Recently, we joined 17 other chambers and pro-business organizations in expressing our support for Gov. Doug Ducey’s fiscal year 2018 state budget proposal and its specific focus on bolstering Arizona’s K-12 education system in several key areas.
In a letter to Arizona’s legislative budget leaders, we applauded Governor Ducey’s budget proposal in its prioritization of new education resources, directing dollars to areas where they will have substantial, immediate impacts. This education-centric budget plan provides an excellent framework for producing successful Arizonans who are ready to fill well-paying jobs – many available right now – with innovative companies.
Now that legislators have had Ducey’s budget proposal in hand for a month, they are busy crafting their own version of the state spending plan, likely with the governor’s priorities close in mind. As lawmakers tackle their most encompassing yearly task, it’s a great time to view this complex process from the business community perspective.
The state’s entire spending plan for the current fiscal year (FY17), which began on July 1, 2016 and runs through June 30, 2017, spends $37 billion in total. The state’s general fund, which is the most discussed and reported upon portion, accounts for $9.6 billion of that total.
You may be surprised to learn that after statutory spending and lease-purchase and debt payments are removed, the Legislature and governor are left with approximately 33 percent or about $3.2 billion to pay for all other state expenses and funding requests each year.
The lion’s share of the total general fund budget, about 40 percent, goes to K-12 education. The state’s Medicare program (AHCCCS) and Department of Health Services uses 19 percent and prisons account for another 11 percent. Other state agencies and higher education account for the rest. The state collects general fund revenue from three main sources including sales and use tax (45 percent, $4.5 billion in FY17); individual income tax (40 percent, $4 billion) and corporate income tax (5 percent, $500 million). The remaining 10 percent comes from all other sources.
Given this simplified summary view of the state budget, it becomes much clearer as to why the annual budgeting process requires time, debate, consideration and can occasionally lead to protracted negotiations. In addition to mandatory funding for core services for Arizonans, there are numerous worthy agencies, programs and advocates that make requests on the smaller, discretionary slice of the general fund each year.
Voters’ approval of Prop. 206 in November is also adding additional pressure to budget talks this year as the associated costs to the state are estimated to eat up and additional $20 million to $75 million, which eliminates the entire projected surplus and then some.
That is why it is imperative that groups such as the business community make our voice heard at the Legislature – loud, clear and unified. Lawmakers want to know what their constituents want them to prioritize in the state budget. Although lawmakers certainly cannot fund every request each year, ensuring they are informed on the priorities and goals of the business community is the minimum we should do as we all work together to help businesses grow, boost our economy and move the Greater Phoenix region forward.