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LEGISLATIVE WORKSHOP

BY DON HARRIS

JLBC Chief Sees Budget Shortfalls,

with Surpluses by Fiscal 2020 and 2021

Richard Stavneak, Arizona’s chief
number-cruncher, concedes that
forecasting revenue and projecting what
state budgets will look like during the
next three years is not a science.
Stavneak, Director of the Joint
Legislative Budget Committee, told
members of three education groups: “A
lot of guesswork is involved.” He o ered
his revenue and budget forecasts at the
Legislative Workshop on November 17
sponsored by the Arizona School Boards
Association, along with the Arizona
Association of School Business O cials,
and the Arizona School Administrators.
Nevertheless, Stavneak said the state is facing a $24 Baseline spending projections for 2018-2021 do not include
million shortfall for the current scal year that ends June 30, discretionary additions, continues the $931 million K-12 rollover,
and $80 million for scal year 2019, which begins next July 1. But excludes the conversion to K-12 A-F grades at a possible cost of
it’s not all gloom and doom. Stavneak’s crystal ball tells him that the $11 million, and includes no shift of money from HURF
state will have a surplus of $68 million in scal 2020, and a healthy (Highway User Revenue Fund) as agreed to in the current
$287 million surplus in scal 2021. budget.
But Stavneak hastened to add that his calculated view “represents Spending in fiscal 2019 exceeds 2018 totals by $351 million,
an unlikely scenario.” and includes $148 million for the K-12 formula, $112 million
Looking at the current and next scal years, Stavneak asked: for AHCCCS Medicaid formula, and $47 million for DES
“Could it get better? Sure. e shortfall could be eliminated if Medicaid formula.
projected revenue growth improves slightly. Or it could be worse if Spending in fiscal 2019 that will be less than in fiscal 2018
we continue $90 million of one-time 2018 spending in 2019.” totals $125 million, and includes $35 million for debt services,
Stavneak explained how analysts missed the current shortfall. e the loss of one-time spending such as $17 million for the
scal 2018 general fund budget had little margin for error – just 0.4 School Facilities Board building repairs and $15 million for
percent. At that rate, he said, a small shortfall forecast easily pushes the three state universities, Stavneak said.
the budget into the negative. For example, a 1 percent variance in the The proposed JLBC budget for fiscal 2019 shows an increase
forecast adds up to $635 million over three years, he said. of $226 million in spending for a total general fund budget of
“Revenue growth was below budget, and the consensus sees that $10 billion, a 2.3 percent change.
trend continuing,” Stavneak said. Looking to the future, Stavneak said candidly, “We just
Comparing the impact of tax credits in 2016 to 2017, School don’t know what is going to happen.”
Tuition Organizations showed a slight increase of $6 million, to $161 Among the risks in making revenue forecasts, Stavneak
million from $155 million. New employment tax credits rose by $3 assumes there will be no discretionary changes in the next
million, to $12 million from $9 million. three years, and there will be no recession through 2021, which
e biggest increase was in tax credits for charitable donations. he said would mark the longest U.S. expansion on record.
e law was changed doubling the amount that could be claimed, In addition, the impact of proposed federal tax changes is
resulting in a $34 million increase to $71 million from $37 million. unknown. They could stimulate economic growth. Changes
Overall, tax credits cost the state $440 million in 2017 compared to to federal health care law could trigger a loss of funds for
$397 million a year earlier, Stavneak said. ere were no changes Arizona.
in tax credits claimed for public school extracurricular activities, “Health care reform would affect the state,” Stavneak said.
research and development and renewable energy/solar. “It could cost the state more than $1 billion a year.”

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