Arizona Gov. Doug Ducey 2020 State of the State

Arizona Gov. Doug Ducey gives his 2020 State of the State address on Jan. 13, 2020.

(The Center Square) – Analysts say Arizona's budget deficit, once thought to be as high as $1.1 billion, could shrink to nothing.

The Joint Legislative Budget Committee predicted in April that COVID-19 shutdowns would put a significant hole in the state's budget. Their June estimate, released on Friday, shows the fiscal year's expected budget shortfall at $190 million, far short of April's estimate of $638 million.

One reason for the smaller-than-expected shortfall, analysts said, was the income level of those who lost their jobs.

"Job losses have primarily occurred in lower-paid retail, restaurant/bar and lodging employment, which may account for the withholding results," they said. "To provide some perspective, 54% of the state's total job losses in both April and May occurred in the leisure and hospitality industry. The average wage for employees in this industry is approximately 48% below the average rate for all employment sectors combined."

Couple that with a better-than-expected recovery and the JLBC said next year's budget shortfall could disappear.

"As demonstrated by the change in the shortfall estimate in the last two months, the budget estimates remain volatile," they said. "While the current estimate for a FY 2021 shortfall is $(518) million without the FY 2020 rollover, the actual shortfall could range from $0 to $(1.0) billion."

JLBC analysts said rolling expected shortfalls into the 2021 budget was feasible, meaning a special session may not be necessary.

"If the Legislature does not reconvene into Special Session before the end of FY 2020, the Executive could employ one or more non-legislative approaches regarding the FY 2020 budget. One approach is to roll any FY 2020 shortfall into FY 2021 and resolve the problem next fiscal year. The Arizona Constitution permits this approach and was last used by the state to resolve the FY 2009 budget shortfall in FY 2010."

Final estimates are not expected until later in the fall due to tax receipts finalizing at a later date.

Nationally, economists are not as optimistic about an economic recovery.

A survey of economists by FiveThirtyEight and the University of Chicago, mentioned in the JLBC analysis, said more than 40 percent do not expect to recover fully until 2022.

Staff Reporter

Cole Lauterbach reports on Illinois and Arizona government and statewide issues for The Center Square. He has produced radio shows for stations in Central Illinois and created award-winning programs for Comcast SportsNet Chicago.