P.L.A.N. Update - Special Session #6 - It's All About the Budget‏

Legislature Completes Work on Sixth Special Session for State Budget Fix

Governor Brewer called her sixth special session to continue chipping away at the current fiscal year’s budget deficit, pegged at $1.5 billion. The Governor’s call included:

• Adjustments to state agency budgets, including sale/leaseback of additional state buildings;
• referring to voters a three-year, one-percent increase in the state’s sales tax;
• prorating income tax deductions for out-of-state filers; and
• bonding against lottery revenues.

Revenue sharing was not discussed as a revenue option. While the Senate was able to quickly move the budget bills, the House took more time. The bills that refer a three-year one-cent sales tax, extend and securitize the lottery, and collect more taxes from out-of-state filers were approved. On Wednesday, things took an interesting turn. The sole outstanding measure, a $450 million rollover payment for K–12 and public universities, was linked with passage of the Speaker’s jobs bill, HB 2250: Arizona’s Job Recovery Act. The Senate apparently did not agree with this maneuver, so adjourned the special session sine die. The House followed suit on Thursday. The $450 million rollover education payment can still be considered in the current regular session or a future special session. The current year budget is still short almost $700 million, so more work remains.

Phoenix City Council Adopts A Two-Percent Emergency Food Tax

The Phoenix City Council took special action on Tuesday, Feb. 3, to adopt a two-percent tax on purchases of food for home consumption. City management estimates that the food tax revenue will provide $62.5 million over the next 15 months to help reduce the revenue shortfall facing the city. Today, every city bordering Phoenix collects a food tax; Phoenix's two-percent tax rate ranks 5th lowest among the 18 cities in Maricopa County that already collect a food tax. The city began this year's work on the budget with a $245 million budget shortfall. With the food tax, several efficiency measures and one-time financial transactions, this shortfall has been reduced to a more manageable $60 million. The Council's action reduces the number of cuts needed to balance the city's budget.

Last week the Trial Budget was presented to the City Council and released to the public. In our last message, we included links for the budget and for the schedule of community budget hearings where you can make your voice heard.

Legislation of Interest

HB 2250: Arizona’s Job Recovery Act (Rep. Kirk Adams, R–Mesa) makes numerous changes to state income tax, property tax assessment ratios, and the enterprise zone program, as well as dedicating new resources to job training and economic development. While the intent of the bill is to spur job creation, elements of the bill will reduce Phoenix revenues when they are fully phased in:

$12-$18 million loss in revenue sharing
$6 million impact in primary property tax collections (affecting the city's general fund)
$20 million hit in secondary property tax collections each year for five years (affecting bond payments), and
$220 million reduction in future bond capacity

As the City works to address this year's budget challenges, it's more important than ever to protect future revenue. HB 2250 will reduce future revenue and make it harder to recover from this downturn in the years to come. We look forward to working with the supporters of this measure to find middle ground that will stimulate the state’s economy without unduly placing public safety, streets, parks and library services in jeopardy.

Source: P.L.A.N.