The good news: More than two months into the fiscal year, the state finally has a budget in place.
The bad news: The state is on track to spend about a billion dollars more than it will bring in, according to the Joint Legislative Budget Committee.
And it doesn't appear as if lawmakers are in any rush to do anything about it.
Tensions continue to run high between Gov. Jan Brewer and the Capitol's Republican leadership—so high, in fact, that GOP lawmakers are balking at Brewer's request to come back for another special session to hammer out the billion-dollar problem that resulted from her decision to veto portions of the budget the Republicans sent her in August.
One major cause of heartburn: Brewer's decision to reject a permanent repeal of the state's property tax, which had been suspended for three years. The state property tax, which costs the owner of a $200,000 home about $70 a year, brings in roughly $250 million annually.
Brewer hasn't completely given up on persuading lawmakers to back her plan to ask voters to approve a temporary one-cent-per-dollar sales tax to help Arizona through the next few years, which was opposed by a handful of conservative Republicans in the Senate and the entire Democratic caucus. But she is now talking about putting it on the ballot through an initiative drive, which would delay the vote until the November 2010 election. (See the week's Skinny for details on the weird politics of that option.)
In the meantime, Brewer vetoed enough of the GOP spending plan to open a $464 million hole in the budget, mostly in the areas of education and welfare spending.
Much remains up in the air. Major state agencies, such as the Department of Education and the Department of Economic Security, are essentially functioning under last year's budget, although officials are aware that future cuts are certain. Budget analysts are still analyzing the impact to other state agencies, ranging from the Arizona Lottery to the Department of Transportation.
Local nonprofit agencies that receive state dollars remain unsure about what expect this year. Jim Murphy, CEO of the Pima Council on Aging, says that his agency has been planning to absorb between $150,000 and $550,000 in funding cuts.
As a result, the Pima Council on Aging is not accepting any new clients for the home- and-community-based program.
"No more seniors or physically disabled adults are able to get in the program to (receive) a warm meal or a bath twice a week," says Murphy.
Despite the uncertainty, a few winners and losers emerged from the latest budget maneuvering.
• Developers: Thanks to a provision in a budget bill, cities and towns will not be able to collect impact fees or change building codes—to, say, require higher energy efficiency—for two years. The law also prohibits any new state regulations.
• K-12 Education: One of Brewer's vetoes saved Arizona's schools from enacting cuts of $300 million. But it's likely that lawmakers will again cut those funds once they address the state's budget shortfall, pushing schools into the losers' category.
• The Department of Economic Security: DES likewise avoided $50 million in cuts, but Brewer warned that spending would be reduced later this year, pushing the agency into the losers' category.
• Cities and counties: Brewer's vetoes prevented a transfer of $22 million in vehicle-registration fees from city and counties to school districts, as well as a transfer of $3 million from Pima County to the state. But lawmakers are expected to revisit that provision as well, pushing the counties into the losers' category.
Speaking of the losers' category: Counties will have to pick up 25 percent of the costs of housing sexually violent mentally ill patients at the Arizona State Hospital. They'll also have to cover a larger percentage of the cost of restoring mentally ill defendants to competency to stand trial.
• The Tucson City Council: Legislation creating a new Rio Nuevo oversight board appointed by state lawmakers and Gov. Jan Brewer was vetoed, so the current Rio Nuevo board—appointed by the Tucson City Council and the South Tucson City Council—remains in place. Expect lawmakers to take another shot at stripping the Tucson City Council of control when they meet again.
• Middle-income families: Nearly 10,000 parents will be losing their health insurance through KidsCare Parents, a program that insures people who made too much money to qualify for AHCCCS.
• Working parents: DES now has the authority to raise the threshold for parents to receive state-subsidized day care. Roughly 7,000 people are now on a waiting list for state help in affording a spot in a day-care center.
• The mentally ill: The Department of Health Services is expected to cut $16 million from programs for mentally ill people who do not qualify for Medicaid.
• State prison employees: The state prison system is being privatized, which means that state employees who work in the facilities will be losing their jobs and associated benefits, including their contributions to the state's retirement program. Whether they will get jobs with private prison operators remains to be seen, but they'll likely have reduced benefits if they do.
• Environmentalists: The State Parks Department is planning on laying off 30 employees and cutting back on the hours that parks are open. Meanwhile, Heritage Fund dollars will be taken from state parks and used for fire-suppression efforts; cuts to the Department of Environmental Quality will trim programs that monitor air and water quality; and the state's recycling program is gone.
• Domestic partners of state employers: A legal tweak has eliminated the extension of health-care benefits for domestic partners of state employees—gay and straight—that was put into place under Gov. Janet Napolitano's administration. Attorneys for the state are studying whether the cutoff will be Oct. 1 or later.
• Science Foundation Arizona: Funding for science grants was zeroed out.