No government has ever spent its way to prosperity. Our proposals help governments be fiscally responsible so citizens can be prosperous.
Editorialists throughout the state have waxed eloquent calling for restoration of funding to various parts of the state budget. University presidents complain of too little funding to universities and community colleges. School administrators complain that schools are short-changed. We’ve all seen the horror stories about reduced health benefits affecting organ transplant recipients and behavioral health services.
Last year, the Arizona Legislature and Governor Jan Brewer passed a state budget they claimed was balanced, although three ballot measures had to pass to make it so. A sales tax increase was approved in a May special election. Two other measures, worth about $450 million, failed in November. As a consequence of “balancing” the budget on a gamble, Arizona now faces a budget deficit of $763.6 million with less than six months left in the fiscal year.
When Governor Jan Brewer released her “Four Cornerstones of Reform” proposal on Jan. 21, she included some good suggestions to change tax policy that would help to spark economic growth in Arizona. Yet it doesn’t go as far as it should.
If termites were eating your house, would you do what it takes to stop the damage, or would you sweep the termites’ trails off your foundation and pretend the problem doesn’t exist?
Unfortunately, the latter appears to be the strategy some lawmakers want to follow in dealing with Arizona’s woefully under-funded government employee pensions.
To: Governor Jan Brewer
From: Arizona taxpayers
Subject: Fiscal and Economic Reality
Over the last two years, you have laid out a vision that government, through tax subsidies, will pursue certain high-skilled industries for the state and make sure these industries will have the workforce they need with funding for education. That’s a laudable goal, but there’s an overwhelming problem with this vision: The numbers do not add up.
The good news is the Arizona Legislature, with the cooperation of Governor Jan Brewer, has passed a balanced budget for the first time since 2007. State lawmakers deserve credit for making some difficult decisions to reduce spending by more than $1 billion.
Governments facing a financial pinch generally have five options. They can print money, borrow, raise taxes, cut spending, or spend fund balances. State governments cannot print money, so were down to four choices. Because a two-thirds vote is required for the Arizona legislature to raise taxes, practically speaking, that alternative should also be taken off the table.
Congress approved $8 billion for President Obama's high-speed rail program without ever asking what the total cost would be, how to pay for it, or who would ride the trains. The dismal answers to these questions reveal much about American politics.
State estimates indicate Obama's plan will cost around $90 billion, or about $1,000 for every federal income taxpayer. Since 17 states, including Arizona, aren't even in the plan, a truly national network would cost far more.
Dr. Phil likes to ask, "How's that working out for you?" We can only reply, "Not very well."
This decade, Arizona lawmakers cast aside the frugality of the 1990s. Since 2000, spending on Arizona's Medicaid system has risen 132 percent, and soaring annual interest payments are up 213 percent. Spending on the Department of Economic Security, the states welfare agency, has almost doubled, from $404 million in fiscal year 2003 to $796 million in fiscal year 2008.
Despite this spending, poverty rates have been heading in the wrong direction.
The state budget deficit is an opportunity in disguise. The pressure of a multibillion dollar shortfall might enable reforms we wouldn't have the courage for otherwise.
Governor Janet Napolitano, although often cited for her skill in avoiding tax hikes, recently unveiled a couple of particularly bad ideas for revenue enhancement. First, she wants to expand photo radar on state highways to generate $90 million of deficit reduction.