DOI 10.1515/cjpp-2013-0020 Calif. J. Politics Policy 2013; 5(3): 343–359 David R. Berman* Dealing with a Surplus: Budgeting, Taxing, and Spending in Arizona Abstract: Arizona’s 50th regular legislative session ended in May, 2012, after 116 days. It will be remembered for headlines, sometimes national ones, involving the ethical behavior of lawmakers (or the lack thereof), an attempt to remove the chair of the independent redistricting commission and various eye-catching legis- lative proposals or laws. This report examines the broader context in which deci- sions were made, the nature of the budgeting system, the making of the budget, and concludes with an overview of financial issues facing budget makers. Keywords: Arizona; budget; FY 2012–13; governor; legislature. *Corresponding author: David R. Berman, Morrison Institute for Public Policy, Arizona State University, USA 1 Introduction Arizona’s 50th regular legislative session ended in May, 2012, after 116 days. It will be remembered for headlines, sometimes national ones, involving the ethical behavior of lawmakers (or the lack thereof) an attempt to remove the chair of the independent redistricting commission and various eye-catching legislative pro- posals or laws. Along the way, lawmakers came up with a General Fund budget for fiscal year 2013. The budget itself accounts for only 31% of what the state government spends. The remainder comes from federal funds (34%) and other state funds for specific programs, some of which are appropriated by the legislature and some of which are not (35%) (see Table 1). Still, while the general fund budget does not tell us all we need to know about how the state raises and allocates funds, its making has long been a central focus of state politics. The year 2012 was no exception through the exercise was far less dramatic than in the previous 2 years. In 2010 and 2011 budget making in Arizona – a place where the Great Recession had a particularly strong impact – was driven by revenue short- ages. Governor and legislative leaders of a conservative bent dealt with the situation through spending cuts, fund transfers, borrowing, and accounting