Ariz. Leg­is­la­ture’s bud­get an­a­lysts see 2018 short­fall

Yuma Sun - - OPINION -

PHOENIX — The Ari­zona Leg­is­la­ture’s bud­get an­a­lysts on Thurs­day pre­dicted a bud­get short­fall that could top $100 mil­lion in the cur­rent and com­ing year as the im­pact of cor­po­rate tax cuts con­tin­ues to over­whelm in­creases in sales, in­sur­ance pre­mium and per­sonal in­come tax col­lec­tions.

Chief bud­get an­a­lyst Richard Stavneak told econ­o­mists and state of­fi­cials who make up the Leg­is­la­ture’s Fi­nance Ad­vi­sory Com­mit­tee that the short­fall will hit $104 mil­lion. That’s out of an ex­pected $10 bil­lion in spend­ing for the bud­get year that be­gins next July 1. A panel of state law­mak­ers also at­tended the meet­ing.

Ex­cluded from that pro­jec­tion is $90 mil­lion in cur­rent spend­ing that is la­beled one-time but ap­pears to be an on­go­ing com­mit­ment by the Leg­is­la­ture and Gov. Doug Ducey, Stavneak said. That puts the ex­pected short­fall next year close to $200 mil­lion if that spend­ing isn’t cut. The rev­enue pic­ture could also brighten, but sig­nals are mixed, he said.

Phased-in cor­po­rate tax cuts en­acted un­der for­mer Gov. Jan Brewer in 2011 have cut more than $600 mil­lion in yearly rev­enue since 2014. Re­pub­li­can Rep. Don Shooter said it may be time to re­visit the cor­po­rate tax cuts and pre­dicted a bud­get bat­tle next year.

“It’s go­ing to be a free-forall. We’re back to the cut­ting, I don’t see any other way,” Shooter said. “It’s go­ing to come down to who’s go­ing to bleed the least, what’s go­ing to be the least painful, I guess.”

Of the cor­po­rate tax cuts, Shooter said: “Maybe we should post­pone them for a year or two un­til we get out of the woods.”

That’s un­likely to be a so­lu­tion that will pass muster, though, be­cause the 2017 tax year com­pletes the four-year phase-in of the tax cuts. On top of that, Ducey spokesman Daniel Scarpinato all but ruled out any change.

“The gover­nor does not be­lieve in rais­ing taxes and I think he’s made that very clear,” Scarpinato said Thurs­day, not­ing that Ducey’s pri­or­ity is en­sur­ing a com­pet­i­tive tax en­vi­ron­ment so com­pa­nies ex­pand in the state.

Scarpinato down­played the anal­y­sis pre­sented by Stavneak and his staff at the Joint Leg­isla­tive Bud­get Com­mit­tee, say­ing a small change in rev­enue or Med­i­caid caseloads could make a big dif­fer­ence in the bot­tom line. But he noted that the gover­nor’s of­fice has been warn­ing for weeks of a tight bud­get year ahead and pledged that Ducey will present a bal­anced bud­get in Jan­uary that will use any avail­able cash to first boost ed­u­ca­tion spend­ing.

“K-12 ed­u­ca­tion is go­ing to con­tinue to be at the top of the list,” he said.

Over­all, state rev­enues for the 2017 bud­get year that ended June 30 came in $19 mil­lion be­low fore­cast, with sales and in­di­vid­ual in­come tax ahead of pro­jec­tions and cor­po­rate in­come tax col­lec­tions $52 mil­lion be­low fore­cast. This bud­get year’s over­all rev­enue pro­jec­tions were re­vised down­ward, and cor­po­rate in­come tax col­lec­tions are pre­dicted to be the low­est since 1993.

Stavneak noted that an­other key part of state rev­enue also faces chal­lenges, this time from Wash­ing­ton. The state col­lects more than $500 mil­lion a year in in­sur­ance pre­mium taxes, more than 60 per­cent of it from health in­sur­ance providers. If the Trump Ad­min­is­tra­tion pushes through ma­jor changes in health in­sur­ance re­quire­ments, that rev­enue could drop sig­nif­i­cantly.

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