Arizona Wrangles with $2 Billion Shortfall

Arizona legislators began a special session Tuesday mostly aimed at reducing the state's $2 billion budget shortfall but also to resolve issues related to foreclosures and research funding.

The House and Senate convened just hours after Gov. Jan Brewer issued a formal call that included a to-do list negotiated by Republican legislative leaders and the governor.

The centerpiece of legislation proposed for action during the special session is a package of budget bills to narrow the midyear shortfall by roughly $450 million. That amount includes $292.6 million of cuts in funding for K-12 schools' equipment purchases and Department of Economic Security social services.

Brewer and Republican lawmakers previously negotiated those cuts, but she vetoed earlier versions on Sept. 4, when lawmakers did not send her proposed sales tax increase to voters.

The state's budget situation has worsened since then, and Brewer has said the lack of additional revenue means more spending must be cut.

Several other budget provisions would restore balancing maneuvers that Brewer also vetoed on Sept. 4. The measures were in a bill that Brewer vetoed as a way to kill the proposed repeal of the state property tax.

The provisions include authorizations for various fee increases and funding diversions intended to keep several state agencies going in the face of previous budget cuts.

Another budget-related prevision is intended to resolve a successful lawsuit against the state over its refusal to provide $18.5 million previously promised for research contracts already awarded.

A newly negotiated non-budget piece of legislation would narrow the state's current legal protections for homeowners after foreclosures. That protection generally bars lenders from suing homeowners for damages if foreclosure sales don't cover the full amount still owed on mortgages.

Bankers and the real estate industry had battled over the issue in the Legislature and in court.

A compromise negotiated by industry representatives for consideration during the special session would retain the general protection for borrowers but allow lenders to sue in cases involving contracts made after Jan. 1 on homes built for speculative resales.

Legislators took no formal action Tuesday on any of the legislation. The House plans to consider the bills Thursday. The Senate had not yet scheduled committee consideration of the legislation.