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Plan to Balance Budget May be Challenged

A legal fight is brewing over one way state lawmakers intend to balance the budget. 

The plan hammered out between the governor and Republican legislative leaders adds funding for education and a new state prison. It even puts $450 million into a special rainy day fund against future deficits. To do that, lawmakers will take more than half of the nearly $98 million the state got earlier this year as part of its share of a nationwide settlement with lenders over charges of mortgage fraud. Senate President Steve Pierce said the shift is justified.

"We have over 3 1/2 billion dollars going toward education," Pierce said. "We're doing everything we can to increase that. And we've gone up I don't know how much in education. Substantial. The money has to come from someplace. So if there's money there we could use for someplace else for the people of Arizona, that's what we should be doing."

 But Valerie Iverson of the Arizona Housing Alliance said that's a bad idea.

"We still have the highest foreclosure rate in the country," Iverson 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."

And Iverson said the settlement says the state SHALL use its money to avoid preventable foreclosures, prevent and prosecute financial fraud and deal with the effects of the foreclosure crisis. She said her organization is weighing whether to sue if the funds are taken.