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By Anonymous Mike, pseudonymously.



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Friday, January 23, 2009
 
The Guns of January

With the all the screaming from the universities and K-12 on the proposed budget cuts, I have a question...

At what point does the FY2009 budget, no matter what scenario, pass the point of no return in terms of balancing it?

Let's look at the facts.

Let's say the FY2009 budget is about $10.2 billion, roll-over adjusted.

Next week is the last week of January, meaning the fiscal year is almost 60% of the way complete. I don't have the latest Treasurer's report in front of me so let's assume (big assumption) that spending is done equally across the fiscal year; that means a little over $4 billion left.

The deficit for this fiscal year stands at $1.6 billion or so and will probably get larger... let's say $1.8 billion to be on the safe side

Cash available... about $670 million or so in fund transfer from tapping Rainy Day Fund and sweeping the other asset accounts. Let's also assume another $400 million (another big assumption) from the feds as part of the bailout (oh the humanity.)

That leaves us about $730 million short, which has to be made up either with spending cuts or tax increases. Let's keep the assumption that no one wants to raise taxes... so we're going to cut the whole amount.

Man I made alot of assumptions but bear with me. Assuming the feds come up with the money, assuming that spending is equal throughout the fiscal year, assuming the deficit doesn't get larger than $1.8 billion, and not counting any interest payments we'll have to make tapping any line of credit to make up for cash flow problems... that means we need to cut about 17% of spending to make the books balance by the end of the fiscal year.

The Republican leadership in the Legislature thinks they can get a budget through by next week, but let's say members of the Republican caucus quail in the face of the pressure brought by those affected by the cuts and slow the process down. What happens then? What happens if we get to February and there's no deal done? Then using the same assumptions, we're down to cutting the same amount from $3.39 billion or 21% cuts.

If they couldn't make it work with 17% cuts, I cannot see them making it with 21% cuts and the longer this goes on the more the pressure will grow for some way to bypass those types of spending cuts in favor of the previous governor's suggestions of liquidating state assets and accounting gimmicks.

That is of course if the budget can even be saved at that point.

So if this going to happen, then it will have to happen quickly otherwise...