Early last year, then-Maricopa County manager Roy Pederson found himself sitting across the table from two men who are not easily lost in the labyrinths of government budgets.

Newly elected County Treasurer Doug Todd is a crusty pro who previously helped craft the state's multibillion-dollar budgets as chair of the Arizona Senate's Appropriations Committee.

With Todd was his chief deputy, Jim Hogan, who had spent his career crunching numbers for the legislature, Arizona State University and an international construction company.

Between them, the two men had years of experience seeing through financial smoke screens. They met with Pederson that day to tell the county's top administrator that, after a few months on the job, they had seen through his obfuscations.

As Todd and Hogan recount the meeting (Pederson did not return phone calls), they told Pederson the county's budget was in a tailspin.

Pederson and the Board of Supervisors were sinking the county deep into debt, the two men said, and swift action was needed to avert financial meltdown.

Pederson's response floored them. He said there was no problem.
"I have no information from my financial department that leads me to believe that the county is in any financial difficulty," Hogan remembers Pederson saying.

Todd, a Western-garbed old-timer not given to niceties, was incredulous, and laid it on the line.

"Well, you got some information from the county treasurer that says you are $82 million in debt, and that there is something very wrong," Todd told Pederson. "Wake up."
Pederson did not wake up. Nor did the Board of Supervisors.
Now, more than a year later, Pederson has been run out of his job because the county is in financial meltdown. County departments have been forced to slash services and lay off hundreds of employees as supervisors grapple with a shortfall in this year's operating funds.

Outside financial consultants have been hired to try to determine how the county's finances can be salvaged, and the next budget year--which begins July 1--promises even more cutbacks and layoffs.

Taxpayers--and county employees who might lose their jobs--are hard-pressed to understand how the nation's sixth-largest county can be nearly bankrupt, even as its economy is growing, and new, taxable houses and businesses are springing up all about.

It is even more difficult to understand given the board's willingness to approve $250 million in new sales taxes for construction of a major league baseball stadium.

"There is no real valid reason for Maricopa County to be in the fix it is in today," says Hogan. "The warning signs were there four years ago."
For the last four years, the county's own books have shown a serious erosion in the government's financial health. Warning signs of impending fiscal problems have been springing up across the financial landscape.

But the county's Board of Supervisors ignored the flashing lights and ducked the issue. Rather than trimming the budget or raising taxes to fill the steadily widening operating deficit, supervisors embarked on a financial shell game of borrowing money from obscure sources that kept the deficit hidden from public view.

The game has been costly. What was once a minor problem that could have been easily addressed has ballooned into a financial catastrophe that has thrown hundreds of people out of work and plunged the county deeply in debt.

Amazingly, the county is in a financial crisis even though the amount of tax money it collects each year has been going up at a steady, predictable pace.

The heart of the county's financial shell game is to move annual operating deficits into short-term credit lines--and then forget about them. Supervisors became addicted to this easy escape from tough financial decisions. That addiction continues, and even now, the full depth of the county's problems has not been fully explained to taxpayers.

Basically, county documents show, and financial experts agree, the supervisors have stealthily saddled taxpayers with at least $100 million in debt.

First, the county has racked up at least $64 million in debt that has been hidden for nearly a year from public view, because supervisors rolled it over and over through short-term loans.

In the governmental equivalent of using one credit card to pay off another, the debt has simply been refinanced again and again, so that it has never drawn taxpayer attention.

In addition, the county's hospital is projected to end this year $40 million in the red. That debt must be paid somehow.

Even if the board is successful in cutting $22 million from its current budget--and three times that much from next year's budget--it still must address a far more serious and fundamental problem--the $100 million debt.

Someday, somehow, the county will have to come up with cold, hard cash to pay it.

Publicly, current and former supervisors--most notably, former board chairman Jim Bruner and current chairwoman Betsey Bayless--have characterized the budget crisis as a complete surprise. They claim they were misled by bad financial estimates, and were never given any warning about the true depth of the county's problems.

That claim tests the bounds of credibility.
@body:Earlier this year, Jim Bruner stepped down after five years on the Board of Supervisors to run for Congress armed with some potent campaign tools.

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