The Financial State of Arizona

moneyThe Arizona Joint Legistlative Budget Committee (JLBC) released two documents yesterday quantifying the effects of U.S. economic fear, uncertainty and doubt as it applies to Arizona’s 2009 budget, and proposals for 2010. The big question on U.S. minds is, “How will all this affect my business?” By most accounts the answer is not positive.

The JLBC’s February 12, 2009 budget update puts “January revenues 21.5%…below [fiscal year] 2008”, for a cumulative 2-year decline of 35.9%. “January results [are] significantly worse than expected”, says slide 4 of the report. These numbers directly translate to additional lump-sum budget cuts for state-funded programs, including the Arizona University System.

Layoffs in the private sector worsen the situation via a direct reduction in state sales and employment taxes. In a 2010 appropriations hearing presentation also released yesterday, the committee discussed specific cuts to a page-long list of Arizona institutions. A 2010 option for reducing the Arizona University System budget calls for a $160.6 million lump-sum reduction. “ABOR and university system received a combined $141.5 million lump sum reduction [in 2009].” Such changes would affect Arizona’s Arizona State University, University of Arizona and Northern Arizona University despite higher projected enrollment numbers and tuition increases across the board. Arizona State leads in projected enrollment increases at 4% in 2010, with 15% at the East campus. Arizona University System tuition prices have increase an average of 8.5% annually since 2004.

The effect? All employees and families of the state of Arizona are nervous to find out, as “[c]urrent forecasts can indicate the direction of the economy, not its precise landing point”, to quote the 2009 update report. The nightly news will likely continue to cover layoffs, salary cuts and sob stories for Arizona not-for-profits for the foreseeable future, and it seems unlikely that a “quick fix” will restore budgets to previous levels as existing layoffs and budget decisions cannot be quickly recovered.

Please tell me I’m wrong.