University research funding is a direct assault on the General Fund, which cannot sustain the current budget proposal or future commitments already placed on it. The Legislature wants to borrow $440 million (with interest and principal it is $831 million). This requires the General Fund to pay the bonds off at $34 million annually for 24 years.
This current budget will be more than $1 billion overextended, and that is achieved by: $78 million in funds transfers, $500 million bonding for schools, using $128 million of intended highway dollars, not paying the $195 million education rollover in the '03 budget, asset sales of more than $250 million, and with optimistic revenue forecast for '04.
The voters already gave the universities money for research by passing Proposition 301 ($50 million annually for 20 years, or $1.2 billion). One needs to read the latest study by the Goldwater Institute on "High-Stakes Betting on Higher Ed" and also a book by Daniel S. Greenberg, "Science, Money and Politics."
We are now pushing a price tag that is alt-fuels times eight.
Ronald Reagan once pointed out that, "outside of its legitimate function, government does nothing as well or as economically as the private sector."
We should be focusing on making Arizona's business climate attractive to all forms of economic enterprise by lowering taxes and getting rid of burdensome regulations.
Any investment that actually offers the kind of returns promised by universities will have no shortage of willing private investors. Companies will line up to accept government handouts, but will they put their own money on the line? That's the real proof of the pudding.
With initiatives that tie our hands and are increasing the General Fund obligation to hundreds of millions of dollars annually, can we afford to commit our future revenues to a program based on fiction and not facts? Most folks, when digging a hole, know when to quit.
The state's current level of outstanding debt is $4 billion. Outstanding state and local debt is near $24 billion.
Arizona already has the 10th highest level of state and local debt as a percentage of general revenue.
Even prior to considering the university technology and Civic Plaza expansion, the current legislative proposal adds $1.8 billion in debt over the next five years. This equates to $2.7 billion in principal and interest payments over the life of the debt and will result in debt service payments of $170 million by 2009. These numbers assume the continuation of new school construction through lease purchase financing for at lest the next five years.
Even under the legislative proposal, our level of state debt will increase by 45 percent.
The Civic Plaza expansion will be an additional increase in state debt of $300 million. This will include $626 million in principal and interest and $20 million in state General Fund debt service.
When you account for all new debt financing currently being discussed, the level of state debt would increase by $2.6 billion, or 65 percent and the principal and interest payments for all new projects would exceed $4 billion.
Annual debt service payments would be $225 million, which would be the equivalent of the seventh largest state agency.
A recent survey of internationally owned businesses showed government investment policies are the least important factor considered when moving to a state. A state's tax burden ranked much higher.
Research conducted by the National Bureau of Economic Research, the country's leading economic research center, demonstrates that high taxes reduce in-migration and, worse, deter private investment. NBER President Martin Feldstein of Harvard University and Paul Cashing, writing for the International Monetary Fund, independently found that private investment is twice as effective as public investment because, as Feldstein puts it, "the deadweight burden caused by incremental taxation (makes) the cost of government spending more than $2 for each dollar of government spending."