This week at the Arizona Legislature: How close is a new budget deal?

Republican leaders in the Arizona Senate say they’re optimistic about having a budget deal with Gov. Katie Hobbs in the near future; Senate President Warren Petersen has said the sides are "probably 97% of the way" to an agreement.

This comes after the governor vetoed a Republican budget proposal that she called "unbalanced and reckless."

Howard Fischer of Capitol Media Services joined The Show to talk about the prognosis for a new spending plan by the end of the fiscal year.

Full conversation

MARK BRODIE: Good morning, Howie.

HOWARD FISCHER: Good morning. As the days continue to count down, I try to remain optimistic, but, you know, anything's possible in this place.

MARK BRODIE: Anything's possible. So, Howie, you had a chance to catch up with Gov. Hobbs yesterday. Does she share Senate President Warren Petersen's optimism?

HOWARD FISCHER: I think she does. She didn't put a percentage on it. The problem of percentages, you say we're 97% of the way there, but the 3% could be major things like tax cuts. So, you know, numbers make little sense.

The really big change is the rhetoric. You know, the governor, as you pointed out, called the legislative budget irresponsible, reckless. You know, said we can't live with that. You know, the the veritable "people will die in the streets if we do this."

Well, by yesterday, she was saying, "You know, we've got a really difficult revenue picture here, and we're doing the best we can." And she also said, "You know, I knew when we started out, we were going to have to compromise." Now, that's a whole change in tenor there, which suggests that, A, she recognizes that she wasn't going to get all she wanted, and B, that everyone realizes we've got July 1 approaching. And if we don't have a budget by July 1, certain state services shut down.

Capitol Media Services

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I think there's also a realization what she is and isn't going to get. Remember, this governor put out a budget, which included various revenue increases. Some of it was supposedly found money, like $760 million the federal government would pay us for border costs during the the Biden administration. ... Not going to happen. There was a tax hike for certain forms of of online gaming — not going to happen. There was a plan where she said, "We're going to limit who can get vouchers based on parental income" — not going to happen. Same thing with a fee on short-term rentals, you know, there's just no appetite for that.

So, the other side then becomes what does the Legislature give up? They had a plan for across-the-board budget cuts. She says that's irresponsible. I think that's not going to happen because she's going to tell lawmakers, "If you say we only have so much money, you make the decision about which agencies you're going to cut. Don't don't dump that back in my lap." So, I think that's exactly where we are, you know, as as of 9:11 a.m. on the 26th of of May.

MARK BRODIE: Well, so, Howie, if those revenue enhancements, which were probably always a long shot from the governor from her budget in January, seem unlikely to happen and across-the-board 5% cuts as the Republicans propose in the vetoed budget plan are not going to happen. Given the state's fiscal situation, does that leave room for new programs, new initiatives?

HOWARD FISCHER: Well, here's where it gets really interesting, because now we're into, I'll call it voodoo economics, to borrow from a phrase years ago. All of this depends on what are the revenue projections.

Now, we already knew that the Legislature said we can adopt across-the-board conformity because there's enough revenues for this year. Now, revenue numbers come out pretty much new every month, and if the economists squint one way or the other, all of a sudden, there's another $100 million or $200 million. ... I'm not blaming them. I mean, you know, how do you make projections based on what's happening in Iran? How do you make projections in in terms of what the traders on Wall Street are thinking?

So, I think the next step is going to be we're going to come up with some revenue numbers that's going to allow for some new programs. It's going to save some programs. For example, the governor has as a high priority saving the Rio Nuevo project in Tucson, which is basically a a downtown improvement project. The the legislative budget had called to wipe that out, which also would have left something like $9 million in debt that somebody would have to pay off or we'd be defaulting in that.

So, I think they will find the money. I think they will all declare victory, sing "Kumbaya," and say that's great. And then if the revenue numbers go in the tank somewhere down the road ... we'll deal with it then.

MARK BRODIE: Well, so Gov. Hobbs has pointed out that, you know, she and Republican legislative leadership have done this before. They've obviously, you know, she's been in office, this is her fourth year. They have passed budgets before the end of the fiscal year each year. But, some of those have sort of been received better than others. Any feeling as to like — this doesn't seem like sort of the Oprah budget where, you know, the first year where every legislator kind of got a pot of money to do with what they wanted. Does this seem like it's going to be more of sort of a "traditional budget"?

HOWARD FISCHER: I think it's going to be much more traditional. I don't think you're going to see a lot of new programs. I think there may be a few which get a new or expanded, you know, the governor's got a thing about more help for folks who need money for for energy, you know, given the, you know, like APS wants a 14% hike in its power, you know. Well, you know, somebody's got to got to pay for that.

I think that what we're going to see is something that's cautious, but it's going to be cautiously optimistic that the revenues are going to get better, that the war in Iran will finally drag to an end, that the stock market will will stabilize, and everything will will be fine.

But also remember, and you know, you've been a student of this, too, we have gotten sometimes five, six months into the budget year, in other words, the next January, February, and all of a sudden, we realize, uh-oh. The numbers are not going to do it, and you end up with these mid-year budget cuts. Sometimes with a little bit of of of fancy footwork where you borrow money from one agency and you move it around, and somehow they're just trying to get through the end of the fiscal year.

So, that is definitely not off the table. I think there's a lot of crossing of fingers and a little prayer, say a little novena, and hope that the numbers come out.

MARK BRODIE: All right. So Howie, about a minute left before we have to let you go. We have heard some lawmakers say they expect to be voting on something in early June, which would be next week. Obviously, that would be, you know, several weeks before the end of the fiscal year. How — I know you don't want to put percentage on it — how optimistic would you be that the budget gets done, let's say, before June 15?

HOWARD FISCHER: Oh, I think June 15 is the date I've been thinking about. I think that that they're shooting for that, recognizing they got to give themselves a little bit of elbow room there, because it's like so many things, something comes apart at the end. The wheels come off, some Republicans say, "We're not going to vote for the plan because it's got too much money for Democrats." And the Democrats say, "We're not going to provide you with the votes unless we get something else, and those little last-minute negotiations there."

We also know quite frankly that there are many legislative Democrats who are not in lockstep with the governor in terms of some of what she wants to do. So, the at what point does somebody like a Mitzi Epstein from from Tempe, who's in her last term and says, "I'm not going to just buy on to everything," says, "No, you can't just count on my vote"?

MARK BRODIE: Interesting. All right. We'll be back at it next week to see where they're at. Howie Fischer with Capitol Media Services, thanks as always.

HOWARD FISCHER: You're welcome.

KJZZ's The Show transcripts are created on deadline. This text is edited for length and clarity, and may not be in its final form. The authoritative record of KJZZ's programming is the audio record.

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