Phoenix—On January 1, millions of Americans resolved to get out of debt. A new report from the Goldwater Institute shows that state and local governments need to join the crowd.
The State of Arizona has taken on an unprecedented amount of debt, $6.3 billion, despite a strict debt limit of $350,000. When local government debt is included, the total amount of debt for all levels of Arizona government swells to $37 billion. That's about $6,000 for every man woman and child in Arizona. In just four years, from 2004 to 2008, state and local debt in Arizona increased by more than $10 billion.
Our state’s framers knew the perils of government debt. They watched the state’s debt explode while Arizona was still a territory and saw the strain it put on taxpayers. When they wrote the constitution, they purposefully included a strict debt limit of $350,000 on state debt. Despite this clear limit and additional limits on local government debt, Arizona state and local governments combined are now $37 billion in debt.
A new report, “Living Debt Free: Restoring Arizona’s Commitment to its Constitutional Debt Limit,” by Goldwater Institute Senior Fellow Benjamin Barr, explains how politicians have used gimmicks to disguise new government debt, often simply by renaming debt a “lease.” The report also explains how judges have failed to enforce the constitutional debt limit by creating new definitions of debt and relying on precedent from other states that do not have the same constitutional limits as Arizona.
“It’s unacceptable for the Legislature or the judiciary to simply ignore the constitution,” Nick Dranias, Director of Constitutional Policy at the Goldwater Institute said. “There will always be pressure to spend more, which is why our framers created the debt limit. Everyone should be concerned when judges and government officials read taxpayer protections right out of the constitution.”
Debt allows government spending to grow virtually unchecked because it eliminates pressure on elected officials to set spending priorities. And, it costs taxpayers more to pay for government services with debt than with cash on hand. In 2008, for example, Arizona taxpayers spent $696 million on state debt interest payments alone. That’s more than the state spent on the Department of Health Services which administers behavioral health, disease prevention and control, and community public health programs and regulates the state’s childcare and assisted living centers, nursing homes, and hospitals, among other things.
The state’s mounting debt, combined with its current fiscal problems, is leading to calls for reforms that will help keep Arizona solvent. Politicians and judges need to return to the plain language of the state constitution to ensure that taxpayers have the protection the constitution promises. Judges should consider the substance, not the form, of an agreement to determine if it creates debt. To help judges in that effort, the legislature should pass a law that provides a definition of debt that applies to all government spending. If all else fails, the constitution could be amended with new language clarifying the definition of debt and the limits placed on state and local governments.
“Living Debt Free” is available online or by calling (602) 462-5000. The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.