azpm – The Buzz: How the state went from a surplus to a deficit
Two economists walk through how the state is facing a projected $1.7 billion deficit by the end of FY 25 after starting last year with a $2.5 billion surplus.
The Joint Legislative Budget Committee is projecting a $1.7 billion deficit in Arizona’s budget by the end of fiscal year 2025. But just last year the state was in a multi-billion dollar surplus.
The JLBC pointed to declining revenues as the cause of Arizona’s shortfall, specifically pointing out the individual income tax as the “primary underperformer” when looking at fiscal year 2024’s general fund revenues. Collections dropped by 27.7% when compared to last year and the JLBC says the implementation of a flat income tax rate is one of the reasons why.
President of Rounds Consulting Jim Rounds says that while he is in favor of having as low of an income tax rate as possible, he believed that moving to a 2.5% flat income tax rate was not the right move.
“I think they were a little too aggressive with the flat tax,” Rounds said. “I would rather have used some of that extra money on some other one time items and then we wouldn’t be having as many fiscal problems right now.”