Phoenix city manager prepares for ‘tumultuous’ budget outlook
Phoenix ended its last fiscal year on June 30, 2023, with a budget surplus of nearly $19 million but its economic forecast is gloomy.
Since getting hundreds of millions of dollars in federal coronavirus relief and stimulus funds, Phoenix has sometimes struggled to distribute all the money. But, going forward, the city could struggle to find enough money to cover all its expenses.
City Manager Jeff Barton recently addressed the City Council, “We do have a pretty tumultuous, I think, next 12 months as the state continues to take revenue away from us.”
Cities split a share of the state income tax, which dropped this year when Arizona began using a 2.5% flat rate for everyone. In 2021, when then-Gov. Doug Ducey proposed the change, Phoenix and other cities objected but state lawmakers approved the legislation.
“We rely on the state’s joint legislative budget committee to provide estimates for state-shared income tax and unfortunately they underestimated the negative impact of that policy change,” said Amber Williamson, Phoenix budget director.
In the 2024-25 fiscal year, she estimates the city will get $36 million less in state income tax. And, starting in 2025, when cities can no longer collect sales tax on residential rentals, she predicts a $19 million shortfall the first half of the year.
Plus, if voters approve a bond in November to add public safety, parks and library facilities, the city will need to budget for ongoing operations. The city is also dealing with a U.S. Department of Justice investigation into officers’ use of force, allegations of discriminatory policing and retaliation against people for conduct protected by the First Amendment, among other things.