City lobbyist predicts some challenges for state budget

Arizona could be facing its own mini version of the fiscal cliff that is looming over the federal government, a lobbyist for the city of Yuma informed the council during its Tuesday work session.

That's because state lawmakers managed to balance the budget during the economic downtown through significant borrowing and cutbacks on voter-mandated health care coverage for Arizona's lower income families, Chuck Coughlin of Highground and Associates, told the Yuma City Council.

The courts allowed the cutbacks to the voter-approved human services programs because it was clear the state didn't have the money, Coughlin said.

Constitutionally, the state is required to have a balanced budget, he said. Lawmakers got that done in the challenging 2009 and 2010 budget cycles, “but it was with a lot of pain.”

With anticipated revenue picking up as the economy improves, there's still going to be a budget shortfall as a result of the need to restore funding to those voter-approved programs, he said. In addition, the federal affordable health care law will require states to provide indigent health care to those who are at or below 133 percent of federal poverty levels. And as the economy soured, that part of the population grew.

As if those issues aren't challenge enough, there's also the funding cuts made to education and the failure of voters to approve a permanent extension of the special 1 percent sales tax to fund schools that had been in place for three years.

Therefore, while the state has a budget surplus now and even has some money set aside for the rainy day fund, Coughlin predicted Arizona will have $900 million less revenue after the tax expires in April.

And he expects representatives from K-12 as well as the universities to seek a reversal of the underfunding and budget cuts they have experienced in the last few years.

Coughlin also touched on a gubernatorial panel's recommended changes in how the state and cities decide what's taxable as a precursor to being able to assess Arizonans for online sales.

The committee proposed to simplify the tax code and hopefully generate additional business that will create more jobs, he said. As it now stands, companies that do business in multiple cities are having to write a myriad of checks for each municipality where it operates.

A concern, one that was expressed by Councilman Edward Thomas, is whether the revenue will go to the municipalities where the transactions took place and not become a way for the state to take some money off the top.

“I'm convinced it's not a money grab by the state, but a genuine effort to simplify tax collection,” Coughlin responded.

It is an issue, though, that is getting vigilant attention from the League of Cities and Towns and one that he is keeping a close eye on, he said.

Councilman Jerry Stuart also brought up shared revenue, such as the HURF (Highway User Revenue Fund) that Arizona lawmakers swept to help balance the state budget.

“Any chance of getting some of those funds back to us?” he asked.

“I don't think we're there yet,” Coughlin answered. However, he added, as the economy and therefore the state budget improves, he expects there will be a push to establish protection of user funds so they're not swept again.

“We need to make sure we're not balancing the budget on the back of future infrastructure.”