Arizona State and Local Government Documents Collection

In "Roadmap to Arizona's Economic Recovery," a general fund revenue forecast is presented which includes proposed changes to the revenue system. If the proposed changes are backed out of these figures, the baseline forecast can be obtained. This addendum provides detail on the Roadmap's revenue projection. the three key points are: 1) Arizona's economy is highly cyclical, growing much faster than the nation during economic expansions; 2) Revenues everywhere, but especially in Arizona, given its revenue structure, are much more cyclical than the overall economy; 3) the revenue forecast in the Roadmap is actually conservative. Revenues relative to the size of the economy remain below the historical norm, even in fiscal year 2015.

The state government general fund shortfall in the current fiscal year is projected to be between about $550 million and $1 billion. This shortfall will need to be eliminated through spending cuts and/or revenue enhancements. The Legislature has demonstrated a preference for spending cuts. However demand does not decline during a recession for most public-sector services, including university services. Any reduction in funding for universities will have a negative and direct effect. A reduction in state government spending for universities of around $200 million would cause direct and indirect job losses of approximately 4,000. A substantial decrease in state government funding for universities will have negative consequences beyond these short-term effects.