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Arizona is facing a growing budget shortfall

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PHOENIX — Collections to the state coffers are down.

The most recent data from the state’s Joint Legislative Budget Committee shows that the department was charged with monitoring the budget, reporting that about $331 million less in revenue in the first four months of the fiscal year than what is required for the budget adopted by Governor Hobbs and Republican lawmakers.

Monthly collection figures have been under the “enacted forecast” numbers every month since the beginning of the fiscal year in July, creating a cascading effect in which the shortfall continues to build.

State budget analysts estimated that in October the state would be in the red to the tune of $400 million at the end of the fiscal year next June.

A drop in state revenue was not unexpected, former Governor Doug Ducey’s landmark flat tax policy went into effect in January and analysts have been pricing a revenue drop into their monthly updates since then.

The impact of the policy is shown in the numbers. Withholdings, the amount Arizonans are paying the state in income taxes each pay period, is down 13% this year.

A decline in this number is rare as the state’s population continues to climb and wages continue to rise. Final payments to the state are down 42%, and tax refunds are up 81%.

Lawmakers do have several tools at their disposal to handle the shortfall, including the $1.5 billion in the state’s “rainy day” fund. They can also cancel some of the one-time expenditures included in this year’s budget, which itself was inflated due to a surplus.

November’s “Monthly Fiscal Highlights” report from the Joint Legislative Budget Committee can be found here.