Whatever she was known during her time in office, as she leaves office, she is known as the woman who drove the state to the brink of financial collapse. Few believed that she could do as much damage as her predecessor; Janet Napolitano.
Whoever prevails in the upcoming Governor’s race; Republican Doug Ducey or Democrat Fred DuVal, one thing is certain; they better be financially savvy or Arizona will continue to sink deeper into the abyss as state revenues continue to sag.
The state is expected to have a deficit in Fiscal Year 2015. According to the Joint Legislative Budget Committee (JLBC) report of August 2014, “July continued the recent trend of disappointing General Fund revenue results. With revenues $(34.5) million below forecast, July marked the 4th consecutive month of failing to meet the budget projection.”
“The enacted budget had assumed an FY 2014 ending balance of $596 million,” according to the JLBC report. According to the most recent data, the state will have a $(282) million shortfall of in FY 2015, and the FY 2016 shortfall is projected to be $(765) million.
“The FY 2015 and FY 2016 estimates include the $320 million annual cost relating to the K-12 litigation ruling, which requires a “reset” of the per pupil amount prospectively to adjust for foregone inflation in prior years,” according to the JLBC. “It does not include “back payments” for K-12 inflation payments which did not occur in prior years.”
July General Fund revenue collections totaled $662.2 million. Base revenues, which exclude one-time adjustments, were (0.7)% below July 2013.
The July revenue decline was due almost entirely to Corporate Income Tax collections, which posted a significant decline from the previous year. This tax category continues to negatively affect revenue growth, as the double digit decline posted in July continues a trend of 4 consecutive months where Corporate Income Tax collections fell below the prior year.
In comparison to revenue of $662.2 million, July 2014 spending was $2.44 billion which represents an increase of $210.2 million from the prior year.
The state incurs significant expenses during the month of July as it makes nearly $1.0 billion of deferred payments to school districts.
The state’s fiscal health can also be measured by the operating fund balance. The state pays its bills out of the operating fund balance, which consists of the General Fund and certain dedicated funds. The operating balance as of mid-August 2014 is $1.0 billion. In addition, the state’s Budget Stabilization Fund has a balance of $455.6 million.
According to the Yellow Sheet, “Ducey is on record as saying he wants to eliminate income taxes and intends to propose legislation every year he is in office to reduce taxes, with the goal of bringing the state’s income tax rate to as close to zero as possible. DuVal has offered an ambitious economic plan that includes a pledge to never cut K-12 funding, restoring all-day kindergarten, reducing start-up costs by providing tax breaks for small businesses in their first three years of operation, raising the caps for R&D tax credits and even reversing cuts to state parks as a way of promoting tourism.”