Arizona Daily Star on Governing Arizona
Opinion
Arizona budget crisis demands strong leadershipOur view: New report underscores impossibility of simple solutions
Arizona Daily Star
Tucson, Arizona | Published: 11.15.2009
Talk about a rock and a hard place: A new report on Arizona's budgetary crisis shows clearly how little room the governor and Legislature have in which to maneuver — and how vital it is that they start moving boulders immediately.
The report, "Beyond California: States in Peril," by the Pew Center on the States, places Arizona among the nine states with budget situations comparable to California's. That translates to one word: disastrous.
It underscores the urgent need for Gov. Jan Brewer and lawmakers to take on reform of the state's volatile, cyclical taxation system; to muster the political courage to seek to overturn some voter spending mandates; to find new, stable sources of revenue; and perhaps to seek reversal of some constitutional amendments.
The stopgap special session that Brewer has called for this week is expected to address only about $500 million of the state's fiscal 2009-10 shortfall.
In fact, the gap in the current fiscal year is about $2 billion and revenues are projected at only about $6.4 billion, Capitol Media Services reported Thursday. The structural deficit is actually $3.7 billion — the difference between revenues and ongoing expenses. Federal stimulus monies have temporarily helped reduce that.
As Jack Cox, president of the Communications Institute and director of Governing Arizona, notes in an article on today's Opinion Page, Arizona has in fact increased spending each year over the past four years because of various factors. This is like maxing out your credit cards without knowing where the money to pay them off will come from, he noted.
Voter mandates are costly.
The Pew report makes clear that none of the "solutions" now on the table in Phoenix will suffice to right Arizona's perilous course.
The report concludes that California, Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are on the brink of fiscal calamity.
After the recession struck, and "as the economy grew bleaker and state revenues sank, Arizona's lawmakers reacted slowly, looking to solutions they had used to deal with other, less serious recessions," the report said. They drained the rainy-day fund; they delayed payments to school districts from one quarter to the next.
Since then, social programs and public schools and state universities have been forced to absorb draconian cuts. State agencies have been asked to prepare scenarios for another 15 percent in reductions this year.
But a 1998 constitutional amendment prohibits lawmakers from changing any program approved by voters, among them a 2000 measure that mandates annual increases in state aid to education and another that requires the state to provide free health care for those who fall below the federal poverty level.
Medicaid rolls have more than doubled since 2000; Arizona's costs for Medicaid have been rising at more than twice the national average, according to the Pew report.
Finding more revenue
Revenue reforms won't come easily either.
The Pew report noted that "a fierce anti-tax faction" in the Legislature favors cutting spending as a solution.
Brewer wants some cuts but is primarily pushing for a temporary 1-cent-per-dollar sales-tax increase. Brewer's proposed sales-tax increase has gotten nowhere with either Republican and Democratic lawmakers.
Recently, Brewer said she would reject other proposals to increase revenues because they won't solve the immediate crisis by bringing in money quickly, according to Capitol Media Services.
To increase any tax, the Legislature must muster a 75 percent majority, which Pew called "virtually impossible." The alternative — asking voters to approve the increase — requires a simple majority, but risks failure and can't be done quickly.
Even if a sales-tax hike was approved, it wouldn't begin generating income for months and, because of declines in spending during the recession, would be unlikely to generate the $1 billion a year Brewer promises. It would be too little, too late.
The Pew report noted that Arizona's reliance on income-tax and, especially, sales-tax revenues makes it vulnerable to sharp cyclical reverses. During the 2009 fiscal year, Pew noted, the state's personal-income-tax receipts fell 32 percent and receipts from the sales tax dropped 14 percent.
Where is the leadership?
Brewer and GOP leaders of the Legislature have been at odds since she took office in January. It's time for them to get out of their opposing corners, bring the ostracized Democrats into the discussion and actually take on these issues.
Cox reports in his Opinion Page piece that Governing Arizona will gather leaders and numerous lawmakers this week for a forum to begin examining Arizona's fiscal choices. Perhaps the exercise will kick loose some new thinking — and instill some new political courage — among participants. We hope so.
We know this: Cutting spending won't solve the problem — the chasm is too deep and the problem stretches years into the future. A temporary sales-tax increase would provide some relief, but not enough.
It's time for all parties to drop their fixed ideological positions, address the state's longer-term fiscal challenges and compromise. If they don't, they will be compromising Arizona's future.