Gov.-elect Janet Napolitano has proposed a commission to undertake a "comprehensive performance review" to solve Arizona's continuing budget crisis. The review committee would be composed of economic experts and business leaders and tasked with finding $300 million in savings. Despite the old saw that good reforms tend to die in committee, there is reason to believe that a committee is a good idea.
Twenty years ago, the Reagan White House created the Grace Commission, consisting of 161 senior business executives and more than 2,000 private sector volunteers, to conduct a comprehensive review of the federal budget. The final report made 2,478 recommendations to eliminate waste, mismanagement and inefficiency in Washington, equaling a potential savings of $424 billion.
The most successful idea to come from the Grace Commission was the Base Realignment and Closure Commission (BRAC). Before the BRAC, Congress had been unable to close unnecessary military bases: congressmen were simply unwilling to vote to close bases in their districts. But in 1988, Congress delegated authority to the BRAC to create a list of superfluous military bases. That same year, Congress voted in favor of an omnibus base-closing bill containing a slate of military bases submitted by the BRAC.
The secret to the success of the base-closing bill was that nearly every congressional district had a base on the list. Each congressman was making a sacrifice, and none could claim that his district had been singled out. By casting a broad net, the omnibus bill galvanized a majority coalition. The BRAC produced base closings again in 1991, 1993, and 1995.
An Arizona budget commission should be modeled after the BRAC and the Grace Commission. This budget realignment commission should go over the budget with a fine-toothed comb, uncovering the waste and suggesting various programs for elimination. Those suggestions should be written into an omnibus, stand-alone legislative bill. The un-amendable bill should then be subject to an up-or-down vote on the floor of the House and Senate within a specific time period. That process would have the effect of keeping special interests out of the amendment process, and force the legislature to make tough decisions.
In its quest to cut government waste, the budget commission could start by reading the Arizona Piglet Book, published by Citizens Against Government Waste and the Goldwater Institute. Modeled after the Congressional Pig Book, the Arizona Piglet Book details local waste and duplication in the budget, identifying over $270 million to be saved through the creation of a leaner and more efficient Arizona government. The Piglet Book's recommendations run the gamut from eliminating the Office of Tourism and the Office of Sports Development to opening up government services to contract bids.
Although Gov.-elect Napolitano is to be commended for suggesting the idea of a budget commission, there is one questionable element to her proposal: Napolitano would have the commission recommend $200 million in tax increases by closing various "loopholes" in the state sales tax. While there may be good reasons to close some of those tax exemptions, eliminating them without also lowering the sales tax rate would amount to a sizeable tax increase on consumers.
Moreover, raising taxes will not solve the root problems associated with wasteful government spending. Waste is waste, regardless of whether the state is operating in the red or the black. Also, raising taxes during a recession hurts the economy. We've seen what happened to states that raised taxes to balance their budgets in the recession of the early 1990s. Substantial data show that those states had the most trouble climbing their way out of the recession, and when they did, their job growth and personal income growth rates were below the national average. On the other hand, states that cut taxes had uniformly faster economic growth, exceeding the national average.
Instead of raising taxes, the budget commission should strive to find an additional $200 million in spending cuts, for a total of $500 million. Our recommendations shield health care and K-12 education from budget cuts, but if those budget areas could be examined, the budget could be balanced through efficiency gains and small expenditure reductions.
A decade of reckless spending has plunged Arizona's budget into the red. With a half-billion dollars of spending to cut, the new governor and legislature have a tough year ahead of them. A well-designed budget commission could make their jobs a lot easier.
--Stephen Slivinski is Director of Tax and Budget Studies for the Goldwater Institute, a Phoenix-based free market think tank.
--David Williams is the vice president for policy at the D.C-based Citizens for a Sound Economy. They are co-authors of an upcoming study, The Arizona Piglet Book.