DALLAS — Arizona legislative leaders have reached an early agreement with Gov. Doug Ducey on a $9.1 billion budget that closes the state's budget deficit with deep cuts to higher education and by shifting money from the rainy day fund.
Higher education would take a 14% cut under the proposal, while community colleges would lose all state funding. State support already makes up less than 1% of the annual budget for community colleges in Maricopa County, Pima and Pinal counties.
The budget increases K-12 public school funding by $102 million rather than cutting it by $24 million as Ducey proposed. However, Democrats said the figure is misleading because increases are primarily driven by higher student enrollment and inflation, part of the state's annual obligation. They say the budget proposal represents a $98 million cut to K-12 in the budget year starting July 1.
"The Republicans just made a bad budget worse," Rep. Eric Meyer, D-Paradise Valley said in a written response to the budget. "They are proposing education cuts that are deeper than those included in the governor's budget, which continues to draw criticism from taxpayers, teachers, students, parents and a university president."
Arizona university system officials said the cuts are troublesome because they come after more than $400 million in cuts during the recession between 2009 and 2012.
The universities received about $1 billion a year from the state's general fund before the recession. The 2016 proposed cuts would drop funding for the universities below $700 million.
The Republican budget plan would scale back and delay for a year a $5 million private-prison contract that Ducey sought. The Republican governor received $10,500 in campaign contributions from political action committees and lobbyists associated with the private prison industry, according to news reports.
Ducey said the budget agreement achieves "99%" of what he sought when he proposed his budget for the fiscal year beginning July 1.
"This budget reflects our values as Arizonans - it protects the Department of Child Safety, it protects the most vulnerable," Ducey said. "And we're asking some folks to tighten their belt."
The Republican budget includes $74 million to make up for inflation payments not made to schools during the recession years, an amount far below what the schools say they are owed.
The rainy-day fund would lose $102 million, less than the $126 million Ducey sought. That could provide more cash for any settlement of a school funding case that is still in litigation.
The state expects to lose about $112 million in fiscal 2016 from the continued phase-in of tax cuts for corporations approved in 2011.
Arizona, which does not issue general obligation debt, has $2.5 billion of lease-revenue certificates for a lower-than-average per capita debt load of $902. Standard & Poor's provides an issuer credit rating of AA-minus with a stable outlook. Moody's Investors Service has a positive outlook on its Aa3 rating.
