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.

August 31, 2009 Update

Well, now that the Legislature has ended their special session the Governor has until Saturday, September 5th to act on the budget. Sources say she is using that extra time to negotiate with the Democrats to pick up the extra votes she needs to get a tax increase on the ballot. The difficulty is finding a balance between what the Democrats want in the budget in order to gain their vote vs. not losing more Republican votes.

In the meantime, economic indicators continue to be depressing in Arizona. The Joint Legislative Budget Committee (JLBC) has issued two graphs showing the impact on state revenue for the next three fiscal years, given the effects of various tax scenarios. Assuming only the repeal of the state equalization property tax, the JLBC forecasts a $1.86 billion deficit in FY11; a $2.62 billion deficit in FY12 and a $2.65 billion deficit in FY13. Assuming the $400 million in income tax reductions, the repeal of the equalization tax and no increase in sales taxes, the deficit estimates are $1.86 billion in FY11; $3.02 billion in FY12 and $3.05 billion in FY 13. Assuming the income and property tax cuts and voter approval of the proposed temporary sales tax increase (one cent in each of the first two years and one-half cent in the third year), the deficits become: $892 million in FY11; $2.2 billion in FY12 and $2.7 billion in FY13.

Why is this important to us? If the Governor approves the budget as is (which is already devastating to K-12 education), and if the JLBC is correct, then the Legislature will be forced to make even more cuts mid-year in order to balance the budget.  I can’t say what kind of action we would take to address mid-year cuts without knowing a budget and without knowing how much we would have to cut, but any action will be very difficult.

August 24, 2009 update

I wish I could report something new, but I can’t.  The legislature has forwarded their budget to the Governor and she has until this Thursday to take action.  This is the same budget she vetoed earlier but nobody is sure what she will do this time.

August 17, 2009 Update

Another week and you guessed it, still no budget.  Last week the Legislature passed a budget that was almost identical to the budget the Governor vetoed.  There were rumors she signed the budget Friday, but an email was sent out Friday evening saying that was false and in fact, the budget hadn’t even been sent to the Governor’s office yet.  The big question for this week is whether the Governor will sign the budget without it including her demand to ask the voters to approve a one cent tax to offset some of the cuts.  If she doesn’t sign the most recent budget proposal, then the Republicans will almost certainly have to ask for some support from Democrats in order to get enough votes to pass yet another budget proposal.

August 10, 2009

Another week, still no budget.  Last week I didn’t even receive information about anything happening.  The last I heard was of the 16 votes needed to pass the budget, the Senate had 14 sure votes and 1 maybe; leaving them at least 1 vote short.  Several went on vacation, so while I’m sure there was a lot happening behind the scenes to line up votes, there wasn’t much happening publicly.