Benjamin Barr

Living Debt Free: Restoring Arizona's Commitment to its Constitutional Debt Limit

Posted on January 05, 2010 | Type: Policy Report | Author: Benjamin Barr
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EXECUTIVE SUMMARY

The State of Arizona is facing an unprecedented amount of debt—some $37 billion. That works out to roughly $6,000 of debt for every man, woman, and child in the state. The heap of debt is leading to calls for reform to keep Arizona solvent. Although various reforms, limits, and oversight may have merit, there is a simpler alternative: follow the state constitution’s debt limit.

The framers of Arizona’s constitution knew firsthand the dangers of government debt. In the mid- to late 1800s, many states and local governments suffered incredible financial losses caused by excessive debt, and the burden of repayment fell squarely on taxpayers. The remedy was simple—prohibit government from saddling taxpayers with debt beyond a reasonable amount.

To protect taxpayers, the framers included a stringent debt limit of $350,000 in the Arizona Constitution. But to the state’s detriment, politicians have evaded the limit with creative debt-hiding schemes. Debt is often labeled a lease or given another name. Complicated financial agreements are also used to hide debt. And judges have failed to enforce the “debt limit” clause. Instead of protecting Arizona taxpayers from financial straits and upholding the constitution’s plain language, judges have interpreted the word “debt” in an absurdly narrow fashion when it comes to government.

Politicians and judges need to return to the simple genius of the state constitution to ensure that taxpayers have the protection the constitution promises. Judicial analyses must 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 for all government-related spending projects. If all else fails, the constitution could be amended with new language clarifying the definition of debt and the limits placed on the state. Returning Arizona to fiscal health and protecting taxpayers from excessive debt requires nothing less.

Read Living Debt Free here

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