Lake Havasu Recovering Faster the the rest of the state

State treasurer sees end in sight for recession
By Diana ParkerMonday, April 6, 2009 9:36 PM MST
The Todays News Herald

During a visit to Lake Havasu City Monday, the “state’s banker” said he’s starting to see the light at the end of the state’s economic tunnel.

Furthermore, upturns in home sales and building permits locally indicate “Havasu may be recovering sooner than other parts of the state,” State Treasurer Dean Martin said.

Martin is traveling the state to visit his “customers,” the 140 local governments that deposit their money in the state treasury, thereby earning a better rate of return.

“They are literally our customers, even though the state’s never treated them like that (before),” Martin said.

Martin has instituted several administrative changes, including holding quarterly meetings, that result in the state acting more like a financial institution when it comes to its depositors. Martin said lower fees and improvements in transparency have contributed to a $1 billion increase in local government deposits during his tenure.

His office has also been producing regular financial forecasts. Martin said he predicted the current economic downturn shortly after entering office in January 2007.

“Gov. Napolitano called me Chicken Little for describing exactly what’s going on right now,” he said.

Martin believes the downturn will bottom out close to the end of 2009 with slow recovery beginning in 2010. He likens the recession to the Nike “swoosh,” saying that we’re now sliding into the dip in the bottom. The upturn will be more gradual than the decline, taking about four years, he said.

In the short term, the state is facing a cash flow crisis that will become critical on April 15, when $650 million in school payments are due to be made. The state currently has about $200 million in the general fund, Martin said. A trickle of tax revenues will add something to that total, but not enough to cover the bill, and sales tax revenues won’t come in until April 20, he said.

“The state is basically living paycheck to paycheck — it’s not their paycheck, it’s your paycheck,” Martin said.

Another $1 billion in school payment will be paid out in July, and the state doesn’t have that money either. To make the school payments, the state will have to create overdraft protection for itself by borrowing hundreds of millions of dollars each day for a few days at a time. Arizona hasn’t had to borrow money since the Great Depression, Martin said.

The interest from those borrowings will only add to the state’s budget deficit.“It’s not going to be cheap. Money isn’t free,” Martin said.

And the state would have to perform this kind of mid-month shuffle when large payments are due for two to three years, or until revenues “exceed expectations,” he said.

Nevertheless, taxpayers don’t need to worry that the state won’t make its obligations, including income tax refunds, according to Martin.

“We’re taking these extraordinary steps so the rest of the state’s functions can go on as normal,” he said.