Wednesday, January 5, 2011

New report says Arizona needs tax reform, not cuts

Given the Courier's history of head-in-the-sand responses to budget challenges, I'm a little surprised to see this piece by AP's Paul Davenport on the new Brookings/ASU Morrison report on how we got where we are. A commenter kindly provided a link to the original report, which it seems to me puts a lot more blame on reckless tax-cutting than untoward spending than DAvenport would have us believe. From the introduction (emphasis mine):

Arizona is now struggling with two related but distinct fiscal disasters. Recognized is the portion of the state’s budget crisis that has resulted from the sudden collapse of annual revenues after the real estate crash and economic downturn. This crisis has hit hard but will ease as the economy recovers.

Less understood is the depth of the state’s massive structural imbalance, which has arisen thanks in large part to policy choices made during the go-go years of the state’s recent past but which will not soon relent. During the growth years, legislative and executive leaders acted as if the state could maintain a basic level of service provision even as it implemented tax cuts that permanently reduced the state’s revenue base.

Now, the illusion has been shattered and the state’s yearly labors to close its fiscal year budget gaps are about to get harder. With one-time fixes, gimmicks, and fund sweeps exhausted, budget cuts from this point forward could—if handled crudely—prove devastating and difficult to recover from. Serious discussions among state leaders have included opting out of Medicaid, cutting a K-12 system often cited before the recession for receiving the lowest per-pupil funding in the nation, and significantly reducing funding for the state’s university system. At the same time, if managed well (that is, with a balanced approach and a sense of strategy and rigor) the crisis might actually prompt innovation instead of just pain.

But what is certain, at any rate, is that the current fiscal crisis will continue to have lasting and damaging ramifications unless the state takes prompt, sober steps to address it. To this end, this short introduction to the state’s cyclical and structural deficit problems provides two groups of suggestions to the state as it prepares to attack its problems.

First, the state needs to improve the quality of its fiscal policymaking by moving to broaden, balance, and diversify its revenue bases while looking to the long-haul balance of taxing and spending. Implicit in this push must be a recognition that action has to occur on both the revenue and reduction side of the equation. Spending cuts alone are not going to put Arizona on a stable fiscal path.

And second, the state needs to improve the information sharing and budgeting processes through which fiscal problems are identified, analyzed, and addressed. As part of this, the state needs to put in place the sort of strategic plan that furnishes a long-term vision of state success against which budgetary and other sorts of performance can be measured against clear goals and mileposts.

In sum, the choices that need to be made by Arizonans are difficult and will require of leaders substantial self-discipline. Success at this work is imperative as the first order of business for Arizona as the state prepares to embark on its second century.

Tax policy reform first. What have I been saying?

1 comment:

dovh49 said...

Part of the problem may be how AZ tax but the bigger problem is how the Repubs spend. I agree with you that a mixed legislature is better than a solid party legislature.

Arizona has spent more every year even through the recession. See

A report was done by AEI titled "As Arizona Goes, So Goes the Nation: How Medicaid Ruins the States' Fiscal Health" shows how taking monies from the federal government actually hurts the states fiscal responsibility (this can be seen here in CV also with the new bus system they have in place, easy money from the federal government makes cities spend more than they normally would, as seen in the work by Nobel Laureate Elinor Ostrom shown in the article "Collective Action, Singular Accomplishment" see ASUs magazin See

Even the states new expenditure website shows that they spend more every year (of course, their trends graph show a different picture but their numbers say otherwise).

See FY09 $32.2 billion and FY10 $33.66 billion. (Look at the last graph on the pages).