Originally Published: January 15, 2010 9:20 p.m.
PHOENIX - Facing gaping budget shortfalls, Gov. Jan Brewer on Friday asked legislators to approve a penny increase in the sales tax while putting other fiscal questions on special and general election ballots, including a plan to take 310,000 people off the state's Medicaid program.
Brewer also proposed spending cuts throughout state government, including a 5 percent pay reduction on April 1 for most state employees to save $15 million through June 30, the end of the current fiscal year.
Other cuts would end state funding for all-day kindergarten, abolish the KidsCare health care program and close the Juvenile Corrections Department - resulting in 980 layoffs and sending 400 offenders to county facilities.
A separate budget cut would result in layoffs of 175 administrative personnel of the adult Department of Corrections, said John Arnold, Brewer's budget director.
The recession has hammered tax collections, leaving Arizona with budget gaps that are among the largest in the nation. The state has already drained its rainy day reserve and is forced to go beyond such traditional budget-balancing gimmicks as delaying spending into the next fiscal year and raiding special-purpose funds.
The KidsCare elimination proposed for legislative action would affect 46,000 children, and a separate change reducing behavioral health services to the seriously mentally ill would affect 17,000 people.
Those proposed health-care reductions are on top of Brewer's proposal that voters be asked to lift a mandated eligibility expansion they approved in 2000 for Medicaid services under the Arizona Health Care Cost Containment System. The state cannot afford to keep serving those 310,000 people, Brewer said.
Brewer repeatedly has said she wants to protect services for the seriously mentally ill, and her proposal "is a recognition of where we're at," Arnold said, referring to the depths of the budget troubles.
Brewer also modified her previous proposal for a temporary one-cent increase in the sales tax and asked that lawmakers approve it outright instead of sending it to voters. She also would have it take effect three months beyond the three years proposed earlier and would have it broadened to apply to repair services for vehicles, appliances and business equipment.
Brewer's budget plan would close a $1.4 billion shortfall in the current $8.3 billion budget, and it would eliminate a $3.2 billion gap in the fiscal year starting July 1. After cuts, borrowing, funding delays and other steps, that budget would spend $8.6 billion.
Brewer's sales tax proposal failed to emerge from the Legislature several times last year, but it's now needed more than ever to avoid even deeper cuts, particularly in education and prison programs, Brewer aides said.
Given that legislators didn't agree to put the tax increase to voters last year, it would be an even more difficult political course to get them to approve it outright.
Arnold said the cuts were forced by the state's dire circumstances, and Brewer said in a statement that she was responding to the short-term crisis while proposing structural changes needed over the long term.
"Today marks the most significant day of state budget reform and restructuring in Arizona's 98-year-old history," she said.
Initial reaction from legislators fell across party lines, with Senate President Bob Burns, R-Peoria, calling Brewer's proposal "a reasonable approach." Added Burns, "We appreciate her roadmap."
Two Democratic leaders, Rep. David Lujan of Phoenix and Sen. Rebecca Rios of Apache Junction, said separately that Brewer's proposal was misguided and damaging to important services.
"Arizonans will see that this budget is completely unworkable," Rios said.
Arnold said the state would save a projected $67 million by eliminating the Juvenile Corrections Department and that Brewer's administration believes county facilities have capacity to take the offenders.
Coconino County Supervisor Liz Archuleta, president of the County Supervisors Association, said she was shocked at the cost shift, which she said could force cuts in other county functions to pay for it.
While the state would repeal the law requiring it to provide treatment for the seriously mentally ill, the proposed budget would still provide intervention and housing services as well as medication for those now covered, Arnold said.
Brewer wants legislators to call a May special election for voters to authorize the Medicaid eligibility rollback, the borrowing of $260 million from the First Things First child development program and continuation of the Arizona Lottery. The last step is needed to allow some lottery revenue to be diverted and other lottery revenue to be used as collateral for borrowing.
Brewer also proposes permanent changes in the state's fiscal ground rules.
Those include letting the Legislature temporarily modify voter-approved spending mandates, hardening the constitutional requirement for a balanced budget, allowing governors to cut spending under certain circumstances and increasing the state's rainy day fund.
Most of those would go on the November general election ballot, but Arnold said the one on spending mandates might be on a May special election ballot.