Treasurer Dean Martin on Channel 15

Treasurer Dean Martin to Brief Lawmakers On State’s Economic ‘Crisis’

PHOENIX — As lawmakers plan to return for another special budget session later this week, Arizona’s treasurer laid out the state’s dismal outlook in an economic briefing Tuesday afternoon.

“We are basically tapped out at this point,” Treasurer Dean Martin said.

About a dozen legislators attended the briefing as Martin reviewed the status of Arizona’s deficit and the “ramifications of the current cash flow crisis.”

“The state is literally broke,” Martin said.

Arizona could run out of available credit and cash as soon as January, when a $320 million K-12 school payment is due.

That news comes just weeks after the state was forced to take out a private bank loan to pay its bills for the first time since the Great Depression.

But for the current fiscal year, the state’s deficit is estimated at $1.6 billion.

Combine that with what remains of last year’s deficit and revenue losses, Martin said Arizona would need about $5 billion to break even.

That’s so deep, that state officials said even if Arizona fires every single state employee, it wouldn’t be enough to make up the difference.

“We are at our limit and have no place else to go,” he said.

The state is spending hundreds of millions more than it’s bringing in every month.

And as revenue collections continue to decline at an increasing rate, the deficit will likely grow, according to a recent report by state budget analysts.

“Given the on-going weakness in receipts … the shortfall estimates may rise again by January when revenue estimates are updated,” the report said.

The upcoming one-day special session is slotted for Thursday.

The session is the fifth one this year. It also comes just weeks after lawmakers last met, when they cut roughly $450 million from the state’s budget — most reductions coming from K-12 education and social services.

“We need to get our spending under control,” said Sen. Bob Burns, R-Peoria.

In this week’s session, lawmakers will aim to slice about $200 million from several state departments.

They will also attempt to approve a special election for two big-issue items: A sales tax increase and changes to voter-approved spending mandates.

The temporary sales-tax increase would be one cent per dollar, lasting three years. It’s estimated that would bring in an estimated $1 billion annually.

Because of state law, legislators can cut only from roughly 30 to 40 percent of the budget. By loosening spending mandates, it would allow leaders to spread cuts more evenly.

“We got to get beyond the one-time stuff,” Burns said. “And we need to get into making these adjustments permanent, or else we just aren’t going to be able to correct what’s in front of us.”

State & University Employees Could End Up With IOUs in Paycheck in 2010

PHOENIX— State and university employees could wind up with IOUs in their pay envelopes instead of checks in February if the planned sale of state buildings hits a snag, state Treasurer Dean Martin warned Monday.

And that could leave worker with a piece of paper that won’t help them buy food for their families, pay the mortgage or heat their homes.

Martin told legislators that by the end of January the state will have borrowed about $1.1 billion to pay its bills. The total amount Martin has available, both internally and from Bank of America, is $1.2 billion.

But the state is obligated to make a payment of about $325 million to public schools on Feb. 1.

What’s supposed to happen around the third or fourth week of January, Martin said, is the state will sell off — at least in title only — a dozen state buildings in exchange for at least $737 million. Martin said that will provide enough operating capital to keep the state going and, more important, to ensure that the payroll checks and bill payments that are sent out are good.

“Should that not happen, should there be a hiccup, a sneeze, something, anything gets lost in the mail, we will not be able to make the February school payment,’’ Martin said.

“There’s just not enough cash,’’ he continued. “The credit cards are maxed out, you’re at your limit.’’

That leaves him only one legal option for paying those to whom the state owes money: IOUs.

“They’ll get a note saying, ‘We’ll give you the money on this date,’ up to 90 days’’ in the future.

The state would be obligated to pay interest. But Martin said it likely would be the same discounted annual rate he got from Bank of America for the state’s line of credit: about three-fourths of a percent.

“The bigger issue is what that does to the economy,’’ he continued. “You put 30,000 state employees without paychecks, the trickle effect throughout the economy, what that does to the vendors, it needs to be avoided.’’

California issued IOUs earlier this year while it was trying to get its finances in order.

The banks did cash those — for a while. But Martin said the chances of banks honoring the IOUs here are minimal, as the state already is borrowing just to cover the checks it already is writing.

