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RANCHO RESORT
MAINTANANCE POSITION

PHOENIX — The newly enacted state budget may already be in the red.

New figures from the Joint Legislative Budget Committee show the state was headed into the end of the last fiscal year with $140 million less in revenues than anticipated.

The problem is lawmakers were counting on that cash to balance the new budget — a budget with little room for error. It presumes the state will have just $1 million left over on June 3, 2008, which is a margin of less than 0.01 percent the $10.6 billion budget.

What's worse, according to Rep. Russell Pearce, R-Mesa, is that lawmakers and the governor got an advance preview of the new report. Pearce, who chairs the House Appropriations Committee, called the new budget "dishonest."

But Jeanine L'Ecuyer, press aide to Gov. Janet Napolitano, said it is "way too soon" to be concerned.

"We have projections" of anticipated tax collections for the new fiscal year which began July 1. "But we don't know what revenues are going to look like."

The root of the problem is tax collections in May, the ones the budget committee staff analyzed, were far weaker than expected.

Individual income-tax collections, which in May mainly represent withholding from paychecks, were down nearly 27 percent from the same month a year earlier. And while some of that was anticipated, what with the cut in tax rates, it still fell nearly $113 million below what budget analysts had predicted for the month.

Other figures, while smaller, show what could be an alarming trend.

Sales-tax growth was at its lowest level in four years, reflecting not just what people are buying, but consumer confidence.

Corporate income taxes also were down.

The bottom line is that the $140 million less going into this new fiscal year means the just adopted budget is already out of balance.

Pearce said all that was known by legislative leaders and the governor when the final budget was approved last month.

"I reminded them that the budget you're bragging about that is a balanced budget is not honestly balanced anymore," he said.

L'Ecuyer said even if that proves to be true, there is no cause for alarm.

"This is what the 'rainy day fund' is for," she said. That fund is expected to have $705 million by the end of the new budget year.

But Pearce said the whole purpose of that fund is supposed to be for emergencies.

"Bad budgeting … should not constitute an emergency," he said. Pearce said if the state is really $140 million in the hole, legislators should start thinking now about cutting expenses.

"My first choice is to cut back government, which we have grown too big," he continued. "We spent money we didn't have a right to spend."

Senate Majority Leader Thayer Verschoor, R-Gilbert, said he personally would have preferred to cut expenses before the final budget was adopted.

But he said that had proved to be politically impossible.