Legislators approve plan to slash $1.2 billion

PHOENIX — State lawmakers approved a budget plan late Thursday to cut $1.2 billion in spending — if not more.

The package of measures, pushed through by Republican leaders over Democratic objections, is designed to help bring expenses into line with revenues. Aside from cuts, it also takes nearly $500 million from special funds and defers payment of some bills to balance the books.

But to make up the $2.7 billion deficit, the budget presumes voters will approve a temporary one-cent hike in the state sales tax at a special election May 18. If that fails, the plan calls for another $867.5 million in spending cuts, more than half of that in state aid to public schools.

Even with that, the plan still may not be in balance.

It is built on the assumption that voters will agree in November to repeal a 2006 mandate to fund programs for early childhood development.

Lawmakers want to use the $150 million a year raised from the 80-cent-a-pack tax on cigarettes, enacted in that initiative, to fund other programs. And they want to drain the estimated $325 million currently in the account.

The budget also counts on taking another $123.5 million out of a fund to preserve open space in urban areas. That, too, will be on the November ballot since the fund was approved by voters in 1998.

The spending plan also is built on decision by GOP lawmakers to remove more than 310,000 people from the Arizona Health Care Cost Containment System, the state's Medicaid program, to save $385 million. Voters mandated expanded coverage in 2000, with nearly 1.3 Arizonans — close to 20 percent of the state population — now getting free care.

But Rep. Kyrsten Sinema, D-Phoenix, said such a change without voter permission will be declared illegal.

"That's about a billion dollars of phony budget solutions,'' she said. Sinema said there is no contingency plan if the two measures are defeated in November or if a judge voids changes in health care eligibility.

The votes for the budget package, largely along party lines, came after Republicans beat back efforts by Democrats to restore funding for some programs. Sen. Debbie McCune Davis, D-Phoenix, said that makes no sense where there are alternate sources of revenue.

For example, she proposed doubling the state tax on hard liquor to $6.08 a gallon, with similar increases in the levies on beer and wine. McCune Davis said the money raise would partly restore funding for fund full-day kindergarten programs, at least at schools with a high percentage of needy children.

That was defeated, as was a proposal to subject soda and candy to the state sales tax to continue to fund certain optional medical services for the poor, like prosthetic devices, insulin pumps and transplants.

Sen. Paula Aboud, D-Tucson, had no better luck trying to keep funding for programs for the disabled by taking money from the Arizona Automobile Theft Prevention Authority.

While he didn't have a specific alternate funding source, Rep. Steve Farley, D-Tucson, complained about raiding lottery proceeds that fund local bus and dial-a-ride services.

"Many rural transit systems will be forced to shut down entirely,'' he said. "And that's going to leave people completely stranded in their homes without access to medical care, without access to food, without access to be able to go out and visit their friends.''

Rep. John Kavanagh, R-Fountain Hills, said the $2.7 billion deficit leaves no choice.

"We stand in a situation where, over the last decade, we grew government at a particularly fast pace because the money was there,'' he said. Kavanagh said the recession sent tax collections into a tailspin.

House Speaker Kirk Adams, R-Mesa, said the package is the best possible way of dealing with a difficult situation.

"As a body we do not have the luxury of being concerned about one particular area of state government over another,'' he said. Adams said the legislature must "do what's best for the entire state.''

But Sinema said there are alternatives.

She pointed out virtually all services are exempt from state sales taxes. Sinema said there is no reason not to tax country club memberships and spa treatments when education funding is being slashed.

GOP lawmakers and Brewer did agree to postpone one part of the plan which would have closed the Department of Juvenile Corrections and forced each county to house and pay for rehabilitation programs for delinquents. The issue will be studied for the next year.

In the interim, though, Pima County will need to give the state $6 million to defray costs, with another $38 million from Maricopa County.