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Arizona governor enters 2nd year with good...

Posted at 10:31 AM, Jan 10, 2016
and last updated 2016-01-10 12:31:44-05

PHOENIX - Arizona Gov. Doug Ducey took office a year ago facing a looming budget deficit expected to top $1.5 billion in his first 18 months in office.

The dire predictions of a fiscal meltdown didn't come to pass, however, as relatively small budget cuts and a surge in revenue erased the deficit.

As he prepares to deliver his second State of the State address on Monday, Ducey is blessed with a flush treasury. But he also faces pressure to restore cuts to universities, K-12 education and county and city funding, to say nothing of social services that were slashed during the Great Recession.

Don't expect the Republican governor to open the purse strings, though. He's vowing to maintain a tight fiscal leash on state spending, offering only select increases in funding while following through on promises he made in his 2014 election campaign to cut taxes every year in office.

"What a difference a year makes. We made some difficult decisions last year, and we're in a much better position right now," Ducey said in an interview with The Associated Press. "There is a significant amount in terms of a cash carryforward. But if people think that we're just going to begin all these new spending programs that put us in a position a year from now that we just dug ourself out of, they're misguided."

"Budget responsibility and fiscal sanity's going to continue to be a theme," Ducey said Thursday. "We're just not in a position we were in last year in terms of having to deliver bad news."

The Legislature's budget analysts in November estimated that the state will have a cash balance of $555 million going into the next fiscal year on July 1, of which $218 million can be committed to ongoing spending or tax cuts. The current $9.3 billion state budget passed in March -- boosted by a $175 million extra payment for K-12 schools in an October special session -- is expected to grow to at least $9.5 billion for the year that begins July 1.

Ducey will face pressure from a broad range of interests who want him to increase state spending on their priorities.

Top among them are K-12 schools, who will benefit from $3.5 billion in new spending over the next 10 years if the October deal that settles a long-running lawsuit is ratified by voters in May. Education advocates -- and Ducey himself -- say the settlement is a good first start to solving school-funding problems. Education leaders want more money this year, but Ducey appears unlikely to grant their wish.

Instead, he's looking to complete an overhaul of school funding first, one that will focus on ensuring money makes it to classrooms and teachers and that includes new accountability measures.

"We think these resources are needed or we wouldn't be leading the charge and I wouldn't be putting so much energy behind this," he said. "But it's entirely possible that you take these dollars and don't properly spend them."

Universities, which took a $99 million cut in funding in the current budget year, are looking to see that money restored. Ducey said "you're going to see a change in the trend line in terms of universities," but it isn't clear if they will get the amount of money they want.

The governor also will face pressure to boost spending at the Department of Child Safety, and he is likely to add measures to help the long-struggling agency. The Legislature under then-Gov. Jan Brewer created a stand-alone department to handle a backlog of child abuse and neglect cases, but there has been no visible improvement. Still, Ducey said the agency is making headway.

"This agency's been broken for years, and I have a lot of concern for the kids that are in the care of the state," Ducey said. "And I want to see the improvement that our citizens and taxpayers and legislators expect."

Where Ducey has pledged to spend more money is on a new border security unit within the state Department of Public Safety. He said last month that he wants to spend "tens of millions of dollars" on the new program, but he hasn't laid out details.

Counties and cities want the governor to restore funding taken from a roads fund that goes to them, but he hasn't committed to that change. Ducey has vowed to keep in place cuts on welfare programs even though they only save the state a small amount of money.

Indeed, cuts to the length of time people with children can collect welfare enacted last year appear to be only the start. He said he supports the social safety net, but he doesn't think just a check is enough.

"I think the right way to do it is to get people a check that they need, but then put employment opportunities in front of them or training opportunities in front of them, education opportunities or opportunities to volunteer," he said. "That's harder work to do that. But I think it's better for the individual and it's certainly better for the state."