Ducey’s bud­get pro­posal: $10.1B

Bulk of new money would tar­get K-12 fund­ing needs

The Arizona Republic - - Front Page - Ryan Ran­dazzo and Ri­cardo Cano

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.

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