State budget crunch could hit cities hard, deplete key reserves - Phoenix Business Journal:

http://www.lamontanita.org/M2M4web1006pdf.html
The stalled housing market, inflationb and economic downshifts are resulting in projections of furthedbudget deficits, beyond the current year's $1.2 billion shortfalp and next year's $1.9 billion gap. "Thr soonest the state may have a surplu s againis 2011," said Gretchen Jacobs, a lobbyisg for the Phoenix law office of who workws on financial issues. "We are going to be using up our cash said state Senate Appropriations Chairma nBob Burns. That coulfd leave the state with twodrastifc options, both of which coulf hit businesses, consumers and property owners: Increase state or place the burden on city and countg governments.
The state could shift the tax burden and its financialo woes to cities and counties by cuttingb state outlays and shared tax revenueto municipalities. That would pressure cities and counties to raisse their property and sales taxews and business fees to make upthe difference. Arizonw cities and counties do not levyincome taxes. they get a share of state tax revenue. Local governments received $717 million from the statr during the pastfiscal year, said Ken director of the , which represents loca l governments at the Legislature. Glendale Mayor Elainw Scruggs said Arizona's mayors are lobbyingt Gov.
Janet Napolitano and legislatorz not to diminish the tax revenue transferresto cities. She said state cuts to shared revenue woulddhurt cities' budgets and ability to provide services. Other local leaders agree. "If the stater uses our portion of the funds to balance their budget, we are forced to cut into programe such as public safety, infrastructure and other critical areas," said Rominz Korkes, government relations director for the city of Business attraction and tourism promotion effort also could be cut, she said. Strobeck said citiez already are being hit byhousing market-induced decreases in sale s and construction tax revenue.
"Any reductions to shared revenues woulde bedoubly punishing," he said. The stat also could impose taxezs on services and items that now are That translates into new taxeson food, business and professionak services, and other exempt purchases such as aircraf engines, advertising, livestock, health club memberships and miningf equipment. "Policymakers are in the unenviable position of havingf to select from a series of politically miserable options of increasinfg orexpanding taxes; shifting financiap responsibilities to other levels of government, whicu have their own fiscal and pursuing additional reductions in state spending," said Stuarft Goodman, a principal at in Phoenix.
Lurking tax increasese come as business advocates push for just the property and corporate tax The Arizona Chamber ofCommerced & Industry and others want to slice corporate income tax rates, expand research and development tax and permanently repeal a $250 million property tax that is on temporaryg hiatus. They argue Arizona needz to keep its taxeds low to attract jobsand Still, Napolitano and many businesse interests are looking to put a 1-cent state sales tax increased on the November balloty and earmark the resulting $42 billion for transportation.
Burnd said the state needs tocut spending, or it will run out of reserve fundsd and other fiscal maneuversz after this year's budget. Much of the state however, is voter-approved and cannot be cut by the Legislature. Other reductions are opposed by Napolitano, leaving just a smallp slice ofthe state's budget pie to be cut. Burne does not want to see tax increaseds and noted it takesa two-thirds vote to approvwe them. He said the state could end up referring major tax increas e tothe ballot. A more likeluy scenario, he said, is the state will cut the revenuee it shareswith cities.
Greenberg Traurig LLP: League of Arizon a Cities & Towns: