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Education likely target after Prop 301, 302 defeats

Facing a $450 million hole in their plan to close the state's budget deficit, GOP lawmakers are likely to respond to the failure of Propositions 301 and 302 with cuts to education, two economists said.

Eliminating voter-approved funds for land conservation and early childhood development was part of the current fiscal year's budget.

Now, without that money and with no obvious appetite for raising taxes among the Republican leadership, the economists said there are few options other than making cuts to K-12 and higher education.

"It's not a pretty picture," said Marshall Vest, an economist with the University of Arizona's Eller College of Management.

Proposition 302 would have transferred to the general fund $325 million from First Things First, which provides early childhood health and development services. Proposition 301 would have transferred $123.5 million from the Land Conservation Fund.

Elementary and secondary education account for 45 percent of general fund spending in Arizona, while higher education takes up 13 percent, data from the Kaiser Family Foundation shows.

Rep. John McComish, R-Ahwatukee, the House majority leader, told Cronkite NewsWatch that lawmakers have few options for cuts.

"Public education, higher education, corrections – those are the areas that we spend money on," he said.

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While education has seen big cuts as lawmakers have addressed the state's red ink, Dennis Hoffman, an economist at Arizona State University's W.P. Carey School of Business, said Tuesday's results mean much more to come.

"This is going to show up in K-12 education. It's going to show up in universities," he said. "It's an evaporation of spending from government."

State Rep. John Kavanagh, R-Fountain Hills, chairman of the House Appropriations Committee, said there will be cuts across the board. He expects cuts to education to fall primarily on higher education.

"It has a lot of administrative fat and the ability to raise additional revenue, which K-12 does not have," he said.

Legislative leaders would like to save money by reducing eligibility for the Arizona Health Care Cost Containment System but are bound by the new federal health care law requiring states to maintain their Medicaid programs at current levels, Kavanagh said.

Rep. Kyrsten Sinema, D-Phoenix, the assistant House majority leader, said GOP leaders have failed to consider alternatives for closing the budget gap.

"I agree that education and K-12 funding will bear the brunt of the cuts, but we could close a number of tax loopholes to balance the budget instead," she said.

Sandy Bahr, executive director of the Sierra Club's Grand Canyon Chapter and a leading opponent of Proposition 301, said lawmakers should explore options for raising revenue such as eliminating the sales tax exemption for soda and closing tax loopholes.

"These conservation dollars are a drop in the bucket and will make almost no difference in the overall budget situation," she said. "There are so many exemptions in the tax code, they just have to close a couple of them."

Asked about raising taxes and addressing tax exemptions, Kavanagh said, "We are not raising taxes. Period."

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Jennifer Grentz, a spokeswoman for the Arizona Board of Regents, said that it's difficult to anticipate whether there will be higher-education cuts or how big they may be.

She said that state university presidents would have to come forward with a plan for addressing cuts.

In the past budget cuts to the state's university system have resulted in tuition increases and furloughs, layoffs and merging programs.

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