The good news is the Arizona Legislature, with the cooperation of Governor Jan Brewer, has passed a balanced budget for the first time since 2007. State lawmakers deserve credit for making some difficult decisions to reduce spending by more than $1 billion.
The bad news is that the budget is balanced on a couple of risky propositions and must survive a legal challenge later this year. The biggest risk involves reduced spending in the state’s Medicaid program known as the Arizona Health Care Cost Containment System. The final budget is more dependent on spending reductions for AHCCCS than either the state Senate’s budget proposal or the governor’s. This means if a lawsuit challenging these reductions is successful, up to $510 million will have to be wrung out of the budget elsewhere after the new fiscal year has started.
A few significant policy reforms were included in the budget that will have long-term, positive impacts on the budget. For example, there is a $12 million savings from encouraging more state employees to move their health benefits into Health Savings Accounts, a laudable goal that will put those employees back in charge of their health care. State employees will also have to contribute more to their own retirement fund to the tune of $40 million.
Still, the budget now before the governor and the bills that implement it are long on reshuffling and short on fundamental reform. This is best illustrated by the state prisons, whose budgets went up in this budget. Arizona has one of the highest incarceration rates in the country and many ideas to bring down the costs associated with prisons have been proposed, including reforming sentencing laws for non-violent criminals. But none of those reforms were included in this budget.
For the first time in four years, the state has taken a critical step toward getting its fiscal house in order. No doubt state lawmakers understand significant reforms are still needed to prevent a similar budget crisis during the next economic downturn. With a little luck next session, legislators won’t have to deal with a budget in crisis so they can get down to the business of government reform.
Dr. Byron Schlomach is director of the Goldwater Institute’s Center for Economic Prosperity.
Goldwater Institute: Budget Memo to Governor Brewer
Goldwater Institute: Budget Reduction Opportunities 2011
Joint Legislative Budget Committee: Budget summary for fiscal year 2011-12