Goldwater Institute

The table below compares Arizona to its neighbor states on ten indicators of economic strength. Three of the rankings assess economic freedom, three assess the state’s business climate, three assess the state’s tax climate and one examines the cost of living.

The first thing to notice is that on average, Arizona outranks only New Mexico and California. Considering that both of these states achieve a rock-bottom ranking in at least one of the measures, it’s not much of an achievement for Arizona to beat out only those two.

Second, while Arizona achieves only one top-10 ranking, Utah and Texas achieve six and seven top-10 rankings, respectively. With regard to economic policy, Arizona has firmly established itself in mediocre territory.

Problem is, Arizona can’t afford to be mediocre. The state has just two percent of the nation’s population, we’re in a desert a very long way from ports, and even farther from the 60 percent of the nation that lives east of the Mississippi.

Arizona can improve its rankings and more importantly, its economy, by making some fundamental changes, including reducing the per-capita cost of government, which is higher in Arizona than in Texas. Arizona needs to simplify its sales and property tax systems – among the most complex in the nation. Arizona could jump ahead of Texas by reforming the sales tax and eliminating the corporate and personal income taxes. Arizona also needs to revise its regulations to make them more sensible.

The days of construction booms are over. Prosperity despite poor policy is a thing of the past. With California in an economic free fall, Arizona has a real opportunity to rise. But, if we don’t want to continue to lose out to Texas, Colorado, and Utah, we must address our economic policies now. There is no time to wait.

Learn more:

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

Missouri Economic Research and Data Center: Cost of Living Data Series

Tax Foundation: 2013 State Business Tax Climate Index

On Wednesday, Pennsylvania became the 24th state to opt out of a state-funded health insurance exchange, declining to foot the bill for overreaching federal policies. One by one, states are learning that state-funded exchanges–which come with hefty price tags but zero flexibility–are a bad deal.

But there’s another reason states shouldn’t rush to set up exchanges: the legal fate of the federal health insurance law is still up in the air. In addition to the Goldwater Institute’s lawsuit challenging Congress’s unconstitutional delegation of power to the Independent Payment Advisory Board, courts across the country will hear new legal challenges to the law next year. Here are a few of the major lawsuits to keep an eye on: 

As states around the country get set to start their legislative sessions in January, making sure children are attending schools that challenge them and prepare them for life tops the list of priorities. Texas is one of the states considering a new scholarship for children in K-12, and even U.S. Sen. Marco Rubio (R-FL) has suggested a tax credit scholarship program at the federal level.

Despite the new options in K-12 education that families have in states like Arizona, Indiana, and North Carolina, only some 200,000 children in the U.S. are attending their first-choice school using a scholarship or education savings account. This pales in comparison to the 50 million children assigned to public schools across the U.S.

As lawmakers consider ways to give children the chance at a bright future, they should take a closer look at what made 2011 and 2012 so significant for students in states that passed laws giving parents the freedom to choose the education that is best for their child.

What sets Arizona’s education savings accounts apart from every other program in the country is the innovative combination of choice and flexibility. Parents can choose a school, but this is only the beginning. Parents can choose online classes, tutors, educational therapies, and save money in college savings accounts and beyond.

A few other states are catching on. New Hampshire’s scholarship tax credit allows parents to use scholarship funds for private school tuition or to homeschool their children. The Jon Peterson Special Needs Scholarship Program in Ohio also allows for multiple uses of scholarship money. In Michigan, a bill has already been drafted that would give children choices between school districts and online classes.

As other states consider new school choice programs, they should look beyond vouchers and tuition scholarship tax credits, or “school choice 1.0,” and embrace what other states, led by Arizona, are doing with “2.0.”

Learn more:

Education Next: School Choice Marches Forward

The Wall Street Journal: The Year of School Choice

The Heritage Foundation: New Hampshire’s Groundbreaking School Choice Expansion

Detroit Free Press: Education funding proposal allows school choice, more online learning

Star-Telegram: The Texas table is tilting toward vouchers

Tampa Bay Times: Florida Sen. Marco Rubio calls for federal tax credit scholarships

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