By Alia Beard Rau – The Republic | azcentral.com – January 24th, 2014
Gov. Jan Brewer and legislative economists over the past week released conflicting budget predictions for the next three years, setting the stage for a battle over Arizona’s future.
The governor has vowed that by the time her term ends in January 2015, the state budget will be structurally balanced — meaning more ongoing revenue is coming in than spending going out. Her budget projections reflect that.
The Legislature’s economic experts, the Joint Legislative Budget Committee, released projections this week showing that Arizona’s budget won’t be structurally balanced for the foreseeable future and that the state’s finances are quickly headed back into the red. “There are very substantial differences,” budget committee Director Richard Stavneak said of the governor’s and Legislature’s forecasts. “We are predicting … an almost $600 million shortfall in 2017.”
In contrast, Brewer is predicting the state will end fiscal 2017 with a $421 million surplus.
State Budget Director John Arnold said Brewer directed him to assure the state’s finances were structurally balanced by fiscal 2016 and beyond, and he maintains that will be the case.
Arnold was not concerned about the differences between the predictions.
“That’s just the nature of long-term forecasting,” he said. “Any difference you have … that just exacerbates over time.”
The three-year look into the state’s economic future isn’t set in stone. Both the budget committee and the Governor’s Office adjust their projections at least once a year, if not more. But it does color even this year’s budget negotiations, and could impact the governor’s legacy.
While Brewer pushes for some new spending and tries to establish a legacy of economic recovery, many state lawmakers have vowed to hold back on any significant budget hikes until the revenue numbers show more significant spikes. “Things are getting better, but it’s still not great,” said Sen. John McComish, R-Phoenix.
The difference between forecasts is in the details. The two disagree on how much revenue the state will see over the next three years as well as how much the state will need to adjust spending to continue providing the same services while meeting required cost increases based on things like K-12, inmate and Medicaid population numbers.
Essentially, Brewer is predicting the state over the next three years will bring in more money and will need to spend less than the budget committee believes it will.
Brewer is predicting $9.4 billion in revenue for fiscal 2016 and $9.8 billion for fiscal 2017. The budget committee is predicting $9.1 billion and $9.5 billion, respectively.
“In every year, the executive has substantially higher revenue growth,” Stavneak said.
Stavneak said recent revenue history doesn’t bode well for large revenue- growth predictions in the short term. Over most of the past year-anda- half, he said, revenue growth hovered below 4.5 percent.
“Right now, we are growing for the first six months of the fiscal year at 3.2 percent,” he said.
The Governor’s Office revenue projections call for growth of more than 5 percent in fiscal 2016.
For expenditures, Brewer projects ongoing spending of $9.4 billion in fiscal 2016 and $9.6 billion in fiscal 2017. The budget committee is predicting the state budget will need to grow to $9.4 billion in fiscal 2016 and $10.1 billion in fiscal 2017 to meet baseline growth requirements.
The largest baseline spending divide is with K-12 and Medicaid spending.
Brewer is projecting $647 million less for those over the next three years than the budget committee has stated it thinks the state will be required to spend.