State Treasurer Dean Martin, who may or may not be challenging the troubled Gov. Jan Brewer in next year’s Republican primary in August, shouted out a warning last week: The state has blown through its $700 million dollar credit line and had to dig into some internal accounts for another $73 million.
By the way, Martin has already tapped $1.6 billion in other state funds, so we’re running out of options as the state continues spending more than it takes in.
Martin was blunt in his assessment: “Government spending in Arizona is out of control.”
Indeed, these numbers are plainly nuts: It only took a week for the state to exhaust that $700 million credit line.
More bad news: We still have not hit bottom in our economic slump. The latest sorry numbers showed that a drop of nearly 24 percent in the state’s overall tax collection compared to October 2008. That’s 15 straight months of double-digit declines in revenues compared to the previous year.
The total take from sales, income and corporate income taxes in October was $142 million below forecast. For the entire fiscal year that began in July, we’re $376 million shy of expectations, so even though lawmakers trimmed $400 million in state spending in last month’s special session, the current year’s shortfall could still be rising back toward $2 billion.
Not only are we not meeting the forecast; in the first four months of the fiscal year, we’re down nearly 18 percent from the previous year.
The biggest drop continues to be in sales taxes by homebuilders, with contracting taxes slipping by 40 percent compared to last year. Retail sales are down by roughly 12 percent, but people are still going out to eat: Restaurant and bar taxes have dropped by about 5 percent.
Income taxes are down by roughly 19 percent compared to last year, which suggests that our job picture is still dismal. Still, there was a bit of good news in the report, as the private sector added jobs for the first time since February 2008.
People are driving less and registering fewer cars, so gas and car taxes are down about 9 percent compared to last year, which is pinching the budget of the Arizona Department of Transportation.
The state is even managing to lose in the gambling business. Although the more people are buying lottery tickets, the state’s beneficiaries are still seeing diminished returns—because the state is giving away so much in prize money.
The bottom line: Our state is nearing a financial breaking point.
You can read more in this week's Skinny or find the JLBC report here.