We break down the budget using emojis
Welcome to our primer on the state budget. (With apologies to Ken Bennett.)
Lawmakers have about a month left to craft and pass a state budget. If they can’t, state government will shut down.
As the Legislature dithers on crafting a budget, it’s a good time to brush up on your budget basics and consider what kinds of priorities you’d like lawmakers to invest in for the coming fiscal year.
This year, lawmakers have billions in excess revenue, meaning they could make huge investments in areas that they’ve ignored since the economic collapse of the late 2000s. Or they could just slash taxes. We’ll go over some of the big-ticket items on budget wishlists — and how that’s complicating budget-making.
But first, let’s talk about the where the budget comes from and where it goes. Over the years, we’ve read lots of documents from the Joint Legislative Budget Committee and the Governor’s Office of Strategic Planning and Budgeting that try to explain the state budget in a way non-accountants can understand.
The one thing we recommend time and again is the Kleenex box presentation, a helpful 10-minute explanation of how the state gets and spends its money, by former Secretary of State and Senate President Ken Bennett.1 Unfortunately, that simple yet effective primer from the Great Recession era is woefully out of date.
So, as with other great ideas that we’ve ripped off, we decided to remake Bennett’s presentation to keep up with the roaring 2020s. There’s no way we were going to spend $100 on Kleenex boxes and willingly show our faces on a video, though. Plus, we never would have been able to recreate the sweet intro graphics. With apologies to Bennett2, here’s a simplified print version of his presentation that we’re calling the Agenda’s emoji budget explainer 🤯 .
Like a Kleenex box, each emoji is worth $1 billion.
As long as we’re using ridiculous stand-ins for real money, please consider paying us a single Bitcoin. That would be cool. Or subscribe for $80 a year.
Revenue: Where the money comes from
When we talk about “the budget,” we’re generally referring to the General Fund budget that lawmakers adjust every year to keep up with the ebb and flow of the economy, which also reflects the state’s priorities and their own personal priorities. For the upcoming fiscal year, General Fund revenues are expected to clock in at around $15 billion.
The General Fund is derived from three main tax sources: sales taxes 💸, individual income taxes 🧾, and corporate income taxes and all other state taxes 👔 .
Sales tax: $6 billion 💸 💸 💸 💸 💸 💸
Individual income tax: $5 billion 🧾 🧾 🧾 🧾 🧾
Corporate income tax and all other taxes: $2 billion 👔 👔
Lawmakers planned for the worst this year, while the state actually saw significant economic growth. The federal government has been throwing pandemic-related money at the states, too. While those funds aren’t supposed to supplant state spending, they’ve certainly helped the state’s bottom line. And lawmakers had set aside money to offer a tax break to those impacted by Proposition 208, the Invest in Education Act, which would have increased taxes on high incomes to pay for education if it wasn’t struck down by the Arizona Supreme Court.
Because of all that, Arizona is sitting on a huge surplus 💰 in the upcoming fiscal year, not to mention the money that lawmakers previously squirreled away in the Budget Stabilization Fund or “rainy day fund” ⛱ .
Surplus: $5 billion 💰 💰 💰 💰 💰
Rainy day fund: $1 billion ⛱
In theory, lawmakers could spend up to $19 billion this year: the $13 billion it spent last year, plus the $5 billion in surplus and the $1 billion in the rainy day fund.
So here’s what we’re working with:
💸 💸 💸 💸 💸 💸 🧾 🧾 🧾 🧾 🧾 👔 👔💰💰💰💰💰⛱
Because much of the surplus funding is one-time money, lawmakers can’t spend it on things like teacher salary increases or tax cuts because those costs are ongoing, unlike, say, road construction.
Spending: What the lawmakers control
By far, the biggest chunk of state General Fund spending is in K-12 education 👩🏫 . That includes money for Arizona’s school districts, charter schools, the Department of Education, the Board of Education, the School for the Deaf and the Blind, the School Facilities Board and other school-related spending. In all, the state spends roughly $6 billion on K-12 education.
K-12 education: $6 billion 👩🏫 👩🏫 👩🏫 👩🏫 👩🏫 👩🏫
The next largest category of General Fund spending is health and welfare 🏥 . This includes the state’s Medicaid system, called the Arizona Health Care Cost Containment System (AHCCCS), which accounts for the largest chunk at about $2 billion. Health and welfare also covers the Department of Health Services, Department of Economic Security and the Department of Child Safety, along with other smaller-ticket items, like the state hospital.
Health and welfare: $3 billion 🏥 🏥 🏥
Prisons and the Department of Public Safety 👮 are the next-largest chunk of the budget. Arizona spends more than $2 billion on that category every year, with about 90% of that going to prisons.
