Ducey’s budget proposal: $10.1B

Bulk of new money would target K-12 funding needs

Arizona would spend a record $10.1 billion in 2019 — finally moving total state spending above pre-recession levels, with most new money going to K-12 education — under a budget plan released Friday by Gov. Doug Ducey’s office.

State spending would grow by 3.2 percent in anticipation of higher tax revenues, according to the budget proposal. Not adjusting for inflation, it would be the most ever spent by the state.

The last time the state anticipated nearly as much spending was in 2006-07, before the recession strangled the general-fund budget to a low of $7.7 billion in 2009-10.

The spending plan doesn’t anticipate a deficit. Instead, administration officials expect a $67 million positive cash balance by the end of the fiscal year in June 2019.

The budget includes $159 million in new initiatives.

As he did a year ago, Ducey focused new dollars on the state’s struggling education system. Eighty percent of new spending will be dedicated to education, according to the Governor’s Office.

“Education, education, education” is how Gretchen Conger, Ducey’s deputy chief of staff for budget and policy, described the budget. “This is a good conservative budget that focuses on the priorities of education,” she added.

House Speaker J.D. Mesnard, RChandler, said the budget was exactly what his party expected from Ducey.

“This is an education-focused budget,” he said, acknowledging that some critics will not see the budget as providing enough money for schools.

“You have a continuum, a full spectrum on that,” he said. “From what I’m hearing, many education stakeholders and leaders find this encouraging.”

School capital funding a big focus

The budget follows a Tuesday announcement from Ducey to “reverse recession-era cuts” to Arizona school funding and help settle a $1 billion lawsuit over a decade of cuts to school capital funding.

The budget includes $100 million in school capital funding. With continued increases over the next four years — assuming Ducey remains in office and sticks to the plan — the capital funding will reach $371 million by 2023.

House Minority Leader Rebecca Rios, D-Phoenix, said the education moves were “a step in the right direction,” but not enough.

“What I and other legislators are hearing is it’s not nearly enough,” she said after being briefed on the budget. “At the end of the day, he proposes returning about one-third of the cuts he made.”

Many Arizona school administrators cheered the governor’s capital-funding plan when he first announced it Tuesday with 50 district superintendents.

Several superintendents said the $100 million in capital funding addresses a desperate need for building repairs, textbooks and school buses.

Capital funding took the steepest cut in the state’s school-funding formula following the recession. Cuts to school capital have topped $2 billion since 2009.

Soon after the governor announced his plan Tuesday, two of the 10 plaintiffs in the 2017 school capitalfunding lawsuit withdrew from the claim. The suit alleges the state has not adequately funded school-infrastructure expenses for things such as building maintenance, school buses and technology.

A spokesman for the Glendale Elementary School District, one of the plaintiff districts, told The Arizona

Republic that it will not withdraw from the lawsuit. “While we are grateful that Gov. Ducey recognizes the need for additional funding for our schools, his proposal does not address the structural constitutional issues at the heart of our action,” said Jim Cummings, spokesman for the Glendale district.

Cummings added that the governor’s plan “dedicates very little to school capital.”

Ducey’s outlook more optimistic than some

The financial picture painted by the Governor’s Office is rosier than that of the nonpartisan Joint Legislative Budget Committee, which anticipates the current fiscal year will end with a cash shortfall of $20 million that will grow to $108 million in fiscal 2019.

The governor’s projection relies largely on the improved job market and current state revenues for 2018 that are $86.7 million above forecasts, thanks to strong sales-tax collections in December.

Revenue is expected to grow by more than $300 million in fiscal 2019 as the economy continues to expand.

“We are expecting slow but sustainable growth,” said Glenn Farley, the governor’s chief economist. “We believe the revenue forecast is conservative, realistic and achievable.”

The budget-committee estimate also differs from the governor’s budget in that it does not contain policy initiatives, such as proposals that could increase revenues.

“The governor ran on rooting out waste in government,” Ducey spokesman Daniel Scarpinato said. “We think we found a way to shift dollars out of the government complex and into schools.”

Revenue will be further increased by new tax-fraud services, the Governor’s Office announced, which will target investigations into sales-tax collections. That initiative is expected to bring in an additional $30 million.

The state also expects to collect an additional $25 million from tax collections and audits as it hires more people in those departments. This move reverses a

“While we are grateful that Gov.

Ducey recognizes the need for additional funding for our schools, his proposal does not address the structural constitutional issues at the heart of our action.” Jim Cummings, spokesman, Glendale Elementary School District

2016 decision to cut 52 workers, mostly auditors, from the Department of Revenue.

Those auditors each brought in $1 million to $2 million in revenue for the state, and collections from audits fell from $155 million in 2016 to $80 million in 2017.

Rios said laying off the auditors gave businesses “an incentive not to pay their fair share.”

“He realized that was a good idea to hire them back,” Rios said. “Democrats have been suggesting (rehiring auditors) for years.”

State revenue also is expected to increase by $11.5 million from initiatives such as the addition of 450 new lottery vending machines, which will be added to the current fleet of 800.

The National Association of State Budget Officers issued a report in the fall regarding all 50 states and their budgets. According to the report, the current fiscal year should have the lowest spending increases since 2010, with 2.3 percent growth expected.

Adjusting for inflation, 27 states still spent less in the previous fiscal year than they did in fiscal 2008, before the Great Recession hit, according to the report.

Nationwide, most of the new money was directed to K-12 education, which according to the report is the largest category of state general-fund spending. Education received funding increases in 38 states and decreases in 10 states, for a net total increase of $8.6 billion, in fiscal 2018, the report said.

In addition to education, key initiatives in the budget include:

$27 million for the first year of a facilities bonding program at the University of Arizona, Arizona State University and Northern Arizona University.

$25.6 million for preventive highway maintenance. $24 million to improve the National Guard Readiness Center near Tucson.

$15.8 million to pay for the adoption subsidy for more than 33,000 children.

$8 million in flexible spending allowed at the three universities.

$4 million to improve Oracle State Park north of Tucson.

$2.9 million to hire 11 new troopers and one sergeant for the Border Strike Force in southern Arizona.

$2.5 million to improve Buckskin Mountain State Park on the Colorado River.

$1.7 million for substance-abuse treatment for an additional 1,560 inmates.

$1.4 million to increase night patrols on Phoenixarea freeways, including hiring six new troopers.

$1.4 million to increase education services to inmates.

$1 million for food banks to provide more “farm fresh” food.

$758,000 to hire three new law-enforcement officers to work with federal agents on opioid issues.

$449,000 for inmate employment training.