Arizona is in the midst of a budget crisis. The state government is on track to overspend its current revenues by an unprecedented $1.2 billion in the current fiscal year. Although a more than 13 percent spending/revenue gap should be considered a critical issue worthy of immediate attention, the last budget was adopted even as there were clear signs that revenues could not keep up. This means that when the legislature meets in January 2009, it will have to take immediate action to avoid a financial catastrophe.
Tax increases are not an option and should not be on the table for discussion. Taxes reduce economic activity, punishing productivity, innovation, and hard work. Government spending often discourages exactly the same activity by rewarding constituencies and projects that often fail to make significant contributions to the citizenry's standard of living.
Immediate action does not necessarily mean drastic action. In many cases, returning agency budgets to fiscal year (FY) 2006 levels would do much to put Arizona on a more secure financial footing. That is because much of the budget gap is the result of dramatic increases in spending in recent years. In fact, in just the last five years, Arizona's General Fund spending increased 66 percent while population and inflation grew just 33 percent.
These cuts, which amount to just a little more than $1 billion, certainly are not prescriptive, but they serve as a starting point. They are also not currently enough to completely close the current gap. However, there is no doubt that further digging by the full legislature can reveal additional reduction opportunities. Budget decisions are sure to be difficult and, in some cases, politically unpleasant. However, they are necessary if Arizona is to restore its fiscal health.
Numbers and calculations are based on the several years of the Joint Legislative Budget Committees Appropriations Report. The JLBC website represents a wealth of information, and the staff was very helpful and professional in responding to inquiries.