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 Numerous financial gurus gathered on Wednesday to provide a dismal outlook on the state's revenue situation. "Good is not a word that you will associate with 2009," summarized economist Elliott Pollack.Richard Stavneak, Executive Director of the Joint Legislative Budget Committee (JLBC), reported that the FY09 state budget shortfall is now forecast to be between $700 million and $1.1 billion. Revenue is predicted to fall by 4.8 percent in FY09 and and by an additional 0.7 percent in FY10. The FY10 budget will be a challenge, as well: Stavneak estimated that the shortfall for that year could be as high as $3 billion. If the state continues the budget cuts and costs shifts it used in FY09 (including a total of more than $72 million taken from county governments) and allows the state property tax to be reinstated, the FY10 projected shortfall could go down to $1.9 billion.
Not all agree with JLBC's forecasts, however. House Appropriations Chairman Russell Pearce (R-18) and the State Treasurer, Dean Martin, fear the FY09 shortfall will reach almost $1.5 billion. Governor Napolitano also refutes JLBC's estimates, and puts the FY09 estimated shortfall between $320 million and $800 million.
Everyone does agree that the budget shortfall will force very difficult decisions. The Governor and legislative leaders are scheduled to begin budget discussions immediately following November's election, and there are rumors of a special session after the Thanksgiving holiday.
Those who have not had enough bad news can click here to view the full Finance Advisory Committee hearing.
The details of a plan to cut
Steve Owens, Director of the Arizona Department of Environmental Quality, and Lori Faeth, the Governor's Senior Adviser for Natural Resources, Agriculture, and the Environment, joined other staff members to review the recommendations and ask for input from Arizona stakeholders. The draft recommendations will eventually be submitted to the state and provincial governments of WCI partners for final approval.
The recommendations detail a plan for a phased-in cap and trade system, beginning with regulation of electrical generation facilities in 2012. Each facility generating more than 10,000 metric tons of greenhouse gas emissions will be regulated by the system and will receive a certain number of allowances for carbon emissions. At the end of a three-year compliance period (the first ending in 2015), facilities must not be not be emitting more than their allowance. A facility may receive additional allowances for increasing energy efficiency, and may use, bank, or sell these extra allowances.
The Arizona WCI group will meet again in November and December to discuss economic impacts and modeling of the proposal.
 The SWAG reconvened this week to discuss ongoing implementation efforts of the new water adequacy law and to evaluate potential legislative changes for the future. Under the provisions of last year's SB 1575: water adequacy provisions and HB 2692: water supply development revolving fund, the Arizona Department of Water Resources (ADWR) and the Water Infrastructure Finance Authority (WIFA) were required to adopt new rules that would outline the details of the state's significant new water policy authorities. Both agencies provided an in-depth update of the steps they had taken in the rule-making: ADWR has wrapped up a lengthy process of public hearings across the state and plans to begin the official rule proposal in the near future, and WIFA has outlined its plans for beginning the same public input process for rules relating to the Water Supply Development Fund (Fund).
The Fund, which will be distributed only to counties and municipalities that have adopted a water adequacy ordinance, will provide loans and grants for the development of water supply development projects. WIFA staff acknowledged that the Fund does not currently have revenue to distribute, but stated, "When it comes, we'll be ready!" This year's state budget did establish a revenue stream to the Fund of up to $10 million per year, but the money will only be attained if the state lottery income reaches higher-than-normal levels.
The members of SWAG also spent time looking at the future and discussing two concepts that could establish a designated revenue source for the ADWR. Though he acknowledged there was likely no way to ensure the legislature did not sweep potential new revenues to balance the ongoing budget deficit, ADWR Director Herb Guenther said it was important to provide adequate funding to the department. "Water is our state's most important resource," he stated repeatedly. "We must do whatever we can to protect it."
Stakeholders all agreed that ADWR is an important resource for the state, but did not come to clear agreement on either of the two funding ideas that were presented. The first would authorize ADWR to implement fees on well registration, and the second would prohibit the transfer of reclaimed wastewater out of a water basin, with some exceptions. The second proposal was described as a "preventative measure" since some have discussed selling reclaimed wastewater and transferring it out of the water basin in which it was reclaimed.
The SWAG plans to meet again in January.
Visit the CSA Calendar of Events at www.countysupervisors.org/calendar.
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County Supervisors Association of Arizona
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