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Arizona broke, may be forced to issue IOU's

Treasurer-Dean-Martin-vert_s(1).jpg Dean Martin

Continuing to ignore the true cause of the state’s budget woes, Arizona faces the prospect of issuing IOU’s to state employees if there are any delays in the 737 million dollar sale of 12 state buildings.

In a December 24th press release,  Treasurer Dean Martin revealed that the state’s spending exceeded a 700 million dollar line of credit from Bank of America mere days after it was received. Operational demands forced the Treasurer’s office to issue 73 million in Treasurer Warrant Notes (debt) in order to make the Arizona school payment due on December 1st.

“Government spending in Arizona is out of control. We are more than three-quarters of $1 billion in the red for daily operations,” said Martin. “As we predicted in our forecasts, just one week after setting up essentially the largest line of credit in state history, the State of Arizona has maxed it out. The Governor and Legislature need to reign in excessive spending; we can no longer afford to continue spending more than we make.”

Martin also pointed out that the negative $773 million operating balance is actually much worse than it appears since it does not include 1.6 billion the General Fund borrowed from other dedicated operating funds, bringing the true General Fund cash deficit to 2.4 billion.

The next major financial obligation is a $325 million payment to public schools on Feb1, 2009. If there are no glitches in the sale of the state owned buildings, there should be sufficient operating capital to  meet the states financial obligations and insure that state employee payroll checks are good.

However, if for whatever reason the sale of the buildings is not completed exactly as scheduled, the prospect of IOU’s similar to what California experienced earlier in the year awaits Arizona’s creditors.

"Should that not happen, should there be a hiccup, a sneeze, something, anything gets lost in the mail, we will not be able to make the February school payment," Martin said. “There's just not enough cash. The credit cards are maxed out, you're at your limit. They'll get a note saying, ‘We'll give you the money on this date, up to 90 days’ in the future.”

As the legislature continues to grapple with the unpleasant alternatives in balancing the budget, a key component in the cause of the massive deficits continues to be ignored. AHCCCS, Arizona’s Medicaid and welfare program has grown 75% faster than the rest of the state budget. In fact, since 1999 the budget for AHCCCS has grown from 200 million to 1.5 billion annually.

This catastrophic escalation can be traced back to Proposition 204 which was sold to the voters as essentially a “free” program that would increase welfare benefits and be entirely funded through the state’s tobacco settlement money. However, as typically occurs with most government sponsored entitlements, the state has instead been forced to divert hundreds of millions of dollars from education and public safety to insure full AHCCCS funding and make certain welfare recipients continue to receive their benefits.

Yes, you read that correctly. Education funding, law enforcement and public safety have suffered so that welfare benefits can continue to escalate 75% faster than the rest of the state budget.

It is clearly time to address this egregious mistake and allow voters to repeal Proposition 204. The facts about this colossal failure must be exposed as well as the ulterior motives of its supporters.