 2 1/2 months. When Treasurer Martin issued his statement on the State running out of money she stated he did it solely to "get a headline."

In short she has done nothing and ridiculed anyone who has tried, this is coming from the leading elected official in the state. Usually when you reject other people's actions or statements, you either come up with a better idea or state why they are incorrect. She hasn't and that's not leadership folks, no matter what the Arizona Republic and others want you to believe. Instead she is trying to avoid the political responsibility for helping fix a mess that she helped create.

A real newspaper, not a paper like the Republic which has served as her lap dog, would be asking the following questions as the State marches on toward fiscal meltdown if only to educate the citizens of Arizona on what is involved. After all the Governor implies she knows more than the rest of us, maybe she can enlighten mere mortals:

1) If a budget deal could be reached tomorrow, how much money does she think the State could cut from the FY2008 deficit?

2) If no budget deal is reached between now and the end of April, when the State Treasurer projects that the State will run out of money, does the State have sufficient cash reserves to keep operating for the remainder of the fiscal year? Since the Rainy Day fund is only $700 million and the deficit is $1.2 billion, where would the difference come from?

3) If the State is forced to tap cash reserves to make it through FY2008, whether by late April or later, will those funds be used up and therefore unavailable for FY2009?

4) FY2009 starts in a little more than 3 months and there has been little to no public progress toward a budget that will deal with the projected $1.9 billion deficit for that year. When can we expect a revised budget from her that deals with the higher deficit? Does she have a comprehensive plan for dealing with both the FY2008 and 2009 budgets?

The State budget, through its direct expenditures and its transfers to other political subdivisions such as K-12 school and cities, affects every citizen to some degree. The budget crisis threatens that relationship and therefore requires some form of public leadership from the highest elected official in the State.

The fact that she hasn't offered any such leadership and has offered no recent public statement outside of criticizing those who have tried, suggests a personal agenda incompatible with her duties.

I'll leave a discussion of that agenda for later.