The state is currently spending $9.3 billion. That will increase by $100 million next year, even if Arizona does not shell out the $336 million it owes the public schools.
Legislative staffers predict revenues of just $8.8 billion.
Until now, the state has been making up the difference with borrowing, accounting maneuvers and the last of the money left from the now-expired temporary sales tax.
Ducey says there are places to cut but in an interview with Capitol Media Services, he concedes he cannot get spending down to the $8.8 billion level at least this year. He suggests it may take his full term of four years.
The governor-elect said he’s sticking with his campaign promise not to raise taxes and he refuses to consider a temporary tax hike or delays in tax cuts that have been approved but not yet implemented.
“I talked during the campaign about making Arizona the best possible place in the nation in which to do business. And states compete. Governors compete. This will make our state more competitive, a more attractive place to do business. So we're going to phase in these tax reductions,” Ducey said.
Ducey rejects suggestions a series of tax cuts implemented by lawmakers over the last decade have left Arizona worse off.
“If you look at our budget over the course of time, it has grown. And our economy has grown. We've fallen on tough times here. But I would say to you, in many ways, much of this has worked," Ducey said.
Ducey believes Arizona’s best bet is to grow itself out of trouble, saying a 1 percent increase in growth represents a $500 million increase in state revenues over three years.
Correction Nov. 18, 2014 at 5:15 p.m.: Updated to clarify Arizona state law requires state budget to be balanced every year.