Jan 282015

By Tammy Gray

A state budget proposal by Governor Doug Ducey could leave cities and towns still struggling to meet both the demands of the state government and the needs of residents.

For the last several years, the state has diverted funds away from cities and counties, and also charged to provide certain services, such as housing mentally ill inmates. With another massive budget deficit facing the state, the executive budget proposed by Gov. Ducey includes such cost shifts to cities and does not clarify whether some transportation funds will be restored.

While fewer Highway User Revenue Fee (HURF) dollars will go to the Arizona Department of Public Safety (DPS) under the proposed budget it remains unclear whether those saved funds will be returned to cities and counties. Last fiscal year the state reduced the amount diverted from cities and counties to support DPS, resulting in an additional $31 million in HURF funding returned to local governments. Then-governor Jan Brewer noted that the return of funding was a “trickle” compared to what had been diverted.

Under Ducey’s proposal, the amount diverted to DPS will be $35 million less, resulting in more money potentially available to cities and counties for road repair and maintenance. The budget does not outline, however, whether that money will actually be returned to local governments. In order to stop the diversion of funds to DPS, Ducey’s budget assumes an increase in vehicle license fees, just about doubling the fees from the current rate of eight dollars. The license fee increase would be intended to serve as a permanent funding stream for DPS.

The proposed budget asks cities and towns to share in the state’s cost of collecting and distributing sales tax. A total of 17.5 percent of the Arizona Department of Revenue’s budget would become the responsibility of cities and towns. Each local government entity would be required to contribute to the total based on a percentage of its state shared revenue.

In addition, local governments would also shoulder 25 percent of the cost of incarcerating juveniles at state facilities under the executive budget.

Cost-shifts to cities and counties are intended to help the state balance a projected $500 million deficit. By next fiscal year, that deficit is predicted to grow to $1 billion. The governor’s proposed budget notes that the plan will “restore the state’s structural budget balance” by fiscal year 2017.

“After eight straight years of budget deficits or living on temporary revenues, the time has come to finish the work of resizing state government to fit the post-Great Recession world,” Gov. Ducey noted in his budget presentation.