State Budget Apt to Reach '04 Ballot

Posted on February 12, 2003 | Type: In the News | Author: Robert Robb
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Arizona's budget mess may be headed for a titanic ballot battle in 2004.

Gov. Janet Napolitano is pretty clearly maneuvering for a sizable tax increase, although she is loath to admit it.

Her indictment of fiscal policy in the 1990s leaves no other logical conclusion than that she believes state government is substantially underfunded. More importantly, her budget proposes a level of expenditures that could only be sustained through a large tax increase.

The assumption is that she hopes her citizens commission will pave the way for a tax hike and garner at least a respectable degree of big-business support for such.

No one believes the Arizona Legislature, as currently constituted, will muster the two-thirds necessary to enact a large tax hike. And so it will have to go to the ballot.

Even if Napolitano's citizens commission turns out to be a bust and Napolitano shrinks from leading the charge without such cover, spenders are likely to initiate some kind of tax increase proposal for 2004.

Moreover, those spenders without current voter protection against budget cuts, such as the universities and children's welfare advocates, may seek it.

But spenders are unlikely to have the field to themselves.

Fiscal conservatives, led by the Goldwater Institute, have become highly enamored of the Colorado Taxpayer's Bill of Rights, passed in 1992.

The heart of that initiative limited the annual growth in state spending to population and inflation. Spending any excess requires voter approval. Any funds collected in excess of the spending limit have to be rebated to taxpayers annually.

Since its passage, more than $2 billion has been returned in annual rebates. And Colorado has one of the smaller budget deficits in the country.

People who complain about Arizona state spending in the 1990s don't like to talk about what it actually was. Annual growth in state General Fund spending was about 7 percent. Population and inflation increased at an average of just around 5.5 percent.

There will be a concerted effort to get a measure similar to Colorado's on Arizona's ballot in 2004. Right now the action is in the Legislature, where the Senate Finance Committee on Monday passed out Chairman Dean Martin's "Budget Stabilization Act" on a party-line vote.

Martin's proposal offers more options than does the Colorado initiative. In addition to taxpayer rebates, the Legislature could use revenue in excess of population growth and inflation to seed a "rainy day fund" of up to 10 percent of state General Fund expenditures, or for one-time capital spending.

The proposal also tries to give the Legislature more flexibility in managing revenue downturns such as the one the state is currently enduring.

If revenue growth fell below population and inflation increases, the Legislature could reduce voter-mandated spending by a proportionate percentage.

An analysis by legislative budget staffers indicates that if Martin's proposal had gone into effect in 1993, after the last revenue slowdown, the state would have rebated an additional $2 billion to taxpayers, fully funded the rainy day fund, and would face a budget deficit of only around $100 million this year, rather than one almost four times that.

Although Martin's proposal sailed out of his own committee, with only token protests from Democrats, getting it through the entire Legislature is going to be much tougher.

While reduced in numbers and political heft, there remain a handful of moderate to liberal Republicans in the Senate who will need much convincing. And the chairman of the House Ways and Means Committee, Tucson's Steve Huffman, has not been a supporter.

But, as with the spenders, fiscal conservatives are already making early plans for an initiative drive should legislative referral fail, a movement that would be highly energized by any indication that the spenders will be successful in getting a significant tax hike on the ballot.

Arizona politicians, particularly Napolitano, may dance around the fundamental question of whether state taxes need to be increased or state spending restrained.

Chances are, however, that the question and both options will, one way or another, be squarely before voters in 2004.

Reach Robb at robert.robb@arizonarepublic.com or (602) 444-8472. His column appears Sundays, Wednesdays and Fridays.

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