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Counties Suffer After Years of Funding Sweeps

Credit: The Arizona Republic

By Rebekah L. Sanders for The Arizona Republic

County officials across the state are waiting anxiously for the Arizona Legislature to deliver its 2018 budget to Gov. Doug Ducey, warning they could be on the brink of financial disaster if the state doesn’t throw them a bone.

Counties have shouldered more than $500M in funding sweeps and cost shifts by state lawmakers since the recession blew a gaping hole in state finances, according to the County Supervisors Association of Arizona, a research and advocacy group representing the state’s 61 county supervisors.

Continued financial pressure from the state after a decade means counties are watching roads crumble, reducing law-enforcement patrols, patching together decades-old equipment, closing facilities and considering the unthinkable in conservative Arizona: raising taxes.

“Year after year after year, (state officials) put their hands in the county’s pockets to balance the state budget,” said Mohave County Supervisor Steve Moss, whose county has borne about $16M in fiscal hits from the state since fiscal 2008. “It’s really kicking us in the teeth.”

Perhaps most alarming: At least two of Arizona’s smallest counties now are unable to make payroll several times a year. After burning through rainy-day funds, Graham and La Paz counties are resorting to bank loans to survive negative cash balances between tax revenue cycles.

Leaders there hope the state provides relief before they have to consider bankruptcy.

But the response from the state Capitol isn’t optimistic.

Cost Shifts Began Slowly

Counties began helping the state when Arizona was staring down the barrel of a $1.2B deficit in the midst of the housing crash. The counties handed over $7M at the time.

By 2012, Arizona’s budget stripped $102M from counties by sweeping back into state coffers money once dedicated to counties, while sending counties bills for services provided by state agencies like the Departments of Revenue and Juvenile Corrections.

Ducey continued shifting costs to counties in his proposed budget this year, even as he modestly increased spending on education and maintained corporate tax cuts.

While urban areas have enjoyed a construction rebirth in recent years, easing tax hauls, many rural counties are confronting falling revenues and worsening unemployment.

The consequences:

  • Navajo County’s road repaving schedule has stretched from 20 years to 40. Though heavy equipment should be replaced every decade or so, Navajo County’s road blader is 37 years old — more ancient than some employees, county staffers joke.
  • Some paved streets in Graham County are deteriorating so quickly, officials are considering converting them back to dirt roads.
  • Nearly half of Mohave County’s roads are due for replacement, said Public Works Director Steve Latoski.
  • La Paz County is late on paying bills from a variety of vendors, said Supervisor D.L. Wilson. The county issued bonds, pledging its future revenue as collateral. Like Graham County, La Paz County is using credit lines to make payroll when cash flow dips into the red.

Some counties could raise taxes.

Officials in Mohave County are considering it, said Moss, the supervisor.

“In a lot of ways we are the poster child for Republican Arizona, but we are being put under such stress that we’re unable to provide the services to our residents,” he said. “The state is patting themselves on the chest, saying, ‘We’re not going to raise taxes.’ But (they’re) going to create the conditions for local governments to need to raise taxes.”

Many counties don’t even have that option. State law restricts growth in property tax levies, and counties such as La Paz and Graham are nearly capped.

“We’re boxed in,” said Graham County Supervisor Jim Palmer. “We have nowhere to go.”

Little Legislative Relief in Sight

Republican budget leaders say they understand the counties’ pain.

The 2018 budget probably won’t be worse for counties, but it may not be much better, House Appropriations Chairman Don Shooter said.

Raising the gas tax is one way the state could return money to counties. It hasn’t been increased since 1991, even as electric and fuel-efficient vehicles drive down gas consumption, he said.

“There are a number of things I’m a heretic on in the Republican Party,” Shooter said. “I don’t like taxes. I’ve never liked taxes. But if you want roads, you have to pay for them. It’s not unreasonable.”

However, there’s no appetite at the Legislature, he said.

Democrats want to support counties, said Senate Minority Leader Katie Hobbs, D-Phoenix, but the governor “doesn’t seem serious” about spending more.

The governor’s proposed budget increases county cost shifts to $52M this year, from $34M last year.

Ducey secured transportation spending last year that benefited counties. This year, he is pushing for additional resources for state parks, a major driver of tourism dollars to rural communities, spokesman Patrick Ptak said.

Arizona also is focusing on economic development, he said.

Read more at The Arizona Republic.

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