Byron Schlomach

Budget Memo to Governor Brewer

Posted on March 29, 2011 | Author: Byron Schlomach
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To: Governor Jan Brewer

From: Arizona taxpayers

Subject: Fiscal and Economic Reality

Over the last two years, you have laid out a vision that government, through tax subsidies, will pursue certain high-skilled industries for the state and make sure these industries will have the workforce they need with funding for education. That’s a laudable goal, but there’s an overwhelming problem with this vision: The numbers do not add up.

Arizona is in its fourth fiscal year since the recession began without honestly balancing its budget. State lawmakers have avoided addressing spending priorities and have made few attempts at structurally reforming government. As the Joint Legislative Budget Committee has pointed out, of the $12.5 billion in budget gaps during the recession, only $2.2 billion has been closed with permanent spending reductions. We have received more in federal assistance, at $2.4 billion, than we have eliminated. And we have created almost as much debt at $2.1 billion. This debt does not include $1.5 billion in spending rollovers to school districts and universities, for which taxpayers also pay additional interest.

Arizona taxpayers suffered the two biggest tax increases in state history last year with the return of the state equalization property tax and the 1-cent sales tax increase. We cannot afford more tax increases. The state’s total gross domestic product fell by $7.5 billion in 2009. But Arizona’s private sector – the producing sector – lost $8.2 billion in GDP, meaning only the government grew in Arizona’s economy that year.

Federal stimulus money is drying up. In 2014, $900 million in annual sales tax revenue is scheduled to end. Your proposed $500 million in reductions to taxpayer-funded health care, while justified and now supported by the federal government, likely will be challenged in court and cannot be counted. Recently enacted tax policy creates more revenue uncertainty both in short term and long term.

In round numbers, 40 percent of state general fund spending is for public education, 30 percent for health care, 10 percent for universities, 10 percent for prisons, and 10 percent is spent on everything else. Your proposed budget would spend more on prisons, a little less on universities, less on health care (which is uncertain at best), and you would make public education off-limits for less spending. The numbers simply do not add up. No budget category can be off-limits. At some point, Arizona will have to face fiscal and economic reality.

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

Learn More:

Goldwater Institute: Budget Reduction Opportunities 2011

Joint Legislative Budget Committee: Revenue and Budget Update

Arizona Republic: A Look at the Numbers

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