Arizona needs to look to the future and protect spending on education and other important programs despite a projected $1 billion shortfall in the next fiscal year, Gov. Janet Napolitano said Wednesday.

While acknowledging that the economic slowdown and its impact on state government's finances will extend into the next fiscal year, Napolitano said the state can't afford spending cuts on the scale advocated by some Republican lawmakers.

"We will protect education. We will protect vital services," the Democratic governor told reporters. "This downturn is not permanent. ... We need to be poised when we come out of it to keep moving forward into the 21st century and that's what I intend to do."
Napolitano said she plans in January to present the Republican-led Legislature with new and revised plans designed to resolve an expected $800 million shortfall in the current fiscal year and $1 billion in the next.

The current fiscal year, now more than a third complete, runs through June 30.

As the budget situation began to seriously deteriorate, Napolitano on Sept. 19 announced a plan to erase a previously projected $600 million shortfall for the current fiscal year's $10.6 billion budget.

Napolitano's initial plan would borrow $300 million instead of spending cash for school construction, withdraw $200 million from the state's rainy day reserve and reduce state spending by $100 million through largely unspecified means.

Napolitano on Wednesday declined to detail what changes she'll propose in her January plan for the current fiscal year or what she'll propose for the following year.

However, she said both years' plans will use the $700 million rainy day reserve and that neither will include tax increases.

She also indicated that she may call for more reliance on borrowing than she originally proposed and that some services might need more funding, instead of less, because of increased demand from struggling Arizonans.

"It is a way to manage our way through this that will keep moving Arizona forward instead of closing the book and moving us back," she said of her overall plan.

Contacted later, House Majority Leader Tom Boone said he and other legislative leaders from both chambers and both parties have already started meeting to try to forge a consensus budget strategy.

But it doesn't help that Napolitano hasn't been forthcoming on what spending reductions her agencies are implementing or plan, said Boone, R-Peoria.

"I'm anxious to see a revised plan. I wished she'd do it sooner rather than later," Boone said. "Quite honestly, the borrowing and also the rainy day fund are one-time fixes and they don't make the permanent spending problem go away."

Democratic legislative leaders have generally endorsed Napolitano's original plan but some have also said lawmakers should consider suspending or repealing tax cuts previously enacted as part of bipartisan budget compromises.