The treasurer’s warnings came as lawmakers sought some answers about the state’s finances.

Legislators know that the current anticipated deficit for this year stands at about $1.6 billion, even with the spending changes made last month, because sales tax collections have been so much weaker than a year earlier as consumers buy less and construction is slowed. And Richard Stavneak, staff director of the Joint Legislative Budget Committee, said the state is on track for a $3 billion gap between revenues and spending next year.

What they wanted to know was how the state manages its finances while trying to come up with a fix.

Stavneak said the temporary sales tax hike being pushed by Gov. Jan Brewer won’t do much, if anything, to help the current mess.

He said that levy could bring in up to $950 million a year. But if an election isn’t conducted until March, it might not be until May or even June before the increased collections show up in the treasury; the fiscal year ends June 30.

That leaves the state struggling to pay its bills in the interim.

Lawmakers approved a plan earlier this year to sell off state buildings for up-front cash and then lease them back. The plan is more akin to a mortgage, with investors buying shares in that $737 million debt in exchange for some rate of return over the next 20 years.

In the interim, Martin has obtained a $700 million line of credit from Bank of America. He also has access to about $500 million from various internal accounts, money that doesn’t belong to the treasury.

And when that’s gone?

“You send out the IOUs,’’ he said.

Martin said he probably can finesse the debt if it looks like the sale of the buildings will take place within a few days after the school payment is due. But if there’s some legal or other impediment to completing the sale, he can only send out IOUs.

“That’s what the statutes require,’’ he said.

There is another legal option: Delay the payment to schools. Martin said though, that would require legislative action.

But he said that’s not a solution, as the schools then would have to borrow money themselves — and agree to pay interest — to meet their payroll and other obligations until the state finally came up with the cash it owes.

“Essentially what you would be doing is shifting the state’s borrowing off to the schools,’’ Martin said. He said that, from a political perspective, lawmakers likely would agree to pay any interest costs the schools incurred.

Howard Fischer, Capitol Media Services

Information from: http://www.aztreasury.gov/media/2009/DouglasDispatch-12-08-09.html, Douglas Dispatch

Arizona State Treasurer Dean Martin Preparing for Expanded Borrowing

PHOENIX — Arizona still doesn’t have an approved balanced budget for the nearly 2-month-old fiscal year and Treasurer Dean Martin’s office is making preparations for new large-scale borrowing by the state.

Martin said Monday his office is preparing a request for proposals for both a line of credit and bond borrowing known as “commercial paper.”

Arizona’s cash-short general fund for months has had to borrow up to several hundreds of millions of dollars from other state funds on a daily basis, but Martin says the real crunch will come in October when a big school-aid payment is due on top of other expenses.

Martin says borrowing this fiscal year could be between $1.5 billion and $3 billion, depending on circumstances such as availability of federal stimulus money.

The Associated Press

Information from: http://www.aztreasury.gov/media/2009/WashingtonPost-08-24-09.html

Arizona State Treasurer Dean Martin: Time to End Budget Game

PHOENIX — State Treasurer Dean Martin says it’s time for Gov. Jan Brewer to sign a budget for the current fiscal year, which began eight weeks ago, and get on with business.

Martin said Brewer and state lawmakers are engaging in a multi-billion dollar game of brinkmanship over the budget and it needs to end. The latest move came Thursday when lawmakers shipped the governor a budget that once again does not include the temporary 1-cent increase in the state sales tax that she has demanded.

“Everybody should just realize that this tax increase for 2011 — there isn’t the votes for it right now,” Martin said. “But, we still have to balance 2010. Let’s get 2010 put behind us.”

On Twitter, the governor said Thursday evening that she had a lot of bills on her desk, “going to have to make some BIG decisions.”

Martin said if a budget isn’t signed soon, the state could have partial shutdowns this fall and the effects could last for years.

“Who wants to invest in a state that not only is having to sell its own Capitol building and rent it back, but can’t pay its own bills?” said Martin. “It doesn’t sound like an attractive place to invest. We really need to solve this problem.”

Meanwhile, Senate President Bob Burns has fired up a new commission to hunt down wasteful state spending.

Sen. Thayer Vershoor, a Gilbert Republican, will head the Arizona Budget Commission until the legislative session ends.

