Posts Tagged ‘Governor Brewer’
Written on December 15th, 2009 by ccottrellone shout
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
Written on September 29th, 2009 by ccottrellno shouts
Arizona State Treasurer Dean Martin said the actions of the governor and Legislature show a “disconnect with reality,” and he’s calling for a return to 2005-06 spending levels.
Martin stopped in Lake Havasu City Tuesday as he travels around the state speaking with residents and city and county officials about the state’s current budget crisis.
Currently the state is short about $1 billion, and next year the deficit is expected to hit $3 billion to $4 billion.
“The budget continued to grow even as the recession hit. In fiscal year 2008 spending increased 10 percent while revenue declined that much. In FY 2009 spending was up 6 percent while revenues dropped 19 percent,” Martin said. “That’s a disconnect with reality.”
Martin also questioned Gov. Jan Brewer’s insistence on a new sales tax.
“The economy is at its weakest point right now. No time is a good time for a tax increase but this is absolutely the worst time,” Martin said. “And even if it passed, we’re not at a sustainable level.”
To get to the point where revenues could support state services, Martin said the immediate solution is to reduce the budget back to Fiscal Year 2005-06.
“If you talked to most private sector businesses these days, they’d be happy to be at 2005 levels. They’ve cut back even further,” he said.
He also suggests that reserves — currently depleted thanks to legislative drawdowns over the past two years — be set by major budget sector and those agencies take responsibility to maintain the reserve levels as set by law.
“And we have to deal with a major spending leak — the entitlement programs,” Martin said. “We’ve grown welfare while cutting K-12 (education) and public safety.”
The problem involves the use of tobacco settlement money. Under the voter-approved plan, the first 20 percent of the budget for the Arizona Cost Containment Health Care System has to be paid for from the state’s general fund before the tobacco money is used.
“So you have to pay that 20 percent and if revenues to the state are off 10 percent, that’s even more that has to be made up somewhere else,” he said.
Martin said the solution he’s suggesting is two ballot questions. The first asking voters if the public health insurance and welfare system be funded solely by the tobacco funds and nothing come from the general fund. The other would be whether voters would like a tax increase to make up the difference between the tobacco funds and the expenditures.
“ACCHS is currently at $1.5 billion. Even in the best of times the state can’t sustain that,” he said. “But only the voters can solve this one.”
Meanwhile the state is looking to borrow about $500 million, pledging its revenues against the loans to cover the day-to-day operations. Bids from major lenders are due today and will be decided on next month.
“The state has never done anything like this before,” Martin said. “We’re not sure how those bids are going to come back.”
He said that internal borrowing sees the state pay anywhere from .5 to 1.5 percent in interest, and he expects the bids from the private sector lenders to come in at about that level or a bit lower.
“But if the market freezes or the state’s financial condition worsens, that could go up,” Martin said, noting there is a 2.5 percent cap set by law.
“You can’t spend more than you make,” he said. “Essentially the state is broke. We have to bring expenditures and revenues in line.”
David Bell , Havasu News
Information from: http://www.aztreasury.gov/media/2009/HavasuNews-09-22-09.html
Written on August 21st, 2009 by ccottrellno shouts
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
Written on August 18th, 2009 by ccottrellno shouts
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
