Tuesday, May 6, 2008

Goldwater Institute: Compromise on Arizona state budget makes 2009

by Byron Schlomach, Ph.D.

Well, blow me down, they did it--and with two and a half months to spare. The legislature and the governor have agreed on a fix for the fiscal 2008 budget. Both sides can claim victory and defeat, so the deal appears an artful compromise.

Going into the negotiations, the state faced a $1.2 billion budget shortfall, with budgeted spending projected to exceed revenues by almost 13 percent. Let's look at the math of the new deal:

* A quarter of the $1.2 billion was made up with $310 million in real budget cuts. In other words, the budget was trimmed by less than 2.5 percent.

* Another $296 million was made up by reallocating unspent agency funds that had been previously appropriated.

* The last increment of annual state payments to schools was shifted into the next fiscal year, postponing $272 million worth of spending until 2009.

* Almost $500 million of our Rainy Day Fund will be gulped up, severely depleting the $700 million balance.

That was the easy part. The 2009 budget, with overspending estimated at $1.9 billion, has yet to be addressed. Most of the Rainy Day Fund is gone, funds have been reallocated, and payments can't be delayed again. Now the real work must begin.

State government spending has grown by 39 percent in real terms since 2002. A top-to-bottom assessment of the necessity of that growth should be lawmakers' top priority.

Dr. Byron Schlomach is the director of the center for economic prosperity at the Goldwater Institute.

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