Tucson’s place in the state budget

Now that state lawmakers have hammered out a deal, it’s time to see how the $18.3 billion state budget will hit Tucson.

The new deal comes about a month after we wrote about what a Republican budget proposal would do to Tucson, including gutting Rio Nuevo and making big cuts to the University of Arizona, along with broad policy changes that would affect Southern Arizona.

But first a quick primer on how we got here.

The state economy isn’t in free fall. Unemployment is relatively low. Businesses are still investing here. Arizona’s budget problems are to some extent self-inflicted.

Years of cutting taxes with the promise that economic growth would eventually make up the difference hasn’t been realized — yet. Revenue is flat while costs are definitely going up.

But both Democrats and Republicans are promising new tax cuts as part of next year’s state budget.

Here’s what caught our eye in the new budget:

The first GOP proposal would’ve cut $19 million in sales tax revenue that’s diverted to Rio Nuevo, which would have basically defunded the whole thing.

For the uninitiated, Rio Nuevo is a taxpayer-approved district that gets sales tax revenue from downtown Tucson and the Broadway corridor and distributes it to business projects in the area.

Rio Nuevo was largely spared in the new budget deal, although the district board will have to abide by new rules.

Under the new budget deal, Rio Nuevo must spend 80% of its sales tax revenue (after dealing with debt and other obligations) on things that generate sales tax revenue.

The University of Arizona is looking at about $12 million in cuts.

About half of that amount is due to a 2.5% reduction for all state agencies, not just universities.

The cuts mean less funding for the main campus as well as the university’s Health Sciences Center (which already is undergoing a realignment that will result in dozens of layoffs).

There is a silver lining in those cuts — the proposed GOP budget included a one-time 5% statewide reduction for the UA — which would have cost the university an estimated $14.4 million between the main campus and the Health Sciences campus.

After the dust has settled, that cut is now down to an estimated $5.7 million.

As for the UA program cuts, they include:

One thing that didn’t get cut? The UA’s budget for its Center for the Philosophy of Freedom — which has long been a pet project for GOP lawmakers. The budget specifically protects its funding.

The Arizona Board of Regents lost $16.3 million in funding for the Arizona Promise Program, which provides working-class students with “last-dollar” scholarships that cover all remaining in-state tuition and mandatory fees that aren’t covered by financial aid.

The state budget removes a $2.4 million capital appropriation for HVAC replacement at the 120-bed Tucson Veterans’ Home. A modified footnote in the budget allows the state to put the money back in the general fund if federal grants don’t come through.

The budget allocates $2 million to Pima County for existing coordinated reentry programs. These funds will go to the Pima County Sheriff’s Department for various safety-net programs designed to help people when released from jail.

The increase in funding comes as the state just reduced the Department of Economic Security’s budget for coordinated homelessness services funding statewide by $15.5 million.

The budget removes $500,000 in one-time funding for the Southern Arizona Sports, Tourism and Film Authority. The board is expected to meet next month to discuss next steps, but the loss of funding won’t close their doors. So don’t expect the budget cut to end the Snoop Dogg Arizona Bowl that the authority helped pull off last year.

The new budget removed $1.5 million for a spaceport. The City of Sierra Vista had hoped to open a “Spaceport Reentry Site” by early 2027 at its regional, municipal airport.

Plans are afoot to put Southern Arizona solidly in the space race, where rockets would be launched in Yuma and land in Sierra Vista. We’ll see how the budget cuts affect that plan.

Democrats in Southern Arizona are celebrating a rare win — a three-year moratorium on tax breaks for data centers.

Senate Democratic Leader Priya Sundareshan told us it was one of the top priorities for Democrats, with the state giving $38.5 million in tax breaks for data centers last year.

It is unclear how this will impact Project Blue, which is still in the earliest stages of development near the Pima County Fairgrounds (or any of the other large data centers planned for Southern Arizona).

But to put it into perspective, a few million dollars is a drop in the bucket for a $3.6 billion, multi-phase data center project.

Finally, please allow us a brief moment to point out the lack of transparency in the budget process.

The new $18.3 billion budget covers a lot of ground, but due to the way lawmakers and state officials drafted and negotiated the budget, nobody has any real time to digest what’s in the budget before it gets final approval.

Just look at the lightning-fast legislative schedule this week (after most lawmakers took a month off). After negotiating with Democratic Gov. Katie Hobbs, GOP leadership introduced the new deal on Tuesday. Lawmakers held a committee hearing on Wednesday and took their final votes yesterday.

There’s not a lot of room in there for lawmakers to digest the budget, let alone get feedback from the general public.