PHOENIX -- State lawmakers are planning to raid a mortgage fraud settlement fund to balance the budget.
"There's a lot of pressure on the budget," said House Speaker Andy Tobin. He said lawmakers decided it makes more sense to use $50 million of what the state got earlier this year for pressing needs, like replacing the loss of federal dollars for welfare programs.
And Senate President Steve Pierce said the current intended uses of the funds are a low priority. He said the funds are currently set to be used for things like "advertising on how to keep your own personal finances in shape."
Pierce said there are higher priorities.
"We have over $3.5 billion going toward education," he said.
"We're doing everything we can to increase that," Pierce continued "The money has to come from someplace."
But Valerie Iverson of the Arizona Housing Alliance said that "someplace" should be elsewhere. She said there were more than 10,000 foreclosure filings in Arizona last month alone.
"We still have the highest foreclosure rate in the country," she said. "We figure that the money they're proposing to sweep could provide 75,000 troubled homeowners with housing counseling and 10,000 homeowners with legal assistance."
But the issue is more than one of fiscal philosophy and priorities.
Iverson pointed out that the settlement signed on Arizona's behalf by Attorney General Tom Horne with the lenders has strings on the $97.7 million going directly to the state. It says the money is supposed to go to things like avoiding preventable foreclosures, minimize the effects of the foreclosure crisis and prosecute financial fraud.
More to the point, Iverson said, the document uses the word "shall" to describe the uses.
"I'm going by what's in the consent decree," Iverson said. And Iverson said her organization, which represents agencies that would get these funds for counseling and legal help, already is consulting with attorneys about filing suit if the provision remains in the budget.
Horne, who signed the documents, isn't talking about whether the move is legal. About the only thing that press aide Doug Nick would say is that he did not agree to the fund shift.
"It's being done to us," Nick said.
The funds are part of a $26 billion pact announced in February with five major lenders to settle claims by Arizona and other states that they acted improperly and illegally in dealing with homeowners who sought mortgage relief. Allegations ranged from refusing to work in good faith with borrowers to outright fraud in providing documents to courts to foreclose on homes.
Arizona's share was $1.6 billion, with virtually all of the money for borrowers themselves.
That includes $1.3 billion in direct help to those who are "underwater' with their mortgages, owing more than the property is worth. There also is $110 million in payments for those who already lose their homes to lender misconduct and $85 million for interest rate reductions.
And then there was this $97.7 million going directly to the Attorney General's Office.
Pierce would not address the question of whether the specific wording of the settlement precludes taking the money. Instead he questioned whether Horne had the authority to claim the money on behalf of his office.
"The money was to come to the citizens of Arizona," he said. Pierce said the only reason the deal was worded the way it was is because Horne got to craft the language about Arizona's use of the funds.
"He put it to where it comes to him," Pierce said, suggesting that was improper.
"He is an employee of the state of Arizona," the Senate president continued. And Pierce said that, for some other states, the pact specified the money was to go directly into the state general fund.
Anyway, Pierce said, it's not like the money would otherwise be used to help homeowners pay down their mortgages.
Iverson, however, said that misses the point.
"This is the only flexible money that can help with home ownership counseling, legal aid and outreach and education," she said. And that still leaves 10,000 people a month who could lose their homes.
"They don't know where to turn, they don't know how to get help," Iverson said. The result, she said, has been a proliferation of mortgage scams.
"So we need this type of money to be able to counsel the people, provide them legal aid, do the outreach and education so they know where to go to," she said. Iverson said they need that information to then be able to tap the other direct help programs created by the settlement.
Pierce, however, said he sees the funding being raided as little more than a glorified consumer education program. He said there are more important needs.
Aside from increasing funds for public schools, he said the state needs to replace the loss of some federal welfare dollars. And Pierce said the state needs to boost funding for programs for the developmentally disabled.