“The idea would be for us to go in and look at agencies like the Department of Economic Security, look at the K-12 system, the Department of Health Services, other agencies,” said Vershoor, who said he views himself as more consultant than hatchetman.

He said he doesn’t want to be arbitrary about budget cuts.

“We want to make sure that, as we look at these reductions, we’re reducing them in a way that serves the taxpayers of Arizona.”

Among things Vershoor is looking at is why K-12 funding jumped by 40 percent in the past four years, with a lot of the increase not reaching the classroom.

House Speaker Kirk Adams said he got no assurances from the governor during negotiations that she would sign the latest budget plan. She vetoes parts of a similar plan last month because it did not include the sales tax — either the Legislature passing it or putting it before voters in November.

“I am not in a position to predict what she will or will not do,” Adams said.

GOP leaders at the Legislature said they will continue to try to resurrect the Republican governor’s proposed sales tax hike by coupling it with $400 million in income tax cuts for individuals and corporations. The sales tax hike and income tax cuts were approved by the House in late July, but didn’t clear the Senate.

Republican Sen. Russell Pearce of Mesa said the Senate is probably one vote short of getting the income tax cuts approved and putting the sales tax proposal on the ballot for voters to decide. “The tax package is a win either way,” Pearce said. “It’s just a bigger win if that tax goes down at the ballot.”

Democratic Sen. Rebecca Rios of Apache Junction, who voted against the sales tax hike, criticized the coupling of the two ideas, saying revenue from the sales tax hike would be used to pay for income tax cuts totaling $200 million for individuals and $200 million for corporations.

The governor has until late Wednesday to act on the budget package.

“She hasn’t made any final determinations yet on what she is going to do with the bills,” said Brewer spokesman Paul Senseman.

The budget plan would use spending cuts, funding delays, borrowing, asset sales and federal stimulus money to close the deficit of more than $3 billion. The budget includes state spending of $8.3 billion padded by an additional $1.1 billion of federal stimulus funding.

The package includes the repeal of a state property tax that has been suspended for three years but was set to take effect again. Lawmakers missed a Monday deadline for approving the bill before counties were required to set tax rates. Legislative leaders say they still have a few days to get the bill signed and give counties enough time to readjust rates before they mail bills to property owners.

By Associated Press Writer

Information from: http://www.aztreasury.gov/media/2009/KTAR-08-21-09.html, KTAR.com

Arizona State Treasurer Dean Martin: Arizone is Broke, Needs to Enact a Budget

PHOENIX – Arizona Treasurer Dean Martin says the state must enact a new state budget by the end of the week to keep its flexibility to borrow money from banks so the state can continue paying its bills.

The state was operating $386 million in the red as of Wednesday and has been making up for it by borrowing money from state government funds.

But Martin says the state will lose its flexibility to make internal loans when the figure hits the $500 million mark and will then need to borrow money from banks that aren’t willing to loan money to the state until its budget is balanced.

Arizona isn’t projected to reach its internal-loan limit until Oct. 15.

Still, Martin said the budget must get enacted this week to give the state the six to eight weeks needed to set up bank loans.

Information from: http://www.aztreasury.gov/media/2009/FOX-08-20-09.html

Arizona State Treasurer Dean Martin: State is Broke and Needs to Enact a Budget

PHOENIX — Arizona Treasurer Dean Martin said Wednesday that the state must enact a new state budget by the end of the week or it will lose the flexibility to borrow money from banks to continue paying its bills.

The state was $386 million in the red as of Wednesday and has been making up for it by borrowing money from some of the 1,800 state government funds. But Martin said the state will lose its flexibility to make internal loans when the figure hits the $500 million mark. Then it will need to borrow money from banks, but they’re not willing to lend to the state until its budget is balanced.

Although Arizona isn’t projected to reach its internal-loan limit until Oct. 15, Martin said the budget must get enacted this week to give the state the six to eight weeks needed to set up bank loans.

“It’s like living paycheck to paycheck with your credit cards also being maxed out. That’s basically where the state is right now,” said Martin, a Republican.

The GOP-led Legislature has approved a budget-balancing package but hasn’t yet sent it to Gov. Jan Brewer. The package doesn’t include Brewer’s proposal to ask voters to approve a sales tax increase, and the Republican vetoed key parts of a similar budget package last month because the tax proposal was missing.

