Last week, Arizona’s non-partisan Joint Legislative Budget Committee (JLBC) predicted a $1.1 billion state budget deficit by the end of the coming fiscal year due to tax revenue shortfall from COVID-19 pandemic. That’s a $1.1 billion deficit in a total budget of $11.8 billion. Given the high degree of uncertainty, JLBC stated their estimate could be off plus or minus $500 million.

While preventative social distancing measures paused the 2020 legislative session, the session has not officially ended. When lawmakers do eventually return, they will have important decisions to make on how to address the budget shortfall.  There is $973 million in the Rainy Day Fund plus $1.6 billion in restricted federal funds which could be used to balance the budget. Yet, those funds will likely not be enough if the budget shortfall is larger than the forecasts or if the economic decline continues beyond this year. 

During the Great Recession, Arizona’s lawmakers cut public education and health care, swept funds for affordable housing and state parks, and used budget gimmicks like selling off state buildings. Despite over a decade of economic recovery, many of those cuts have still not been restored.  Arizona lawmakers must respond to this economic crisis with good stewardship of existing revenue by stopping all new tax cuts and raising new revenue by reversing some of the previous tax cuts so that corporations and the wealthy pay their fair share. Congress must also act to provide even more fiscal relief to help states balance their budgets.

Arizona’s workforce and economy will recover, but how quickly depends on the path lawmakers take for navigating out of this budget shortfall.

—David Lujan, Director