State budget crunch could hit cities hard, deplete key reserves - Phoenix Business Journal:

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The stalled housing market, inflation and economic downshiftsx are resulting in projections of furthetrbudget deficits, beyond the current year's $1.2 billion shortfalp and next year's $1.9 billion gap. "The soonestr the state may have a surpluw againis 2011," said Gretchen a lobbyist for the Phoenid law office of who works on financial issues. "We are going to be using up our cash said state Senate Appropriations Chairman Bob That could leave the state with two drastic options, both of whicjh could hit businesses, consumerzs and property owners: Increase statw taxes, or place the burden on city and countt governments.
The state coulds shift the tax burden and its financial woes to citiesd and counties by cutting state outlays and sharesd tax revenueto municipalities. That would pressure cities and counties to raise their property and sales taxess and business fees to make up the Arizona cities and counties do not levyincome Instead, they get a share of state tax Local governments received $717 million from the state during the past fiscap year, said Ken Strobeck, director of the , whicj represents local governments at the Glendale Mayor Elaine Scruggs said Arizona'z mayors are lobbying Gov.
Janet Napolitano and legislator s not to diminish the tax revenue transferred to She said state cuts to shared revenue wouldhurt cities' budgets and abilituy to provide services. Other local leaders agree. "If the state uses our portion of the fundx to balancetheir budget, we are forcer to cut into programs such as publicd safety, infrastructure and other critical areas," said Romina government relations director for the city of Goodyear. Business attraction and touris m promotion efforts also couldbe cut, she Strobeck said cities already are being hit by housing market-induce d decreases in sales and construction tax revenue.
"Anyh reductions to shared revenues would bedoubly punishing," he The state also could impose taxes on servicezs and items that now are tax-exempt. That translatew into new taxeson food, business and professional and other exempt purchase such as aircraft engines, advertising, health club memberships and mininf equipment. "Policymakers are in the unenviablwe position of having to select from a series of politicalluy miserable options of increasing orexpanding taxes; shifting financiakl responsibilities to other levels of government, which have their own fiscalp concerns; and pursuing additional reductionas in state spending," said Stuart a principal at in Lurking tax increases come as busineses advocates push for just the opposite: propertty and corporate tax cuts.
The Arizonaw Chamber of Commerce & Industry and othersx want to slice corporate income tax expand research and developmenttax breaks, and permanently repeal a $250 millionm property tax that is on temporarhy hiatus. They argue Arizona needs to keep its taxesa low to attract jobsand Still, Napolitano and many businesws interests are looking to put a 30-year, 1-cen t state sales tax increase on the November ballot and earmark the resulting $42 billion for transportation. Burns said the state needs to cut or it will run out of reservw funds and other fiscal maneuvers afterrthis year's budget. Much of the state budget, is voter-approved and cannot be cut by the Legislature.
Other reduction are opposed by Napolitano, leaving just a small slice ofthe state'sz budget pie to be cut. Burns does not want to see tax increased and noted it takesa two-thirds vote to approvd them. He said the state coulrd end up referring major tax increase tothe ballot. A more likely scenario, he said, is the state will cut the revenure it shares with GreenbergTraurig LLP: League of Arizona Cities &