QUESTIONS FOR STATE MUNICIPALITIES ABOUT THEIR FINANCES

posted by Michael Chihak

Friday's edition of Arizona Week on KUAT-TV, Channel 6, will focus on how Arizona's cities and towns are doing financially in the face of slow recovery from the recession.

Up for interviews are Avondale Mayor Marie Lopez Rogers, whose city of nearly 80,000 residents is a western suburb of Phoenix, and Ken Strobeck, who is executive director of the League of Arizona Cities and Towns, based in Phoenix and representing the state's 91 incorporated municipalities.

Among questions for Rogers and Strobeck:

• Please give an update on how the state's municipalities are doing financially.

• Have cities and towns gone through their rainy day funds the way the state did, or do they have something in reserve?

• The state passes along to the cities and towns about $800 million a year in income tax, sales tax and other tax and fee revenues. Do you expect that to continue in the coming fiscal year?

• Cities and towns are, in fact, are in line for some cuts, a little under $20 million total, from the state Department of Water Resources and the Highway User Revenue Fund. What impact will they have on municipalities?

• Governor Brewer and the Legislature are counting on a federal waiver on the state Medicaid program to balance the budget. At more than a half-billion dollars, it’s the biggest single chunk of savings. Are the state's municipalities worried about what happens if the state doesn’t get the waiver?

• Some Arizona cities, Phoenix notably, are using federal grant money to shore up their budgets. Are others doing likewise, and is that wise given the budget cutting mood in Washington and the possibility that such grants won't be renewed?

NO STATE BUDGET "PLAN B" SHOULD KEEP LOCAL GOVTS ON THEIR TOES

posted by Michael Chihak

Arizona Gov. Jan Brewer and state legislative leaders are counting so much on a federal Medicaid waiver to cut nearly $542 million from next fiscal year's budget that they have no existing fallback.

That's despite some legislators' warnings that a "Plan B" needs to be discussed and worked up. Additionally, as Arizona Week journalist commentator Luige del Puerto of the Arizona Capitol Times said on last week's program, Arizona is not in an exceptional position when it comes to asking for a federal waiver. Many states are in similar straits, and if the feds grant Arizona a waiver, it sets the precedent for others, del Puerto said.

All of that means a federal waiver isn't a sure thing, and if it doesn't come through, the budget axing will have to become more of a budget slashing, running almost randomly through the state's spending plan. And it likely will occur with little time to spare, because the timing on a federal waiver decision isn't at all known.

A sure target would be the $800 million in revenue that the state collects and then passes along to municipal governments. Half of it is from the state income tax, the other half a mixture of vehicle license fees and sales tax revenue.

Municipalities are counting on that money coming through for the 2011-12 fiscal year.

If the Medicaid waiver doesn't come through, all bets are off.

AZ CITIES, TOWNS HOPING FOR MINIMAL STATE BUDGET IMPACT

posted by Michael Chihak

Arizona Week will explore how the state's cities and towns are doing in the current economic downturn. Municipalities in the state have seen their budgets cut by an average of 30 percent in the last two years, the head of their state association says.

But the good news is that they think this year's state budgeting process won't add in a great way to cities' and towns' woes.

"At this point, given the comments that state legislative leaders have made saying they will use the governor's budget as their starting point, we think we should be OK," Ken Strobeck said. He is executive director of the League of Arizona Cities and Towns, which represents and lobbies on behalf of 91 municipalities.

Strobeck pointed out that fiscally healthy cities and towns are key drivers in the state's economic recovery. "The way the state budget is going to come back in any meaningful way will have to involve activity at the local economic level," he said.

Eighty-five percent of Arizona's population lives in incorporated cities and towns, and 90 percent of state revenues come from economic activities in cities and towns, he said.

Strobeck said Gov. Jan Brewer's budget proposal includes two ideas that could cost cities and towns a total of about $20 million in the 2011-12 fiscal year. One is in fees for the state Department of Water Resources and the other a switch of transportation money.

"We felt like $20 million was a small amount to us as a contribution to the state's budget problems if other parts of our state-shared revenue is left intact," Strobeck said.

The cities and towns are getting about $800 million this fiscal year in shared revenues from the state, a little more than half from distribution of state income tax revenues and the rest a combination of sales tax revenues and vehicle license fees.

