Special session looks at $450 million in cuts

PHOENIX — State lawmakers return to the Capitol Tuesday to start whacking away at the $2 billion deficit while altering other laws on real estate foreclosure and Tucson's Rio Nuevo project.

The deal, hammered out late Monday, involves reducing "soft capital'' aid to public schools by $144 million. That is money for computers, books and school buses.

Another $148 million will be taken out of the budget for the state Department of Economic Security. House Speaker Kirk Adams, R-Mesa, said that agency, under direction from Gov. Jan Brewer, has been spending less than authorized to deal with the possibility that its funding would be cut.

Lawmakers hope to achieve another $160 million in savings by making some technical fixes to state agency budgets, fixes they had made earlier this year but got caught in Brewer's veto of the repeal of the state property tax.

Republican legislative leaders said they have the necessary votes lined up, with even some Democrats agreeing to go along.

But not all of them: Hopes for a one-day session were dashed when Senate Minority Leader Jorge Garcia, D-Tucson, refused to waive the rules that require all legislation to be read at least three times on three separate days. Garcia had wanted — but could not get GOP support for — a change in law that would have allowed the use of certain federal funds to help schools that serve reservation children.

That means the earliest the savings could be enacted into law is Thursday.

Several GOP legislators remained unhappy that lawmakers were not cutting spending even deeper. But legislative leaders said they needed to start with the items of consensus, leaving the more politically difficult questions of trimming services and programs for another day.

For the same reason, lawmakers will not take up Brewer's call to let voters decide if they're willing to hike their own sales taxes by 1 percentage point, to 6.6 percent, to minimize the need for further cuts.

While the focus of the session is the budget, lawmakers are planning to alter several other laws while they are in Phoenix.

Most significant is consideration of a deal being worked out between the Arizona Bankers Association and the Arizona Association of Realtors.

Earlier this year, at the behest of the bankers, lawmakers agreed to partially repeal the state's "non-recourse'' law.

That law protects homeowners who default on mortgages owing more on the property than it is worth. It forbids lenders from trying to collect the balance from the former owners.

Under the change, only those who actually lived in a home for at least six months were entitled to the relief.

That brought protests from real estate agents who said it left others financially vulnerable for their second homes or houses they bought for relatives. Lawmakers undid the changes in a special session, only to find themselves sued by the bankers who questioned the constitutionality of the move.

The deal being worked out late Monday partially restores what the bankers want. But it limits lenders' ability to go after borrowers to situations where the property is clearly a speculative investment rather than a place they or their relatives plan to occupy.

Lawmakers also are being asked to give $18 million to Science Foundation Arizona.

In a move to cut state spending, lawmakers last year stopped making scheduled payments to the foundation, money the organization already had committed for grants for research. The foundation sued and a judge ruled the move was illegal.

But the judge said he was powerless to order lawmakers to give back the money.

The proposal on Rio Nuevo is designed to wrest control of the redevelopment's board from the Tucson City Council. Instead, board members would be appointed by the governor, the speaker of the House and the president of the Senate.

Lawmakers had previously approved that changed. But it was part of a larger bill that included provisions Brewer did not like, forcing her to veto the entire measure.

Brewer has agreed to sign the changes this time if they reach her desk without being tied to other issues she does not want.