Legislative leaders declined to specify when they would send the package to the governor, and the governor’s office has declined to say whether she would sign it.

Brewer spokesman Paul Senseman said the state isn’t in danger of running out of money to pay its bills, but the cash flow predicament could become more of a problem later.

Eileen Klein, Brewer’s budget director, said it’s not a certainty that the state would have to take out loans to improve its cash flow. The state could avoid such borrowing through the use of federal stimulus money and the enactment of a state budget.

“We remain hopeful that we will have the sales tax,” Klein said.

If the state can no longer make internal loans and bank loans aren’t already set up, Martin said the state will have to consider issuing IOUs and making late payments on the debts that it owes.

California last month started issuing $1.95 billion worth of IOUs to state vendors and taxpayers owed refunds while the legislature worked to plug a $24 billion budget deficit. Officials said last week that they could stop the practice because California’s revised budget would allow the state to get short-term loans to pay daily expenses.

Brewer’s office said Arizona IOUs are a possibility, but such discussions are premature because the state must first consider other options, such as borrowing from banks.

The state’s cash flow problems prompted some legislators to complain about the state spending $100 million more than it did at the same point last year.

“Every day this state is in danger of actually starting to bounce checks,” Sen. Thayer Verschoor, a Gilbert Republican, told his colleagues Tuesday.

Despite efforts to cut state spending, the state has incurred more expenses this fiscal year because more people are on the state’s Medicaid program, the state’s prison population has risen, and the number of students at schools continues to grow, Senseman said.

Meanwhile, the state has less tax revenue than in the past. Brewer’s answer is the sales tax increase.

Senate President Bob Burns, a Republican from Peoria, said he doesn’t know how to get enough votes to refer the sales tax hike to voters. The referendum fell two votes short of passage in the Senate.

“I don’t see how we get that,” Burns said. “We have tried numerous ways to put together a bill that had the referral on it, and we have been unsuccessful in doing that.”

Jacques Billeaud, The Associated Press

Information from: http://www.aztreasury.gov/media/2009/USAToday-08-19-09.html, USA TODAY

Arizona State Treasurer Dean Martin Says Arizona Must Enact Budget This Week

PHOENIX – Arizona Treasurer Dean Martin said Wednesday that the state must enact a new state budget by the end of the week or it will lose the flexibility to borrow money from banks to continue paying its bills.

The state was $386 million in the red as of Wednesday and has been making up for it by borrowing money from some of the 1,800 state government funds. But Martin said the state will lose its flexibility to make internal loans when the figure hits the $500 million mark. Then it will need to borrow money from banks, but they’re not willing to lend to the state until its budget is balanced.

Although Arizona isn’t projected to reach its internal-loan limit until Oct. 15, Martin said the budget must get enacted this week to give the state the six to eight weeks needed to set up bank loans.

“It’s like living paycheck to paycheck with your credit cards also being maxed out. That’s basically where the state is right now,” said Martin, a Republican.

The GOP-led Legislature has approved a budget-balancing package but hasn’t yet sent it to Gov. Jan Brewer. The package doesn’t include Brewer’s proposal to ask voters to approve a sales tax increase, and the Republican vetoed key parts of a similar budget package last month because the tax proposal was missing.

Legislative leaders declined to specify when they would send the package to the governor, and the governor’s office has declined to say whether she would sign it

Brewer spokesman Paul Senseman said the state isn’t in danger of running out of money to pay its bills, but the cash flow predicament could become more of a problem later.

Eileen Klein, Brewer’s budget director, said it’s not a certainty that the state would have to take out loans to improve its cash flow. The state could avoid such borrowing through the use of federal stimulus money and the enactment of a state budget.

“We remain hopeful that we will have the sales tax,” Klein said.

If the state can no longer make internal loans and bank loans aren’t already set up, Martin said the state will have to consider issuing IOUs and making late payments on the debts that it owes.

California last month started issuing $1.95 billion worth of IOUs to state vendors and taxpayers owed refunds while the legislature worked to plug a $24 billion budget deficit. Officials said last week that they could stop the practice because California’s revised budget would allow the state to get short-term loans to pay daily expenses.

