by Matthew Benson and Mary Jo Pitzl
Jun. 26, 2009 01:19 PM
The Arizona Republic

State officials have formally reached a budget deal for 2010, according to the Governor’s Office.
“We have agreement with legislative leaders,” said Paul Senseman, spokesman for Gov. Jan Brewer. Senseman said a tentative deal was reached Thursday evening and cemented in talks with the governor Friday morning.

Details of the agreement remain scarce, but it is said to include roughly $600 million in cuts and funding sweeps, as well as the referral of a temporary tax increase to the November 2009 ballot. If the 1-cent-per-dollar tax is approved by voters, the bulk of the spending cuts would be backfilled.

Putting it mildly, conservative legislators have been cool to the idea of a tax hike. But Senate President Bob Burns, R-Peoria, said he’s comfortable putting the issue to voters. “We need to have the voters tell us,” he said. “We need to put that out there for the voters.” Along with the proposal to hike sales taxes, the agreement includes tax cuts and tax reforms.

Arizona would institute a flat tax, charging no more than 3 percent on all incomes. Currently, tax rates range from 2.59 percent for the lowest income brackets to 4.54 percent for individuals who earn more than $150,000. The rate would not kick in until the 2012 tax year. The budget agreement also includes the repeal of the equalization tax, a property tax that nets $250 million.

The deal, if approved by lawmakers and signed into law by Brewer, would avert a government shutdown that would result from failure to approve a spending plan for 2010 before the fiscal year ends Tuesday. The governor and legislative leaders have been at a stalemate on the budget for weeks, with the biggest sticking points centering on the size and scope of budget cuts needed to close a shortfall estimated at more than $3 billion, as well as the tax increase sought by Brewer.

The House is planning to move the budget accord through a committee hearing later Friday and probably vote the budget on Saturday. Plans in the Senate are unclear. With the deal apparently reached Friday, legislators could vote on as many as 11 trailer bills to amend a budget plan that they approved in early June but never sent to Brewer.

Those trailer bills will include the sales-tax referral, as well as key policy and other changes to the legislative budget. Among the changes, lawmakers have agreed to remove a fiscal maneuver that would have delayed $100 million worth of higher education funding into fiscal 2011. The tactic, known as a rollover, would have saved the state $100 million in 2010 but potentially endangered federal stimulus dollars.

Also, the trailer bills will remove a provision that would have instituted a three-year moratorium on the ability of cities to charge development impact fees. Instead, cities will be told to refrain from increasing their impact-fee rates for a period of two years.

Additionally, cities will lose to the state about $22 million of their share of vehicle-registration fees, but not until the second half of the 2010 fiscal year, meaning after January 2010. Previously, the cities would have lost $45 million in shared license fees. A plan to take the 15 counties’ share of the license fees has been removed and replaced by other maneuvers. Additional details of the budget agreement are expected to be released late Friday afternoon.