JLBC: Budget shortfall less than predicted - AZEdNews
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JLBC: Budget shortfall less than predicted


Of The Joint Legislative Budget Committee Photo By Mike Barcia/ASBA

Arizona’s budget shortfall may be significantly less than the $1.1 billion predicted in April, according to recent information provided by the Joint Legislative Budget Committee.

Arizona’s budget shortfall could be $708 million for Fiscal Years 2020 and 2021, due to the economic effects of the COVID-19 coronavirus pandemic, according to the June Budget Update.

JLBC: Budget shortfall less than predicted Projected-Shortfall-in-20-and-21-1024x763

Click here for links to the June Budget Update

“The economy has performed better than we anticipated in this the fourth quarter of fiscal 20,” said Richard Stavneak, director of the Joint Legislative Budget Committee.

JLBC: Budget shortfall less than predicted RichardStavneakHP
Richard Stavneak, director of the Joint Legislative Budget Committee Photo by Mike Barcia/ASBA

“In the current fiscal year, we are forecasting a shortfall of just under $200 million, and then we would incur an additional $500 million in fiscal 21,” Stavneak said.

JLBC: Budget shortfall less than predicted JLBC-SLIDE-1-1024x767

“Now there remains in the economy great uncertainty about what the next year will look like,” Stavneak said. “As a result, that (fiscal year) 21 balance could range from a balanced budget to a $1 billion shortfall.”

Several factors will influence that outcome, Stavneak said.

Those factors include a second wave of COVID-19 and the government’s policy response to that, the availability and effectiveness of a future vaccine, the willingness of the public to resume normal activities and Gov. Doug Ducey’s plan for allocating federal coronavirus resources.

Joint Legislative Budget Committee Video: June Budget Update Video Presentation

How will this shortfall and the projected shortfalls in upcoming years affect the State of Arizona’s Budget from now until Fiscal Year 2023?

JLBC: Budget shortfall less than predicted Balance-Sheet-for-FY-20-through-FY-2023-1024x766

The JLBC usually updates their revenue forecast in January, April and October, but they added a June update this year, because of the changing economic environment.

“To give you a sense of how much economic opinion currently varies on the topic of the life of the COVID recession or downtown, we saw a survey conducted by the entity FiveThirtyEight and the University of Chicago, where they surveyed 38 economists throughout the country and asked them when would GDP at the national level return to a pre-COVID level,” Stavneak said. (Forty three of the panelists did not believe that would occur until Calendar Year 2022.”

JLBC: Budget shortfall less than predicted JLBC-GDP-to-Pre-COVID-level-1024x760

As you can see by those forecasts, there’s a wide range of thought among economists about when the economy will recover, Stavneak said.

The state delaying it’s income tax filing date until July is one of the factors that complicate projecting revenue, said Jack Brown, deputy director of JLBC.

Click here for a slideshow presentation of the JLBC’s June Budget Update

“This tax deferral issue primarily affects the individual income tax category,” Brown said. “This is less of an issue for corporate income tax category because corporations generally pay most of their revenues to the state through quarterly estimated tax payments, which were not impacted by the policy change.”

JLBC staff reviewed spending estimates underlying the enacted budget and the April forecast and revised its estimates in Fiscal Year 2020 administrative adjustments and revertments, as well as Medicaid spending.

Click here for a narrative summary of JLBC’s June Budget Update

“The state’s revenue collections were growing significantly in the first few quarters of Fiscal Year 20 at above 9%,” Brown said.

“Given that we saw that much growth, the state probably won’t see year-ove-year revenue growth until the fourth quarter of Fiscal Year 21,” Brown said.

JLBC: Budget shortfall less than predicted June-vs-April-Forecast-1024x766

It’s estimated that state agencies will have $28 million in expenditures instead of the $128 million originally estimated and that revertment will be about $173 million instead of $184 million which would add a $111 million gain in Fiscal Year 2020 to the forecast.

JLBC: Budget shortfall less than predicted Medicaid-Estimates

Since no special session of the Arizona Legislature has been called for, the JLBC offered these suggestions Gov. Ducey could take to deal with the projected budget shortfall.

JLBC: Budget shortfall less than predicted Possible-Solutions-1024x762

The State of Arizona received $1.8 billion so far in federal Coronavirus Relief Funds, which must be used on COVID-19 related expenditures.

JLBC: Budget shortfall less than predicted Coronavirus-Relief-Funds-1024x768


Budget shortfalls are projected for upcoming fiscal years as well.

JLBC: Budget shortfall less than predicted Projected-Shortfalls-after-FY-21-1024x766