Brewer’s office said Arizona IOUs are a possibility, but such discussions are premature because the state must first consider other options, such as borrowing from banks.

The state’s cash flow problems prompted some legislators to complain about the state spending $100 million more than it did at the same point last year.

“Every day this state is in danger of actually starting to bounce checks,” Sen. Thayer Verschoor, a Gilbert Republican, told his colleagues Tuesday.

Despite efforts to cut state spending, the state has incurred more expenses this fiscal year because more people are on the state’s Medicaid program, the state’s prison population has risen, and the number of students at schools continues to grow, Senseman said.

Meanwhile, the state has less tax revenue than in the past. Brewer’s answer is the sales tax increase.

Senate President Bob Burns, a Republican from Peoria, said he doesn’t know how to get enough votes to refer the sales tax hike to voters. The referendum fell two votes short of passage in the Senate.

“I don’t see how we get that,” Burns said. “We have tried numerous ways to put together a bill that had the referral on it, and we have been unsuccessful in doing that.

By JACQUES BILLEAUD / Associated Press Writer

Information from: http://www.aztreasury.gov/media/2009/Anchorage_08-19-09.html

State Could Run Out of Money by Mid-October

Arizona is on track to running out of money to pay its bills and its employees in the middle of October — if not sooner — if lawmakers don’t adopt a new budget plan quickly, state Treasurer Dean Martin said Monday.

Martin said by Tuesday the state’s books would already be in the red to the tune of about $360 million. The only thing that’s keeping Arizona afloat is about $500 million in accounts that belong to specific state agencies, money that is being loaned, with interest, to the general fund.

But Martin said the state is spending at the same rate it did last year despite the fact that tax collections are even less than last budget year. So that line of credit — Martin compares it to a credit card — will be “maxed out” in October.

That, however, doesn’t mean Arizona has until then to adopt a balance budget.

Martin said that, no matter what happens, the state is going to need to borrow money, even on a short-term basis, to pay its bills.

He said, though, it takes six to eight weeks to set up such a line of credit. And Martin said banks have told him they won’t even consider extending credit until the state has a balanced budget.

That, he said, makes this week or next the drop-dead deadline for lawmakers to approve a spending plan. Martin said if there is no action soon, Arizona “will be in exactly the same position that California was, sending out IOUs or not paying people or doing emergency furloughs.”

“We’ve already informed the governor’s office last week that they need to start creating a list of who gets paid and who doesn’t get paid,” he said. “Physically, there will be no money to cover those checks.”

That presumes things don’t get worse before the line of credit is in place: He said the money available internally to loan the general fund could run out as early as next month.

“If that’s the case, we’re already screwed,” he said.

But Martin’s predictions of financial meltdown, echoed by Senate President Bob Burns, R-Peoria, did not convince Gov. Jan Brewer to back off her demand that any budget must include putting a measure on the ballot asking voters for a temporary hike in state sales tax.

“The governor has made it very clear to the legislators for many weeks now that if they were not to send a budget that was acceptable to her that a financial crisis of order and magnitude the state has never seen would ensue,” said gubernatorial press aide Paul Senseman. He said any problems that result are the fault of legislative leaders, not the governor.

Senseman said Brewer “remains committed to securing additional revenues to protect those three core areas of education, public safety and health.” A one penny surcharge in the state’s 5.6 percent sales tax rate could generate an extra $80 million a month.

Burns said Monday, though, there are not the votes to fulfill the governor’s demand for a sales tax referral. So he intends to send her the budget, perhaps today, that Republican lawmakers have adopted, one that cuts spending sharply and uses other fiscal maneuvers, including borrowing, to deal with the fact that tax collections are far below where they were last year.

Burns said if Brewer agrees to sign the budget, he will commit to continuing to try to find additional revenues. But Senseman said Brewer has a different idea of how this should play out.

“The Legislature could adopt her entire package and send it to her with what she’s proposed,” he said.

Complicating matters, Burns also plans to send Brewer another measure permanently repealing the state property tax even though that actually would make the state’s financial situation $250 million worse. The Senate already has approved that repeal, with the House Appropriations Committee voting to follow suit.

