Tom Patterson Article in East Valley Tribune

Posted on November 07, 2001 | Type: Op-Ed | Author: Thomas C. Patterson
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Arizona's state government is facing a fiscal crisis. Over the next two years the state is projected to spend $1.6 billion more than it can expect to take in from taxes.

How could this happen? A booming economy created a tax revenue gusher that lawmakers must have believed would never stop. Spending increased faster than population growth and inflation combined. Voters joined in the binge as well. Last year in the polling booths, voters committed the state to automatic increases in education spending and an expansion of state-provided health care. Now, a modest decline in revenue growth, even though totally predictable, has created a situation in which the current size of programs cannot be supported by available funds.

Laudably, the governor has called for spending cuts, but unfortunately, she and some legislators are also considering an historic, first time ever fix: using debt to balance the budget. There could not be a worse nor more dangerous precedent. Borrowing money to make up for any revenue shortfall would weaken an already tenuous budget discipline and burden future Arizonans with the consequences of our poor planning.

Thomas Jefferson pessimistically observed that the natural course of events is for government to grow and liberty to yield. Legislators are under relentless pressure to spend more money. Even though state general fund expenditures have nearly doubled in the last decade, there never is enough money to satisfy all the special-interest supplicants. The only limits on spending are available revenue and lawmakers' willingness to extract more money from taxpayers.

Since the political and economic effects of tax increases are pretty well known (people hate them and they slow economic activity), requiring spending to match tax revenue is a reasonably effective counterweight to the desire to spend more. However, if legislators borrow to finance spending, this deterrent to spending is gone. By borrowing the money, legislators can spend more; hear constituents, special interests and the media praise them as visionary humanitarians; and pass the bill on to future generations. Debt financing will cause state outlays to grow explosively and burden workers and families in the years to come.

Proponents of borrowing often argue since private citizens take mortgages to buy a house, government is justified in borrowing for capital expenses like school buildings. The analogy is false. The typical family cannot absorb the one-time cost of a house into its yearly budget, and so must spread the cost over 30 years. The state, however, is now being forced to spend money annually to build and repair school buildings, making it just like any other routine expense in the budget. Under these circumstances, borrowing for capital expenses is just a way to dodge making cuts somewhere else.

If the state incurs $200 million of debt each year to pay for schools (the usual proposal), we would eventually be paying well over $200 million per year in debt service alone. In other words, future taxpayers would have to pay not only for the costs of the school buildings themselves, but also for the cost of the borrowed money. It would be almost impossible to ever pay off this revolving debt load.

Overspending produced the current crisis, and spending more will not get us out. Over the past decade, real state tax revenues have never gone down in spite of the "draconian" tax cuts enacted during that time. As Casey Stengel said, "You can look it up." Today's citizens received whatever benefit was gained from the additional spending and we should pay for it ourselves rather than pushing it on to future generations. If we really care about our children, the last thing we should do is slip them the bill for our overspending with interest.

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