Stephen Slivinski

Put a Cap on It: How to Control Government Spending and Balance the Budget

Posted on November 15, 2001 | Type: Policy Report | Author: Stephen Slivinski
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EXECUTIVE SUMMARY

Arizona is facing a $675 million budget deficit this year. This budget crisis is a product of irresponsible and out-of-control government spending during previous years. If the state budget had grown no faster than the rate of population growth plus inflation since 1995, the budget would be $650 million smaller this year. To balance the budget, the state legislature must cut spending to that level during a special session that will begin on November 13. The rest of the budget gap could be covered by transfers from Arizona's $350 million rainy day fund.

The budget deficit is not a product of the tax cuts passed and enacted during the 1990s. Those tax cuts were not big enough to decrease the overall revenue flow into the state capitol. In fact, new spending far outpaced the tax cuts in any given year. During fiscal years 1999 and 2000, for instance, only 30 cents of each new tax dollar was returned to taxpayers.

The Arizona government should not issue bonds to cover the budget gap. Arizona enjoys an economic benefit from the current low debt level of the state. Debt issues now will only lead to higher taxes to pay off the bonds in the future. The legislature should not issue bonds to support what is really a bad spending habit.

After the legislature cuts spending, it should refer to the ballot for voter approval a tax and expenditure limitation modeled after the successful Taxpayers' Bill of Rights enacted by voter approval in Colorado in 1992. A budget cap of this sort added to the constitution would limit general fund spending to no more than the rate of population growth plus inflation unless approved otherwise by voters. The surplus tax revenue would be refunded to taxpayers. Since the size of the state government would affect the size of each taxpayer's refund, this system would create the political momentum necessary to keep state government in check and responsive to taxpayers.

Read Put a Cap On It here.

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