Candidates Vary on Plan for Deficit

Posted on September 07, 2002 | Type: Issue | Author: Robbie Sherwood
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Asked how he would fix the state's $1 billion deficit, Matt Salmon promised not to raise taxes, but declined to specify the state programs he would cut.

Betsey Bayless, his closest Republican rival, offered several budget-cutting specifics in a plan that would rely on economic growth spurred by a cut to the business personal property tax.

Attorney General Janet Napolitano, the leading Democrat, suggested several ways to save money, but offered no overall estimate as to whether the cuts would add up to $1 billion.

The two candidates who offered the most specific budget-cutting and revenue-generating strategies were Independent Richard Mahoney and Democrat Alfredo Gutierrez, both of whom are considered long shots in the race to become governor.

All 10 gubernatorial candidates in Tuesday's primary election were asked by an Arizona Republic reporter to describe how they would tackle this year's $300 million budget deficit and a shortfall that is expected to reach $1 billion next year.

Mahoney and Gutierrez, whose deficit-solving plans share many elements, said they would close tax loopholes and tax several services that they say would eventually raise more than $1.2 billion.

Mahoney also would eliminate several state agencies, including Commerce, Tourism, the Auto Theft Authority, the Criminal Justice Commission and the Office of Excellence in Government.

Mahoney's plan would balance the budget with $333 million in budget cuts and $958 million in new taxes. Critics point out that closing tax loopholes, even if a new governor could get the idea past the Legislature, would be slow to bring in significant new revenue. And some skeptics say closing entire state agencies would be next to impossible.

Gutierrez has repeatedly said that a loophole for merchant electrical generating plants, which import natural gas and sell their electricity out of state, could realize at least $400 million by 2004. Legislative budget analysts estimated the potential take at $92 million, but industry lawyers testified to lawmakers that the exemption - other states tax the transaction - could be worth $600 million.

Salmon supports Gov. Jane Hull's order to agency heads to curtail spending by 10 percent, which is expected to save $150 million to $200 million. In addition, he said the federal government should pay for unfunded mandates like emergency room treatment for non-citizens, and hand over more of Arizona's share of federal transportation taxes. He did not say how he would persuade the federal government to funnel more money to Arizona, nor how much he would expect.

When asked what he would cut, Salmon pointed to a study by the Goldwater Institute targeting $233 million in "unnecessary" government spending as a good starting point. However, nearly half of the targeted spending deemed unnecessary by Goldwater, $105 million, comes from the state's university system. And many of the remaining programs were trimmed in previous budget go-rounds.

"He hasn't been through that line-item by line-item, but it's a credible document and we should look at it and consider it as a framework where budget discussions can begin," said Tom Puglia, a Salmon spokesman.

Salmon also pointed to $600 million in potential cuts identified last year by the Joint Legislative Budget Committee, but not passed by lawmakers.

Salmon and the other Republicans in the race, Secretary of State Betsey Bayless and Treasurer Carol Springer, all vowed not to raise taxes.

Napolitano offered a six-point plan for lawmakers to erase the current budget deficit that relies heavily on federal help, and a less detailed list of options to deal with the $1 billion deficit. She also backs Hull's call for 10 percent state agency spending cuts. And she said lawmakers should rethink their rejection of the tax on federal Medicaid insurance premiums, which could bring $40 million to $60 million.

The rest of her short-term plan, nearly $200 million, comes from persuading Congress to reimburse the state for federal mandates to medically insure inmates and other indigent populations, and for the high costs of battling border-related crime.

Napolitano's plan for tackling the expected $1 billion deficit contains several specific proposals, such as closing corporate loopholes, but no bottom-line projected savings.

Napolitano would not close agencies but would consolidate the Departments of Commerce and Tourism and the Economic Development Commission, for a net savings of about $20 million.

Napolitano said she would also seek bonds for School Facilities Board funding for repairs and new campuses.

The largest cost-cutting measure in Gutierrez' plan also involves the School Facilities Board. Gutierrez would dissolve it and equalize school construction funding with a statewide property tax.

However, school construction is no longer the financial drain that some candidates seem to think it is. Lawmakers last session created a $200 million lease-purchase plan for school construction to forestall the budget drain.

The budget plan offered by Bayless features some specifics, such as an estimated savings of $150 million by placing a freeze on state employee overtime, hiring and out-of-state travel, and getting rid of high-priced government consultants.

The Bayless plan also relies on economic growth, spurred by a cut to the business personal property tax and a passage of job investment tax credit to spur job growth.

Bayless calls for cutting unnecessary middle managers and consolidating agencies.

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