December 10, 2009

Here are the monthly Joint Legislative Budget Committee Fiscal Highlights for November.  I am posting them to help everyone understand that tough times are still very much ahead.

While nationally, the economic recovery is happening, albeit at a slower rate than first believed, Arizona’s October was a particularly poor revenue collection month with the economy continuing to contract. There were some positive indicators such as the increase in private sector employment.  They were focused in three industries: employment services, retail trade, and food service. At the same time, persons on AHCCCS increased by nearly 26,000 in the month of November alone.

Arizona Revenues:

• October collections were down 23.8% from October of last year; 15th consecutive month of double-digit declines in General Fund revenue collections; and $142 million BELOW the budget forecast for FY10
• Sales Tax collections were down 17.6% from October of last year; 9.1% year-to-date (four months) below forecast
• Income Tax collections were down 34.6% from October of last year; 18.8% year-to-date (four months) below forecast
• Corporate Income tax collections were down 11.1% from October of last year; 35.2% year-to-date below forecast

• With the action of the 4th Special Session that included $144 million in soft capital cuts, JLBC is estimating that Arizona will still face a $1.6 billion shortfall IN THIS CURRENT FISCAL YEAR with the possibility of this estimate to rise by January.

Other Key Arizona Indicators:

• The most recent release of economic indicators suggests that while the state’s economy is still contracting it is doing so at a slower rate than in recent months
• 13,200 jobs were added in October; however, Arizona has lost 10.7% of its workforce since the recession began in December 2007
• Private sector jobs have expanded for the first time since February 2008, while government jobs are contracting
• Unemployment rate increased from 9.1% to 9.3% in October – the highest reading in more than 26 years
• Initial claims for unemployment insurance has moderated over the past few months, with October’s year-over-year increase of 2% being the lowest in 3 years
• AHCCCS (Arizona’s Medicaid Program) caseloads have increased 1.9% from the previous month; 19.2% caseload increase from November 2008
• There are now 354,798 more Arizonans on AHCCCS than there are children in Arizona public schools

November 24, 2009

You have probably heard that yesterday the Legislature did meet and voted to cut $144 million in K-12 education, all in soft capital. In short, this is the same money that the Governor line item vetoed earlier this year in order to reduce cuts to K-12. Our district chose not to spend any of that money in anticipation of having to give it back, so this cut will not have a direct impact on our employees.  An interesting note: charter schools were not cut.

For those MSM employees reading this, below are the results of the surveys that were returned on or before November 20th. I continue to remain hopeful that we will not need to implement mid-year cuts, but will not know for sure until the Legislature convenes in January and we see if there will be more cuts to K-12.

	Support	Certified	TOTAL	%
All employees take a general salary reduction	61	31	92	65.7%
Reduce number of employees through RIF	21	27	48	34.3%
Implement salary reduction as soon as possible	17	2	19	13.9%
Implement only after knowing how much is necessary	62	56	118	86.1%

November 23, 2009

This blog may be back to reporting nothing!  Last week the rumor was a special session was unlikely because they didn’t have enough votes lined up to pass what they wanted.  To the surprise of many they went ahead and convened, only to discover that they didn’t have enough votes to pass what they wanted!  There was talk last week that they were going to try to meet again today, but I have not received any word from any source stating that they will actually meet.  If anything happens that impacts us I will post it in this blog.  Otherwise, have a happy Thanksgiving.

November 16, 2009

The latest information I have is that a special session tomorrow is very unlikely.  It appears they don’t have the votes necessary to do what they want, and won’t call a special session until they have those votes lined up.  As for what they want, they originally were going to cut $140 million from K-12.  That amount has increased to $144 million.  They arrived at that amount because they believe that is the most they can cut without violating the maintenance of effort (MOE) agreement made to be eligible for the stimulus money.  The MOE requires them to fund education to at least the level they did in 2006.  According to Mike Smith, ASA lobbyist, they will cut right up to the penny to comply with the MOE, and then the Governor will ask for a waiver releasing them from this requirement.  If the waiver is granted, they will make additional cuts to K-12 education when the legislature convenes for their regular session in January.

