Governor to urge lawmakers to avoid budget cuts

PHOENIX — Gov. Janet Napolitano delivers her last State of the State speech Monday with pretty much one message: Stay the course.
 
The governor hopes to convince lawmakers to avoid the kind of sharp cuts in spending many are considering to deal with what now has grown to be close to a $1.6 billion gap between revenues and expenses. Instead, she wants them to use her plan, one heavy on borrowing and what some consider budget gimmicks.
 
But the governor is speaking not so much to the Republican-controlled Legislature as she is to the constituents who elected her — twice — by large margins. And she hopes to make the case to them that the kind of fiscal maneuvers she is proposing are preferable to the loss of services, even if some elements of her plan are, in effect, really large payday loans.
 
"Don't sacrifice long-term vision for short-term budget situations," Napolitano told Capitol Media Services will be the central theme of her speech. She said while borrowing and deferring spending causes some concerns, the alternative is far worse.
 
"It makes sense compared to eviscerating universities, eviscerating public education, eviscerating basic safety-net services that more and more Arizonans need to help them through this period of economic turmoil," Napolitano said.
 
The governor already has given lawmakers a plan to balance this year's budget without severe cuts. She will present her proposal for next year's budget next week.
 
But the kind of deferral of expenses and reduction in future revenues is going to be a hard sell, at least in part because there is no evidence next year will be any better. In fact, preliminary figures peg the deficit for next fiscal year at somewhere between $2 billion and $3 billion.
 
The problem, plain and simple, is the state is spending more than it takes in. Lawmakers realized that last year when they prepared the current $9.9 billion budget. But they fixed it only partly with cuts.
 
Some of the balance came from the state's "rainy day" fund and raids on other special accounts.
 
And certain expenses were taken off the books.
 
Part of that is borrowing for new school construction rather than paying cash. Napolitano said that move was justified, even with interest costs, because the buildings will be used over a long period.
 
But the package also took money scheduled to be paid to schools in state aid in June and moving it into July, which happens to be in the next fiscal year. That reduced the state budget by $330 million - and made it next year's problem.
 
Rep. John Kavanagh, R-Fountain Hills, who will head the House Appropriations Committee, said Arizona can't afford any more of those gimmicks. He and Russell Pearce, R-Mesa, his Senate counterpart, are crafting options which include slashing some education funding, the largest single element of the budget.
 
Napolitano, however, wants not only to continue those payment deferrals but expand them. One element of her package has the state delaying payments to state universities.

And she wants to do the process in reverse.
 
Specifically, Napolitano wants investors to buy the right to future lottery proceeds in exchange for upfront cash now. She has a similar plan for the state's future share of the settlement of a nationwide lawsuit against tobacco companies.
 
What that means, however, is there will be less money coming in future years.
 
Napolitano said while she will be addressing the Legislature on Monday - that's what the constitution requires - she said the speech also is "the one formal time each year when you address of Arizona."