Byron Schlomach

Five Reforms Arizona Should Immediately Adopt to Close the Budget Gap

Posted on September 16, 2009 | Author: Byron Schlomach
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Arizona's general revenue spending currently is about $3.3 billion more than its ongoing revenues. Money-saving strategies are a must. But reducing spending need not mean cutting core services. Rather, the situation presents a golden opportunity to make government more efficient.

Here are five ways to help state governments become more efficient:

Reform #1) Privatize public buildings - The state should fully outsource all maintenance on its 4 million square feet of office space, saving on employee costs as well as providing for efficient building maintenance over time. Currently, state agencies pay $21 per square foot for state buildings. The average cost per square foot paid to rent private buildings is $17.50. If the state sold its buildings and rented space, it could represent a potential total one time savings of $14.4 million.

Reform #2) Expand school choice - Of the $9,700 per public school student Arizona spends, more than $4,000 comes from the state. Arizona's corporate income tax credit program for private school tuition costs the state $2,300 in tax revenues per scholarship recipient. By expanding the program to allow 15,000 children to transfer from public schools, the state would save $25.5 million annually.

Reform #3) Convert higher education funding to per-student grants - Arizona already has grant programs for students attending private colleges and universities. These programs should be used as a model to convert the entire university funding system to yearly tuition grants so students can attend any school they choose. By including a requirement to graduate, grants could foster greater competition among universities and the resulting efficiencies could save $750 million annually.

Reform #4) Provide high deductible health plans with Health Savings Accounts for public employees - Arizona could potentially cut its health benefit premium costs in half with high-deductible health insurance benefits. Half of those savings could be used to help fund employees' health savings accounts. The state would still net $154 million in annual savings.

Reform #5) Develop alternative sentencing for minimum-security criminals - It costs Arizona $18,500 per year to incarcerate minimum-security offenders. GPS tracking costs $4,500 per prisoner. Even with group therapy and other monitoring costs, the state could save $10,000 per prisoner, per year. With only one-quarter of Arizona's minimum-security prisoners sentenced this way, the state could save $25 million annually.

The ongoing nature of the fiscal challenges facing state and local government requires innovative solutions. Arizona's legislature has recognized this fact in one modest way: a private concession for some state prisons. Savings are estimated at $100 million. These additional five reforms would be good steps toward state government making the most of its limited tax dollars.
Byron Schlomach, Ph.D, is director of economic policy at the Goldwater Institute.

Learn More: 
Goldwater Institute: Saving with Systemic Change
Goldwater Institute: School Choice in Arizona: A Review of Existing Programs and a Road Map for Future Reforms

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