It was reported last week that Arizona is 2nd behind California in terms of being on the verge of a financial crisis.  This year’s deficit is still at $2 billion, and next year’s is estimated at $3 billion.  Given that they have already emptied the “rainy day” fund, have already used tactics such as rolling over payments until the next fiscal year, and have already spent both this year’s and next year’s allocation of stimulus money, it is not difficult to see why Arizona is in trouble.  An interesting bit of information: this year’s budget, already at a $2 billion deficit, contains $78o million in projected revenue from their idea of selling 40 buildings.  After reviewing legal issues, deeds, etc.  that list of 40 buildings has been reduced to 12 that are actually eligible to be sold.  It is very unlikely that they will reach their projected revenue amount.

November 9, 2009 Update

There is more and more discussion that the Legislature will convene a special session on November 17th to review cuts to K-12 education totaling approximately $140 million.  It will depend on how they take the cuts (from M & O, from Capital, or from both) and whether they free up some of the restrictions on how money can be spent before I can say how much it will directly impact employees in our district.  I am still hopeful that we will be able to get through this year without mid-year cuts in staff or salary.  Those of you that work in our district know that a survey is currently being distributed so that we can have a better understanding as to whether the majority of our employees would prefer a RIF or a general salary reduction.  Again, I want to emphasize that at this time I am hopeful that neither of these options will be necessary.  I simply want to have your input so that I have that information if/when the time comes that it is necessary to implement one of those mid-year due to mid-year cuts the State imposes on us.

It is important to note that even if we get through this year without having to reduce staff or implement a general salary reduction, we will most likely have to implement severe cuts next year.  Here are the monthly Joint Legislative Budget Committee Fiscal Highlights for October. While there are some positive indications, there is also concern that we haven’t seen the bottom yet.

Arizona Revenues:

• September collections were down 16.1% from September of last year; 14^th consecutive month of double-digit declines in General Fund revenue collections
  • Sales Tax collections were down 15.9% from September of last year; 17% year-to-date below forecast
  • Income Tax collections were down 24.9% from September of last year; 14% year-to-date below forecast
  • Corporate Income tax collections were down 46.6% from September of last year; 38.4% year-to-date below forecast

• JLBC is estimating that Arizona will face nearly a $2 billion shortfall IN THIS CURRENT FISCAL YEAR, even with the FY10 budget passed by the Legislature, along with the Governor’s vetoes.

Other Key Arizona Indicators:

• “While the Arizona economy still appears to be in a recession, there are indications that suggest that the decline in economic activity is moderating … However, any improvement in coming months will be largely dependent on the conditions in the housing market.  A strong and sustainable recovery will likely not occur until foreclosure related sales return to more normal levels” JLBC October Report

The Arizona coincident index continues to “suggest that economic activity in the state has not yet reached its bottom.” JLBC Report

• 10,600 jobs were added in September; however, September’s year-over-year loss is 7.5%

o   Employment data indicates unchanged labor market conditions in the last 5 months.

• Unemployment rate held steady at 9.1% in September
• Initial claims for unemployment insurance are up 26.7% over last year

o   Lowest claims since  November 2008

• AHCCCS (Arizona’s Medicaid Program) caseloads have increased 0.2% from the previous month; 17.7% caseload increase from October 2008

o   There are now 329,000 more Arizonans on AHCCCS than there are children in Arizona public schools

• Department of Corrections’ inmate population has increased by a monthly average of 63 inmates per month; FY10 budget funded growth of 151 inmates per month

October 26, 2009 update

In an email from Chuck Essigs recently, he notes that reports indicate that the projected state budget deficit for this year may be increasing to an estimated $2 billion. Some are trying to blame the deficit on Governor Brewer’s budget veto and her fight to reduce proposed budget cuts to K-12 education. It is important to note that Governor Brewer’s reduced K-12 budget cuts were mostly offset by the Governor’s veto which restored $250 million in revenue from the $0.33 Education Tax Rate. The fact is that with or without the Governor’s support for K-12 education funding, the state would be facing very significant budget shortfalls for FY 2010 and FY 2011. The projected budget deficit for FY 2011 could be almost double the projected deficit for FY 2010. I do not see a way for Arizona to get through this unbelievable budget situation without additional revenue. Cuts will be necessary, but without a balanced approach, which includes cuts and increased revenue, the impact will devastate K-12 education, universities/community colleges and other essential state services.

