FY2010 "Legislative Majority Budget Proposal"

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From the AEA website:

http://www.arizonaea.org/politics.php?page=469

FY2010 "Legislative Majority Budget Proposal"

The Republican legislative leadership met with Governor Brewer the morning of July 27, 2009. Apparently a deal has been brokered with the Governor's Office and the Republican Legislative Leadership. This budget is much worse for education in the long term than the budget that was passed on June 4 and June 30.

Some key points:

Because the June 4th and June 30th budgets would be used as the budget numbers for FY10, education would lose the 2% inflation factor, would be cut $175 million in soft capital this school year, would have a .5% reduction to the Career Ladder Program, and would have no money for true utility costs.

It appears that the budget policy changes that are aimed against teachers and association members would be included in this new budget.

The Legislature would refer two ballot items to a November 2009 election.

The first would be to approve a three-year sales tax that would start to get collected in the 2010 tax year at 1-cent, .75-cent in 2011, and .5-cent in 2012. This tax would generate significantly less than what the Governor originally proposed since she wanted a one-cent sales tax in place for all three years.

The second ballot referral would be to ask the voters to approve a three-year waiver of all Proposition 105 protections. This means that the legislature could fail to fund the 2% inflation factor for education for the next three school years.

A TABOR-like concept is included in this proposal. Spending at the state level would be frozen at the June 2008 level through FY2012.

There are significant tax cuts also included in this new proposal. In addition to the school tax being permanently repealed (the state equalization property tax), the plan calls for an additional $400 million in permanent income tax cuts beginning in the 2011 tax year. This tax cut would be aimed at corporations and top income earners.

Legislative Majority Budget Proposal -- Comparison w/ Executive's 5-Point Plan
(Word-for-word as distributed by Republican leadership)

#1 Reform budget process with focus on longer-term needs and resources

Legislative plan would apply a spending freeze at $10.2 billion, the FY09 budget enacted June 2008, for 3 years starting in FY10, with the spending cap lifted after FY12.

At an anticipated spending level of $8.2 billion in FY10, the Legislative plan's spending cap leaves $2 billion in budget capacity for baseline spending to grow to ensure the state is not out of alignment with federal stimulus requirements.

Executive's 5 Point Plan (5PP) calls for a budget package that returns the state to structural balance. With permanent spending more than $3 billion out of alignment with ongoing revenues, instituting a spending freeze at the enacted FY09 level ensures spending will not grow beyond that point, while also ensuring that there is enough budget capacity to accommodate baseline spending in health & welfare and education programs and stay in compliance with federal stimulus requirements.

#2 Improve Prop. 105, the Voter Protection Act

Legislative plan would suspend Prop. 105 for 3 years through a referral to the ballot, the duration of any temporary sales tax increase. Executive's 5PP calls for flexibility during extraordinary times of crisis, identifying Prop. 105 as the linchpin for doing so. Executive's 5PP seeks to spare core state services from bearing brunt of budget reductions.

#3 Further spending cuts, reduce General Fund by $1 billion

Legislative plan adopts the June 26 budget negotiated with the Executive during June 2009. Package includes more than $1 billion in spending reductions. Executive's 5PP calls for significant ongoing spending reductions to close $3 billion structural deficit, acknowledging federal stimulus is insufficient to close the deficit.

#4 Institute Tax Reform to attract business and more jobs

Legislative plan calls for $400M in permanent income tax reductions, split evenly between Individual and Corporate income tax, beginning in FY12 (Tax Year 2011). Corporate Tax rate would fall to approximately 4.9%; Top Individual Rate falls to 4.2%; change in corporate rate would move Arizona from 23rd most competitive state to 7th. Executive's 5PP asserts Arizona must grow way out of crisis, stating tax reductions must be provided to facilitate economic recovery and job creation.
#5 Temporary Tax Increase - $1 billion in revenue to bridge gap in budget

Legislative plan refers 3-year sales tax increase to the ballot, with a 1-cent tax in 2010, .75-cent tax in 2011, and .5-cent tax in 2012, which raises more than $2.2 billion in revenue
Executive's 5PP calls for a $3 billion revenue enhancement to complement the other components of the 5PP. Wants the referral for Nov. 2009, which the Legislative plan is designed to meet.