Republican lawmakers begin push on Arizona budget

By PAUL DAVENPORT

PHOENIX

Republican legislative leaders on Monday unveiled a plan to close the state's big budget shortfalls, proposing cuts for schools, health care and state employee pay while asking voters to permit raids on special funds to help tide the state over.

Largely modeled on Gov. Jan Brewer's January budget proposal, the Republican lawmakers' package faces initial hurdles with House and Senate committee hearings Tuesday morning.

Formal votes for passage by the full Legislature could come as early as Wednesday.

The state faces a $2.6 billion shortfall on projected spending of $9.5 billion for the fiscal year beginning July 1. There's also a $700 million shortfall remaining from what was a $2 billion gap in the current fiscal year's budget.

"Nobody's disbanding or dismantling the state, but cuts are necessary (for) reductions of services," said Senate Appropriations Chairman Russell Pearce, R-Mesa. "We've tried to prioritize those, giving education the top priority."

Key provisions include asking voters in November to allow $450 million to be diverted from special funds for land conservation and early childhood programs, and removing 310,000 people from the state's Medicaid program on Jan. 1.

The plan presumes voter approval of a temporary sales tax increase, Proposition 100, on a May 18 special election ballot. But it has a contingency plan to trigger $867 million of conditional spending cuts across state government -- hitting hardest on education -- if Proposition 100 is defeated.

"The bottom line was to get us in balance," said Senate President Bob Burns, R-Peoria.

Hundreds of thousands of Arizonans would lose state-funded health care under the plan regardless of the Proposition 100 outcome.

The plan would authorize the Arizona Health Care Cost Containment System to make eligibility changes that would drop 310,000 people from the Medicaid program to save $385 million.

Separately, approximately 40,000 children would lose coverage under the elimination of the KidsCare program launched a decade ago. And reduction of funding for services for some seriously mentally ill people would eliminate services for an estimated 14,600 Arizonans.

A Democratic leader, Sen. Jorge Garcia of Tucson, said the health care cuts would devastate families and the health industry.

A coalition of social services advocacy groups decried the proposal. "Hundreds of thousands of children, families and vulnerable adults will lose health care and safety-net human services," the Protecting Arizona's Family Coalition said.

The two additional ballot questions would be put to voters in November.

One would repeal the First Things First program of early childhood services and sweep its $324 million into the general fund for use for "health and human services for children." A second proposed ballot measure would sweep $123.5 million from the Growing Smart land conservation fund.

Both programs were established by voter mandate, so any changes require voter approval.

The biggest education cut that would take effect regardless of the outcome of the Proposition 100 vote would reduce the state's funding for all-day kindergarten to half-days to save $218 million.

Full-day kindergarten was a major policy initiative of former Gov. Janet Napolitano, a Democrat who left office last year to become U.S. Homeland Security secretary.

The plan also would hit the wallets of most state employees.

It includes 2.75 percent pay cuts and days off without pay. There'd be one furlough day in what's left of the current fiscal year and six days off in each of the next two fiscal years.

University employees are excluded while the state is under so-called "maintenance of effort" requirements set by the federal stimulus program.

Brewer proposed a 5 percent pay reduction.

The plan retains but delays implementation of Brewer's proposal to close the state Department of Juvenile Corrections and to shift responsibility for custody and treatment of juvenile offenders to counties.

Of the $867 million in conditional cuts, $550 million would fall on education, with K-12 school funding bearing the brunt, followed by universities and community colleges. Other big cuts would be applied to the state's Medicaid program and the Department of Economic Security.

Under the conditional cuts, most agencies would see cuts ranging from 5 to 12 percent.

The plan also would increase the state's use of borrowing to cover its budget gaps. In the current year, $450 million in education spending would be temporarily delayed. In the next fiscal year, the state would add $100 million of sale-leaseback financing for state buildings.