Byron Schlomach

Arizona's broken budget system

Posted on September 28, 2011 | Author: Byron Schlomach
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Months after the housing bubble burst in 2007, Arizona passed a state budget that many knew was out of balance the day it was passed. By summer of 2007, there was even talk of having a special session to fix the situation.

In 2008, warnings from the State Treasurer went unheeded. Revenue estimates, driven by then-Governor Napolitano, were excessively optimistic. The state’s budget stabilization fund was drained. Even with more-conservative leadership in 2009 and an accumulating $13.9 billion in shortfalls over three years, certain types of government spending were declared off-limits for reductions. Truly difficult decisions were put off with gimmicks, borrowing, and optimistic revenue estimates until this year.

The bias toward spending by the legislature and governor is easy to see. It’s always easier to say yes than no. Those asking for money are at the capitol every day; those who pay the bills are working.

The deck is stacked against taxpayers in favor of spenders, and the best way to counteract this natural tendency is with a budget system that favors taxpayers.

Two states have budgeting systems that favor the bill payers: Arkansas prioritizes spending, categorizing every program as either absolutely necessary; desirable but optional; and not worth the money. By tradition, the revenue estimate is conservative. In Texas, the Comptroller (an office like our Treasurer and not involved in budgeting) gives a revenue estimate that is constitutionally binding. Both states’ finances have fared relatively well as a result of these safeguards.

Arizona’s Treasurer is capable of doing the revenue estimate and the legislature is capable of setting priorities. It’s high time both these practices were adopted.

Dr. Byron Schlomach is the director of the Goldwater Institute’s Center for Economic Prosperity.

Learn More: The Arkansas approach: How one state has avoided fiscal disaster

Arizona Republic: Governor clashes with state treasurer on budget

National Conference of State Legislatures: Legislative Budget Procedures: Budget Framework

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