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Ugenti-Rita: Arizona needs swift, proactive approach to address state economy uncertainties

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The numbers speak for themselves, Arizona is facing a substantial budget deficit and the only uncertainty is when the economy will reach its bottom and begin to turn around. We cannot wait until that moment occurs, we need to be proactive and prepared to make the tough decisions we will face because the longer we wait the more difficult it will be.
– Sen. Michelle Ugenti-Rita

With the end of the Stay at Home Executive Order and Arizona beginning to return to normal, businesses of all sizes will start to open their doors to welcome back consumers.

While this is wonderful news for businesses, employees and consumers, the impacts of the Covid-19 pandemic on Arizona’s economic outlook and budget are significant and very real. The sooner the legislature tackles the depth of the fiscal impacts to our budget and what options are available to address them, the sooner we can get on the road to recovery.

Due to the unprecedented nature of our situation and the difficulty of being able to predict how and when the economy will return to solid footing, I believe it is most prudent to act out of an abundance of caution when stabilizing the current year’s budget, reducing the budget just enacted for next year, and crafting the following year’s budget.

The Joint Legislative Budget Committee is projecting a $1.1 billion deficit by the end of the next fiscal year, June 30, 2021. Of this amount, $638 million of the shortfall is projected to occur in the current fiscal year, ending June 30, 2020, which can be resolved before then or deferred until next year.

The projected shortfall of $1.1 billion could be off by $500 million in either direction due to the highly unstable and unpredictable nature of the current economy.

The numbers speak for themselves, Arizona is facing a substantial budget deficit and the only uncertainty is when the economy will reach its bottom and begin to turn around. We cannot wait until that moment occurs, we need to be proactive and prepared to make the tough decisions we will face because the longer we wait the more difficult it will be.

Time is of the essence and I believe we should have solutions in place to address at least the 2020 fiscal year deficit by the end of June and preferably also the 2021 deficit to the best of our ability.

With continuing unemployment insurance claims of approximately 293,000 people, a 1500% increase since the middle of March, significant job losses and drops in corporate and individual income tax collections, to manage the deficit, I believe we need to be willing to reduce spending.

The cuts can be softened on a one-time basis by making wise withdrawals from the state’s Rainy Day Fund, which has a balance of almost $1 billion.

These decisions will need to be made with the understanding that temporary solutions will not suffice and that permanent solutions will provide the certainty needed to achieve the long-term goal of returning our economy to what it was just a few months ago.

Some may advocate for an increase in revenue by raising an existing or enacting a new tax, even on a temporary basis. This will weigh down consumer spending and job growth, adding further stress to an already fragile economy.

As a member of the Appropriations and Finance committees, my experience has shown me that to implement the reductions necessary to balance the budget it will require swift and decisive action. The impact of these decisions may not be preferable, but it is what is necessary to preserve our quality of life and keep Arizona the great place it is to live and raise a family.

Editor’s Note: Michelle Ugenti-Rita a Republican Arizona senator representing District 23, and a resident of Scottsdale.