There is more and more talk that there might be a special legislative session sometime in November to address the budget. I’ll keep you posted when there is something to report.

October 12, 2009 update

Because there is very little happening with regard to the budget, from this point forward I am going to reduce my posts to one time per month instead of weekly.  I will revert back to weekly posts if and when there is enough information to warrant that.

Economic news continues to be bleak in Arizona, which will most certainly result in cuts to our budget when the legislature resumes in January. Here are the monthly Joint Legislative Budget Committee (JLBC) Fiscal Highlights for September.

Arizona Revenues:

• August collections were down 12.7% from August of last year; 13th consecutive month of double-digit declines in General Fund revenue collections
  • Sales Tax collections were down 16.7% from August of last year and $20.7 million short of the monthly forecast
  • Income Tax collections were down 0.2% from August of last year and $1.7 million short of the monthly forecast
  • Year-to-date Corporate Income Tax collections are down 6.9% from the prior year; $9.0 million below the monthly forecast

• JLBC is estimating that Arizona will face a $1.5 billion shortfall IN THIS CURRENT FISCAL YEAR, even with the FY10 budget passed by the Legislature, along with the Governor’s vetoes.

Other Key Arizona Indicators:

• The Arizona coincident index “suggests that economic activity in the state has not yet reached its bottom.” JLBC Report
• 19,700 jobs were added in August, mostly due to the seasonal hiring of teachers
• Arizona, in percentage terms, had the 2nd largest in the Nation year-over-year job loss in August – Michigan was 1st
• Unemployment rate stayed essentially flat at 9.1% in August
• Initial claims for unemployment insurance are up 45.5% over last year
• There are now 1.327 million Arizonans on AHCCCS; there are 1 million children in Arizona public schools
• AHCCCS (Arizona’s Medicaid Program) caseloads have increased 2% in August from July; 17.3% caseload increase from September 2008
• Department of Corrections’ inmate population has increased by an average of 101 inmates per month for the first two months of FY10, BELOW the FY10 funded growth of 151 inmates per month

September 28th update

There is very little to report this week.  I have begun the process of visiting schools within our district in order to share the information contained in this blog.  I will also be attending a support staff association meeting to provide the same information.  After informing our district employees, I am considering holding some public forums to share the information with community members.

September 21st Update

I apologize for not posting last week.  I had a series of meetings and learned a lot, but none of it is good.  I heard the Governor speak; her K-12 adviser speak; and I heard officials from the Arizona Association of School Business, from the Arizona School Boards Association, and from the Arizona School Administrators.  And the message was the same from all of them: expect mid-year cuts.  And from the information being presented, I think the cuts will be severe.  Why?  Because the State right now has $10 billion in expenses but is bringing in $7 billion in revenue.  Further, the budget that was passed has a $1.2 to $1.5 billion deficit.  And all of the statistics from the latest Joint Legislative Budget Committee report show that Arizona has not reached the economic bottom yet.  Revenues continue to fall millions short of forecasts.  Add to these issues the fact that the Governor and the Legislature still philosophically disagree on whether the budget should be balanced by cuts only, or by a combination of cuts and revenue enhancements; and the fact that education makes up the largest percentage of the State budget – and it is not hard to predict severe cuts when the legislature resumes in January.

How will this impact us?  It is still too early to tell because we have no idea how badly we will be cut.  Reacting to a $6,000 cut will not be the same as reacting to a $600,000 cut.  What I will be asking the Governing Board to consider is the same thing I have from the beginning: keep the overarching philosophy of stretching what we have for as long as possible.  Under that philosophical umbrella, we try to protect student academics, protect student programs, minimize the disruption to students, and impact as few employees as possible.

September 8th update

As most of you know, the Governor took action on the budget last Friday, vetoing the key cuts to education ($250 million cut to funding and the permanent repeal of the equalization tax). It is too early to know how this will impact us. However, one thing everyone needs to understand is while that seems to be a good thing for K-12 education, the budget remains unbalanced. When 43% of the entire state budget is in K-12 education, eventually cuts will have to be made.  Most believe that will happen when the legislature resumes in January.