Until February of this year, the Arizona Students’ Association (ASA) had never had to compete for funds in the marketplace of ideas. ASA is a private organization formed in 1974 as a student group claiming to represent the approximately 150,000 students attending Arizona’s three public universities. Until 1998 ASA was directly subsidized by taxpayers through the Arizona Board of Regents (ABOR), an arm of Arizona state government. In 1998 ABOR began collecting money for ASA directly from students through their tuition bills.
The no strings attached collection method has proven lucrative to the private organization. At $2.00 a semester per student the revenue nears $600,000 without any competition from other groups and no oversight on how it is spent. Most students never knew they paid a fee or what the fee supported. Until last year when a Goldwater Institute investigation showed that ASA had donated $120,000 in student fees to a political campaign to raise taxes.
In February ABOR changed its policy. Now students have to intend to fund ASA rather than doing so unwittingly. Instead of pushing their message and ideas on Arizona campuses and soliciting student support through donations, the Students’ Association filed a lawsuit against ABOR claiming that the change in policy violates its right to free speech protected by the First Amendment.
ABOR’s new “opt in” policy does nothing to prevent ASA from peddling its ideas and soliciting donations to help promote their causes. The policy infringes on nothing. It simply ends the subsidy gravy train that ASA has been riding since its founding. It seems ASA would rather litigate in a courtroom than compete with ideas in the free market. And you have to wonder why?
The Goldwater Institute agrees with the Board of Regents’ decision and has gone to court to protect the First Amendment rights of five students who no longer want to fund the Students’ Association’s political activity. These students want to preserve their constitutional protections against compelled speech.
Goldwater Institute: Investigative Report: Welcome to the Real World
Two years ago, when the Legislature considered reining in handouts to the solar industry by the Arizona Corporation Commission, the hearing room was packed with lobbyists opposing the move. Solar subsidies, they argued, were the cornerstone of the state’s job creation program.
Their poster child was Suntech, a large Chinese firm whose Goodyear solar panel factory was hailed as proof that government economic planning works. Indeed, when Suntech announced its plant in 2010, Gov. Jan Brewer proclaimed it the result of “the right incentive program to make business sense.”
Three years later, Suntech is shuttering the Goodyear plant and laying off its 43 remaining workers. But not before it pocketed $1.5 million in tax breaks from the state, $2.1 million from the federal government, and $500,000 in job training from the city. Goodyear also waived its plan review requirements and permit fees. Not for all firms, mind you, just for this one particular Chinese company with its grandiose promises.
People with a basic grasp of economics could have predicted the sad end to this story. When government subsidizes something, sure enough we get more of it. In this instance, we have a glut of solar companies competing to offer a product that is still not yet economically sustainable. At some point the charade ends and the taxpayers end up picking up the tab.
How about, instead, we create an economic climate characterized by low taxes and mild regulations that fosters innovative ideas of all kinds? When will government figure out that the market is far better equipped to determine winners and losers than a bunch of bureaucrats?
Apparently not soon enough. Arizona House Speaker Andy Tobin is sponsoring a massive new corporate subsidy scheme, H.B. 2646, that would allow insurance companies to divert tax money to a fund in which the state “invests” directly in chosen companies. Given the state’s dismal track record in predicting companies that will actually succeed, this seems a good time to hold tightly to our wallets.
Goldwater Institute: Dawn of a New Day at the Corporation Commission?
Goldwater Institute: Put Energy Policymaking Decisions Back Where They Belong
You may be wondering what the “sequester,” or cuts in federal funding due to a Congressional budget impasse, will mean for Arizona schools. The estimated reductions in federal money to Arizona schools could amount to $17.7 million, but before we stock up on canned goods and head for the hills, let’s put in perspective what $17.7 million represents.
While the Arizona Daily Sun says “Arizona could face massive budget cuts across all public programs” because of the sequester, it’s important to keep in mind that Arizona’s total education budget is $9.7 billion. This means the sequester reductions represent just 0.18 percent of the entire Arizona education budget. Total per student spending has increased 9 percent, after adjusting for inflation, since 2000. Arizona spends $9,233 per child every year—a figure that has always seen regular increases and never seen a multi-year decrease, even after adjusting for inflation, for as far back as these data go.
Still, Education Week warns that sequester cuts may impact “districts serving high numbers of disadvantaged children, students in special education, and English-learners, along with those near military bases and on Native American reservations.”
Good thing Arizona has these students covered thanks to the Goldwater Institute’s work in education reform. Children with special needs or in failing schools, along with children in military families and adopted from the state foster care system are eligible for education savings accounts: bank accounts that can be used for online classes, private school tuition, textbooks and even college expenses. Parents use their child’s portion of funding from the school funding formula in the accounts to create a unique, challenging experience that specifically meets their child’s needs.
The Institute designed the accounts in 2005 and has researched and advocated for this excellent education option for parents ever since. Our work has helped make 1 out of every 5 public school children in Arizona eligible for these innovative accounts.
Parents and children deserve better than a call to run and hide because of these minor budget adjustments. If we’re really concerned about giving children the best education we can, then we should be informing parents about all their options, not trying to scare them.
Goldwater Institute: The Myth of Education Cuts and Why Money Can’t Buy an A+
Education Week: Sequester Adds to Districts’ Budget Uncertainties
Arizona Daily Sun: ‘Sequester’ will cost Arizona millions
In Arizona’s tax code today there is a hidden, automatic tax hike that is based on something you, and even the state legislators and members of Congress who write the tax code, have no direct influence over: inflation.
Luckily, this is not a problem in the federal income tax code on top of the state’s. Thanks to the landmark tax cuts of 1982 proposed and signed into law by President Ronald Reagan, the federal income tax brackets are “indexed” for inflation – meaning the brackets move up every year by the same amount as inflation. In Arizona, on the other hand, over time state income taxpayers may be pushed into a higher tax bracket as a result of inflation because Arizona’s tax brackets stay exactly where they were the last year no matter what the inflation rate is.
Let’s say your pay raise was set at exactly the rate of inflation. You could get pushed into the higher Arizona income tax bracket even though your pay raise was simply meant as a way to keep up with the rising costs of goods. Even at a tame inflation rate, the compound effect of this hidden tax increase can be large over time. Also, the difference between the tax rates grows the further up the scale you go. The jump between the first two brackets may not seem big to some (a 0.29-percentage point leap from 2.59% to 2.88%). But the next step is even bigger – a 0.48% jump between 2.88% and 3.36%. The leaps only get bigger after that.
Arizona’s tax brackets used to be indexed to inflation in the 1980s, but the state legislature in 1990 ended the indexing of the income tax brackets. That action locked into place this automatic tax increase that happens every year. The impact on individual families – especially the working poor -- who are hit by this “bracket creep” can be devastating.
Luckily, relief may be on the way for Arizona taxpayers. A bill passed by the House and being considered by the Senate (HB 2439) would eliminate the inflation tax. Hidden auto-pilot tax hikes are not features any state should ever want to keep in their tax code. Passing HB 2439 is an important step that the Arizona legislature needs to take and the governor needs to sign into law.
Arizona State Legislature: Fact Sheet on HB 2439
Arizona State Legislature: House Ways and Means video archive of testimony supporting HB 2439
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