State Budget Has Been Passed, But Is Not Likely To Be Signed

By Tammy Gray-Searles
   Although a state budget was passed through both the House and Senate June 4, lawmakers and analysts seem to agree that it is not likely to be adopted as is. That’s good news for cities across the state, including those in Navajo County.
   The budget that was approved by lawmakers, but not yet signed by the governor, includes several provisions that cut funds available to cities, including the vehicle license tax that is used to fund city services. Under the existing budget, cities and counties would be forced to turn over half of their vehicle license tax revenues to local schools. While that is a slight relief from an original budget proposal that would have required all of the vehicle license taxes to be turned over, it still puts a burden normally carried by the state on cities and counties.
   “This is a shocking shift of state responsibility onto local elected officials and local taxpayers,” noted Arizona League of Cities and Towns Director Ken Strobeck in a press release. “Cities and towns have no responsibility for funding or operating local schools. That is a state responsibility. In addition to its questionable legality, this fund shift will have to come out of the pockets of local taxpayers who had nothing to do with creating the state budget shortfall.”
   Counties receive somewhat of a break under the proposal, with an option to use Highway User Revenue Funds (HURF) in place of the vehicle license tax in their general fund, according to Assistant Navajo County Manager Dusty Parsons. The ability to transfer funds from HURF, however, means that some other projects would be left unfunded.
   If the budget is passed as it currently stands, Navajo County would be required to turn over approximately $500,000 in vehicle license taxes. Winslow would be required to hand over roughly $117,000; Holbrook, $65,000; Snowflake, $59,000; and Taylor, $49,000.
   Those totals are also reduced in half from an earlier proposal, meaning that across the state cities would be asked to turn over a total of $42 million rather than $84 million, and counties, $53 million instead of $106 million.
   Even with the reduction, cities and counties are battling to keep the funds. Officials of The League of Arizona Cities and Towns have indicated that they intend to file a lawsuit if the budget is not changed.
   “In an attempt to get around the constitutional provision that requires a two-thirds vote of the legislature to increase taxes or change revenue allocations in order to benefit the general fund, the legislative proposal earmarks vehicle license tax proceeds as the source of this $42 million,” a league press release notes. “However, for more than 50 years, vehicle license tax has been distributed to cities and counties without any strings attached. The requirement to distribute vehicle license tax funds to local governments is found in the state constitution. This provision is highly likely to trigger a lawsuit challenging its constitutionality, which would throw the approved budget out of balance.”
   While the league has been battling the proposals in the budget that negatively affect cities, counties have been doing the same. Navajo County Manager Jimmy Jayne noted, however, that despite all the efforts, cities and counties have very little control over the outcome of the final budget.
   “We’re obviously very concerned about the impact of the budget on the citizens of Navajo County, but we have very little control over it,” he said. “We do our best to be fiscally responsible, but this is adding a whole other level of difficulty on top of that.”
   By law, the state budget must be finalized by June 30. Legislators are still negotiating with Governor Jan Brewer and her staff to come up with a budget package that she will not veto. The governor has offered up a budget proposal of her own that does not harm the cities.
   Cities and counties, in the meantime, must craft budgets of their own without knowing exactly what the state budget will look like. For many cities, the new fiscal year begins July 1, meaning expenditures will begin before it is known what the state budget will cost cities and counties.
   The press release from the League of Arizona Cities and Towns notes that some cities could also feel the impact from a proposal to ban impact fees, which was included in the budget passed by the legislature.
   Negotiations continue between legislators and the governor to come up with a state budget that will bridge an estimated $3 billion to $4 billion deficit.