Goldwater Institute

In 2000, Arizona’s pension funds were considered some of the healthiest in the nation. Just over a decade later, Arizona now has the dubious distinction of seeing the third worst decline in its pension fund health among the states from 2000 to 2009. For too long, policymakers and pension fund managers have assumed their investments would have endless high returns and little or no risk. The last decade and two recessions have proven otherwise, and Arizona’s retirement systems are on shaky ground.

The chart below illustrates the stark reality. On an average yearly basis, benefits paid out in the state’s four pension systems have increased much faster than inflation and population, GDP, or personal income growth. Contributions have risen even faster in all but one of the funds. Meanwhile, assets built up from past contributions and investment earnings have barely grown at all, with two of the funds seeing losses.

Source: Arizona pension plan Comprehensive Annual Financial Reports, author calculations

It may already be too late to avoid breaking promises to some retirees. After all, contributions to the pension systems have increased six times faster than the state’s GDP. But to minimize the pain, action must be taken sooner than later. As soon as possible, new public employees must receive their retirement benefits only as 401(k) contributions. By doing so, we will avoid creating even more obligations that we can’t meet and making promises we can’t keep.

Learn more:

Cato Institute: Funding Status, Asset Management, and a Look Ahead: State and Local Pension Funds

Goldwater Institute: Defusing the Pension Bomb: Making Retirement Plans Solvent for All Public Workers

Arizona Treasury: Arizona’s Pension Challenges: The Need for an Affordable, Secure, and Sustainable Retirement Plan

It’s time to let everyone—parents in Arizona and other states, along with state and national policymakers—see the results of Arizona’s education savings accounts. Over 400 children are using the accounts this year, and thousands more become eligible next year.

But a critical feature is missing from the accounts, and it is the same feature missing from Arizona’s private school tuition scholarship tax credit: We need a way to be sure children in these programs are learning.

It is exciting to see so many children attend the school that challenges them and prepares them for life through a tax credit scholarship or savings account. But children are shortchanged if our expectations stop at the schoolhouse doors. Unless they take regular assessments to measure their progress, how does a child or her parents or teachers know whether she is being prepared for the future?

The savings accounts and scholarships are also vulnerable to attack if we can never show that children using the programs are succeeding. Test results can also help schools see what is and is not working for the children using savings accounts or tax credit scholarships.

In his book Tests, Testing, and Genuine School Reform, Herbert J. Walberg explains that testing regimens are related to better student outcomes. A study of students required to take either the Advanced Placement, New York State Regents, or Canadian exams found that these students “perform nearly a full year ahead” their peers. Another study of 39 nations taking the same international test found that “students in rich and poor nations learned the most when their countries employed external, curriculum-based examinations.”

Details on testing are important; we will have to sweat the small stuff. The link below to our research explains how and why parents should be able to choose a test for their child and not be forced to take the state test. The state doesn’t need to be overly prescriptive, but students should be tested. We owe it to the thousands of children who could be receiving a better education to make sure those who have the freedom to choose their school now are actually getting one.

Learn more:

Goldwater Institute: Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life

Milwaukee Journal Sentinel: Scores show voucher schools need accountability

Washington Post: Quality controls lacking for D.C. schools accepting federal vouchers

Yesterday morning Goldwater Institute attorney Nick Dranias argued before the Ninth Circuit on behalf of Tombstone, Arizona, defending Tombstone's right to access its water supply against hostile action by the Obama Administration.

As you may remember, last year a devastating combination of wildfires and monsoons ravaged Tombstone’s water supply, leaving only 3 of 25 springs in operation. Despite a declared state of emergency, the Obama administration still refuses to let the town repair its water lines, which originate in federal wilderness area, with anything besides horses and hand-tools, for fear of disturbing the Mexican spotted owl.

I discussed the case yesterday morning on Fox & Friends, which you can watch here.

The federal government often gets in the way during disaster and emergency situations when state and local governments need to protect the health and safety of the public. During the BP oil spill, Louisiana Governor Bobby Jindal wanted to send state workers out to protect the shorelines and the federal government held him off for weeks. Who knows how much damage to wildlife and the wetlands could have been prevented if Louisiana had been able to act quickly.

It's a terrible irony that constitutional law has deteriorated to the point where governments can ban Big Gulps under the guise of "public safety," but lack the right to restore a desperately needed water supply.

The Tenth Amendment guarantees state and municipal governments the right to protect public health and safety without seeking a permission slip from the federal government. We hope a victory in this case will help restore this critical freedom.

Learn more:

Goldwater Institute: Tombstone v. United States of America

New York Times: With Wild West Spirit, Tombstone Fights for Its Water

I’m a relative new-comer to Arizona, having lived here only five years. But I’ve traveled the length and breadth of the state, visiting more places than most native Arizonans have ever visited, if my personal sampling is any indication. Considering that, the degree to which Arizonans believe tourism is an economic powerhouse and worthy of government support is striking.

Take a look at the table below, which compares shares of GDP in the U.S., Arizona, and Texas. The two sectors most directly impacted by tourism are “Arts, entertainment, and recreation” and “Accommodation and food services.” Together, they contribute about one-half of 1 percent more to the Arizona economy than to the U.S. economy and over 1 percent more than to the Texas economy.

The tourism industry is not that much more of an economic contributor in Arizona than it is in the U.S. as a whole. And it’s a relatively small part of Arizona’s overall economy; certainly not an industry to plan economic recovery by.

So, what’s the point? The point is that state and local governments do a lot for tourism in this state, with all the government financed golf courses, stadiums, hotels and convention centers. Yet, it seems someone is constantly promoting yet another tourism scheme taxpayers need to fund. And even though we’ve spent a lot of money on the industry, it isn’t paying off with loads of new jobs.

But this is Arizona’s unfortunate pattern. Pick an industry, shower it with taxpayer money and hope jobs come. Instead of pinning our hopes on a hand-picked industry, Arizona needs to have the most efficient governments and produce the most efficient infrastructure, with the least intrusive taxes in the country. Do that and we might just see an economic revival that doesn’t depend on tourists.

Read more:

Goldwater Institute: Lessons from Texas on Building an Economically Healthier Arizona

Goldwater Institute: How Arizona Can Become the Oakland A’s of the States

Goldwater Institute: When Government Picks Winners, It Creates Losers