That tax has not been collected for the last three years, the result of a 2006 budget deal between the Republican-controlled Legislature and Democratic Gov. Janet Napolitano. It returns automatically this year absent legislative action.

“That’s a tax increase right out of the chute on homeowners and businesses who are struggling,” he said. “In my opinion, that is a problem to put a $250 million tax increase on a struggling economy at this time.”

Senseman said, though, Brewer agreed to forego the revenues from the property tax only in exchange for the sales tax referral.

The stalemate on the budget also means lawmakers didn’t repeal the property tax before supervisors in the state’s 15 counties had to set the tax rates Monday for this fiscal year. So, as of now, Arizonans are set to pay an additional 33 cents per $100 of assessed valuation on the tax bills that are due Oct. 1.

For the owner of a $200,000 home that adds about $66 a year. Businesses, which are valued for tax purposes on a different basis, face a higher burden: A $500,000 business would pay an extra $364 a year.

Burns and House Speaker Kirk Adams, R-Mesa, are asking county treasurers to delay printing and mailing out the tax bills while they make a last attempt to either reach a budget compromise or convince Brewer to sign the property tax repeal.

Assistant Senate Minority Leader Rebecca Rios, D-Apache Junction, said Monday there is another way to reach a deal: Negotiate with the Democrats who control 12 votes in the 30-member chamber.

“We believe that we can get a compromise budget done with Republicans in less than a week if we fully commit ourselves, which we’re committed to doing,” she said in a floor speech, with Burns presiding. “And we would ask, would you commit yourselves to work for an entire week?”

At this point, though, Burns said he intends to push forward with that Republican-only budget.

In the House, meanwhile, Democrats tried to get the Appropriations Committee to adopt a plan to expand the list of items subject to state sales taxes but lower the overall tax rate. Rep. Matt Heinz, D-Tucson, said the change, which would not take effect until mid-2011, would provide Arizona a more stable source of tax revenues.

Republicans said they could not support such a major change in tax policy without more time to study it.

Howard Fischer, Capitol Media Services

Information from: http://www.aztreasury.gov/media/2009/EVTribune-08-17-09.html, East Valley Tribune

Treasurer, Once Chided as ‘Chicken Little’ says His Caution Has Been Vindicated

KINGMAN – State Treasurer Dean Martin is expecting it to be a long, slow haul out of the recession for the state. He also anticipates Mohave County’s economy to bounce back quicker than the rest of Arizona.

Martin was in Mohave County last week to visit the state’s “customers.” Martin said he likes to think of the residents of Arizona as customers and wishes some other state officials would think the same way.

“This is the worst it’s ever been,” Martin said in a sit down interview with the Miner last Tuesday. “The state is living paycheck to paycheck.”

Since Martin took office in 2007, he has seen a dramatic decrease in the state’s bank balance. In January 2007, the average balance was about $2.4 billion, in January 2008 it had fallen to $1.8 billion, and in January 2009 it was around $740 million.

From the moment he stepped into office, Martin said he tried to warn the state and the governor that the economy was failing and the state needed to prepare.

“The governor (Janet Napolitano) used to call me Chicken Little,” he said.

Martin’s main concern now is a $650 million payment that needs to be made to state school districts before the end of the month. The state will have to borrow approximately $200 million each day for six days in order to make the payments this year.

This is the first time the state has had to take out a loan since the Great Depression, Martin said. During that era it was not uncommon for states to take out loans because most were surviving off of property taxes.

Now most states have a sales as well as a property tax to help boost their revenue – along with any number of programs to spend the money on as the role of government has expanded.

The money’s spent

Unfortunately for Arizona, all the surplus revenue it collected in sales and property taxes during the building boom is gone.

“It’s all gone. It’s all been spent,” Martin said. His department, which is operating on a budget about 75 percent less than it had in 1991, has employees in the mailroom pulling the revenue checks from envelopes as soon as they arrive. “It’s just what’s coming in the door.”

The loans would be akin to overdraft protection for the state, he said.

“But it’s not going to be free,” he said. The state will be able to get the loan, but every loan comes with interest payments. Currently, the state is angling for the best interest rate it can find and is hoping to secure a rate below 2.25 percent.

