Spending on Social Welfare Programs in Rich and Poor States. Final Report.. State Budget Development and Implementation

07/01/2004

Arizona slowly transitioned from an annual to biennial budget in the 1990s. In 2002, the state returned to an annual budget cycle for larger state agencies including the Department of Economic Security (TANF, Food Stamps, child care, child welfare, adoption, foster care, and child support enforcement) and the Arizona Health Care Cost Containment System (Medicaid and State Child Health Insurance Plus (SCHIP)).

Arizona's budget process begins with the governor providing funding targets to state agencies for the upcoming fiscal year. State agencies submit their budget requests to the Governor's Office of Strategic Planning and Budget (OSPB) in September. OSPB shares these requests with staff of the Joint Legislative Budget Committee (JLBC). The governor presents his or her budget proposal in January. The legislature presents a separate budget that can be very different from the executive proposal. The state Constitution and statute impose a balanced budget requirement on both the executive and legislative branches of government, although there is authority to incur up to $350,000 in debt. Arizona does not have a consensus revenue forecast requirement.

The Arizona legislature has been characterized as the most powerful branch of government in the state in budget development. The state's Constitution gives the legislature authority to develop, amend, and pass budget bills for the governor's signature. A state official interviewed indicated that it can be difficult for the executive to get the legislature to incorporate the governor's priorities in its budget. The executive must lobby the legislature by way of the Governor's state of the state address, appropriations hearings, and other avenues.

Governors can direct state spending through the threat and use of their veto authority that includes the ability to veto specific items or the entire budget bill. Governor Janet Napolitano, who took office in 2003, is currently being sued by members of the legislature over 13 line-item vetoes to the legislature's SFY 2004 budget. The vetoes delayed $75 million in payments on a class action tax lawsuit and restored more than $31 million in legislative cuts to state agencies, social services, and education. The legislature argues that Governor Napolitano's vetoes violated the separation of powers between the executive and legislative branches of government and intruded on the legislature's appropriation authority. The outcome could impact the governor's power in future budget cycles.

Citizen-driven initiatives limit the ability of the legislature to raise revenue and direct spending. Successful ballot measures that impose significant restraints include:

  • Proposition 108-Limits the ability of the legislature to raise revenue by requiring a two-thirds vote by the legislature to enact a tax or fee increase. The same two-thirds vote is necessary to eliminate or reduce a tax deduction or exemption.
  • Proposition 204-Expanded eligibility for the state's Medicaid program and allocated state tobacco settlement funds to this effort.
  • Proposition 105-Limits the legislature's ability to amend citizen-driven initiatives by requiring three-fourths vote by the legislature to amend a proposition and only when the action furthers the proposition's purpose.

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