GOV. JAN BREWER'S $541 MILLION GAMBLE

posted by Michael Chihak

Gov. Jan Brewer is seeking to balance the 2011-12 state budget by tightening the eligibility rules for the state's health-care program for the poor, called AHCCCS. In most states, it is Medicaid, funded largely by the federal government.

Reduced eligibility would save the state $541 million next fiscal year, Brewer says, whole dropping 280,000 adults from state-supported health care. Where they will go for health care, what the effects will be on hospital emergency rooms and other facilities and what the overall economic effects will be are questions yet to be answered.

But one thing is known, having come clear in an interview for Friday's Arizona Week broadcast: if Arizona gets federal approval to cut $541 million, it stands to lose more than $1 billion in federal matching money. So the reduction is much larger than it looks on the face of Brewer's budget. That was brought forth by Kristin Borns, senior policy analyst at the Morrison Institute for Public Policy at Arizona State University.

Some have suggested that if Arizona doesn't get the federal waiver, it should consider dropping its participation in Medicaid altogether, hearkening back to a time decades ago when the state declined to participate in the beginning days of the program.

If the state were to drop its participation, it would risk the loss of $7 billion in federal matching money for health care for the poor, leaving them, the state's hospitals and many small businesses in dire straits.

ARIZONA BUDGET CUTS COMING; HOW WE GOT INTO THIS MESS

posted by Michael Chihak

Gov. Jan Brewer's proposals to balance this fiscal year's budget and set a budget for next fiscal year include a series of onerous cuts to education and health care. Public safety, in the form of money for state prisons, would increase under Brewer's proposal.

The Legislature will begin vetting it this week, and on Arizona Week, we will talk with key legislators getting involved in the process.

Republicans are blaming Democratic former Gov. Janet Napolitano for huge increases in state spending in her six years in office, 2003-2008, or the mess Arizona is in. Certainly, spending rose sharply in those years, with three consecutive years of 15-percent plus increases in 2005, 2006 and 2007.

All this occurred on the cusp of the great recession, making the effects even more pronounced as the state went into an unprecedented cyclical revenue reduction that saw 30 percent of state revenues go away.

But before that, the stage was set by Republicans in a series of tax cuts over 15 years -- back to 1995, that effectively cut state revenues as a share of personal income nearly in half.

Economist Matthew Murray of the University of Tennessee studied Arizona's situation at the behest of the Morrison Institute for Public Policy at Arizona State University. Murray found that in 1995, state tax revenue per $1,000 of personal income was about $50. In 2010, after steady declines and a series of major income tax cuts and one significant property tax cut, that fell to about $27 per $1,000 of personal income.

Another way to look at it is that residents were paying about 5 percent of their personal income to the state in taxes in 1995, and by 2010, they were paying about 2.7 percent.

In Murray's words, via e-mail: "Personal income measures the size of the economy, but since it is 'resident based' income, i.e. income earned by residents, it also reflects your ability to pay taxes and thus fund government services. In short, you are spending less and less of your income in support of government. This is a rather dramatic reduction especially in such a short period of time."

Combine that factor with the steady and sometimes dramatic increases in state spending, and we have the current situation -- a structural deficit in the order of $2 billion or more, with no rebounding economic cycle. And even if there were a rebound, it wouldn't help without long-term adjustments in both revenue and spending.

Hence, when it comes to finger pointing, everyone should get a share of the blame.

SHOOTING TRAGEDY OUTCOMES? CIVILITY? MORE GUNS?

posted by Michael Chihak

Last week's tragic shootings in Tucson have driven several political issues to the surface in Arizona, and nationally.

Several politicians have used the tragedy to call for civility in political discourse as a way to be true to oneself and others, as Arizona House Speaker Kirk Adams said, and to honor the memories of those who died, as President Obama said.

How long that will last is up for question. The journalists analyzing and commenting on tonight's debut edition of Arizona Week weren't certain that it would have "legs" beyond the realm of shock and mourning that Tucson, Arizona and the nation are undergoing.

Another issue brought to the fore is that of gun availability and gun control. On that, Arizona Senate President Russell Pearce is adamant that nothing will lead to any rollback of 2nd Amendment rights in the state. And the commentators on Arizona Week agreed, with Robert Robb of the Arizona Republic saying that it simply won't happen.