However, even if the state gets the loan and manages to balance the budget, it will still continue to have budget problems until there is a surplus in revenues.

Locally, city and county governments and residents may see state grants and assistance disappear, even grants that have already been awarded, he said.

He likens the current economic situation to the Nike “swoosh.” The state’s economy took a sharp nosedive in 2007/2008, and it is now nearing the bottom of the swoosh. Once it hits that bottom it will be a long trek back up the other side of the swoosh. Martin thinks the state is very close to the bottom of the swoosh now.

However, he thinks that some areas in the state, especially those with tourist attractions such as Mohave County, will recover faster than other sections.

People are looking to save money, especially on vacations, so they’re going to look locally for something to do. Mohave County has a number of attractions for tourists.

“We need to have a long-term plan,” Martin said, explaining that the state can’t keep taking revenues from one year and pushing the payment of bills to the next fiscal year. For example, the state just decreased the length of the state fiscal school year by two months for fiscal year 2008/2009. However, local fiscal school years have remained the same. Somehow, local school districts are going to have to find out how to remain open and operating during that time and the state is going to have to figure out how to pay three months worth of school district payments in the first month of the 2009/2010 fiscal year.

“They’re just rearranging the deck chairs on the Titanic. Things need to change,” he said. If the state had frozen spending at 2007 levels, as he suggested at the time, then such drastic cuts in the state budget in 2008, 2009 and 2010 would not have been necessary.

Martin is currently predicting that the state revenues will be down by 20 percent before the end of the 2008/2009 fiscal year.

“The state needs a sustainable budget,” he said. If the state would set the 2009/2010 budget at 2006 spending levels and stick to it, the state could balance the budget.

However, that would mean putting off payments to a number of voter-approved initiatives. Once the state received enough revenue to pay for day-to-day operations and fund voter initiatives, the state could start funding those projects again.

“If we don’t ask why things are going wrong now, we won’t know how to fix them later,” he said.

The problem is that a number of voter initiatives affect Department of Economic Safety programs and Child Services programs, which are more in demand during an economic downturn.

An example is the Healthy Child/Healthy Family program. The program was supposed to be funded by state tobacco settlement money. The catch is when settlement funds run short, money from the general fund is used to make up the difference.

Martin suggests putting the initiative back before the voters and have them decide whether they want to continue funding benefits at current levels and take funds out of the general fund to pay for it or cut benefits.

The state also needs to look at saving more once it does start getting a surplus, he said. Saving money in individual rainy day funds for each of the major departments, such as education and public safety, would go a long way to preventing deep budget cuts during the next recession.

Federal stimulus funds will help dig the state out somewhat. The state is slated to get around $3 to $4 billion in stimulus funds over the next three years. But only one-third of the budget problems in the state are caused by the failing economy. The other two-thirds are caused by excessive spending by the state government, he said.

“There are very good people in the legislature, but people (legislators and state officials) don’t look past the next election cycle,” he said.

The fantasy land “there’s as much money as I want there to be” budget forecasts by the legislature and the governor have to stop, Martin said.

Leveling growth

Another new first for the state is a leveling off in population growth. The population of Arizona has been growing since before it became a state, he said. The demand to move to Arizona is still out there, but due to the economy, people simply don’t have the funds.

The sudden slowdown in population growth, while bad for the home building industry, will give the state a chance to catch its breath and hopefully prepare for the next building boom.

One thing state residents will not have to worry about are state government paychecks and state tax refund checks. Those checks are good, Martin said. There are plenty of banks that are willing to lend money to Arizona, because they know the state will pay it back.

Another interesting silver lining for the state is state investments, Martin said. The state currently had more than $10.3 billion of state and local government dollars invested. In 2008, those investments earned $350 million in profits. That’s down from $580 million in 2007, but still a profit.

One of the 26 different investment pools the state has was recently rated AAA by Standard and Poor’s, the highest rating a fund can receive.

Martin emphasizes safety when investing state and local funds. Nearly 70 percent of the funds invested by the state are located in limited risk funds.

But in order to survive and avoid problems in the future, the state still needs to plan for the long term, he said.

Information from: http://www.aztreasury.gov/media/2009/KingmanDailyMiner-04-13-09.html, http://www.kingmandailyminer.com