All other government agencies 💵 , including the Governor’s Office, the Legislature, and dozens of other state offices and departments, cost a mere $1 billion. And the three state universities 👨🏾🎓 receive less than $1 billion per year from the state.
Prisons and DPS: $2 billion 👮 👮
Universities and all other government: $2 billion 👨🏾🎓 💵
So the current year’s $13 billion spending plan looks like this:
👩🏫 👩🏫 👩🏫 👩🏫 👩🏫 👩🏫 🏥 🏥 🏥 👮 👮 👨🏾🎓 💵
Lawmakers are trying to figure out not only how to reprioritize those funds for the upcoming fiscal year, as they do every year, but also what to do with all that surplus money: 💰 💰 💰 💰 💰
Federal, local and other funds: More money, outside lawmakers’ hands
The General Fund makes up only a fraction of government spending. Local property taxes, federal funds and other monies make up about 75% of the funds that fuel Arizona government.
Lawmakers don’t get to allocate most of that, however.
For example, the federal government kicks in a huge match to AHCCCS and the Department of Health Services, and that federal health and welfare funding category 🚑 has been vastly increased in the past few years through pandemic-related federal assistance. The federal government also kicks in a significant amount of matching funds and grants for other assorted government functions 💳 , such as the Department of Environmental Quality. In all, federal funding accounts for about $22 billion.
Taxes collected on certain industries that are dedicated to fund certain programs are called “other unappropriated funds.” Think gas taxes and car registration fees, which mostly pay for road construction and maintenance 🚗 , or alcohol and cigarette taxes, which largely pay for health programs. It also includes things like college tuition, which make up part of the additional spending on the state universities 🍎 . In total, other unappropriated funds count for about $6 billion of state spending.
The K-12 school system is largely propped up by local property tax dollars 🎒. While local tax dollars usually stay local, and therefore are not part of the state budget, the state does track local spending on K-12.
So the full spending that the state tracks from all sources is closer to $54 billion. It would look something like this, with the first set of emojis representing General Fund dollars and the second representing federal, local and other unappropriated dollars in each category:
K-12 education: $9 billion 👩🏫 👩🏫 👩🏫 👩🏫 👩🏫 👩🏫 🎒🎒🎒
Health and welfare: $27 billion 🏥 🏥 🏥 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑 🚑
Prisons and DPS: $2 billion 👮 👮
Universities: $7 billion 👨🏾🎓 🍎 🍎 🍎 🍎 🍎 🍎
Capital projects: $2 billion 🚗 🚗
Other: $7 billion 💵 💳 💳 💳 💳 💳 💳
Where to spend the money: The big-ticket items
Let’s get back to the General Fund money lawmakers appropriate, or “the budget.”
While most of the legislative horse-trading during budget season is over small-ball items — a few million for a road here, a few million for freedom schools there — lawmakers this year are still arguing over the broad strokes of the budget.
And there are a few emoji-sized appropriations hanging in the balance.
Notably, Gov. Doug Ducey wants to pump $1 billion — or one full emoji worth — into securing the state’s water future🚰 . His plan involves creating a new state water agency to acquire water supplies and develop water augmentation and conservation projects, including a desalination plant in Mexico. But the proposal is running into trouble even with Republicans, who are supportive of spending on water but worried about creating a powerful new government agency.
Republican Sen. Paul Boyer is trying to broker a deal to put $1 billion more into K-12 education 👩🏫 to make up for the money schools “lost” after voters approved Prop 208, then the Supreme Court struck it down before it could go into effect. He argues his plan invests much-needed resources into K-12 and fulfills the will of the voters. But because that’s ongoing spending, it’s a multi-year plan that eventually eats up far more than the $1 billion price-tag this year.
Lawmakers already approved about a half-billion dollars to widen Interstate 10 this year, and they are also looking at pouring another half-billion into road infrastructure 🚧 .
Lawmakers are also keen to pay down debt and are reportedly looking at pumping as much as $1 billion into paying down pension obligations for public safety and correction officers’ retirement plans 🍹.
We want to hear from you: How would you craft the state budget, within all the parameters we listed above?
And give us a prediction for when lawmakers will finally end this legislative session (predictions must include a date and time). The person who guesses the closest date and time to reality gets a free paid subscription for themselves or a friend.
We’re knocking off early today for the long weekend, so no podcast this afternoon. We’ll be back in your inbox at 6 a.m. Tuesday.
We’re trying our best here to forget Bennett’s “Arizona Shire” presentation about how the election might have been stolen from Donald Trump and just focus on the good memories.
And special thanks to Matt Gress, the director of Ducey’s Office of Strategic Planning and Budgeting, who pointed us to the right budget documents and helped double check this.