Arizona Needs Spending Limit to Prevent Future Budget Crises

GoldwaterInstitute News Release

PHOENIX – Arizona state government has become a victim of the boom-and-bust economic cycle. Policymakers ramp up state spending when tax revenues are rising, then they must rush to cut back programs when the economy contracts and tax revenues fall. Voters expected to stop such yo-yo spending when they amended the Arizona Constitution 30 years ago by capping the annual amount of money the state can spend.

A new study from the Goldwater Institute reports that reform of the spending limit could prevent financial problems like those Arizona is facing today from happening in the future. “Put Arizona on a Real Budget: New Spending Limit Can Restore State’s Fiscal Health” outlines why the state should use population growth and inflation to set the spending limit, instead of the current measure of personal income.

“Arizona needs an effective spending limit that prevents the budget rollercoaster and allows core government services to keep pace with our growing state,” said Byron Schlomach, Ph.D., author of the study and director of the Goldwater Institute’s Center for Economic Prosperity.

Colorado adopted this type of spending limit in 1994. That state has had the greatest reduction in poverty since then and has weathered the current recession better than most states. Colorado voters did suspend the spending limit in 2005 for five years, largely because the limit adopted there prompted state spending growth to fall below population growth and inflation during recessions.

A new Arizona spending limit could prevent that situation by directly tying the limit to the historical sum of population growth and inflation, by allowing voters to circumvent the limit for specific purposes, and by including provisions for a fully funded budget cash reserve and for an emergency fund, the study says.

Arizona’s current spending limit based on the total personal income of everyone in the state has been ineffective, allowing spending to rise and fall rapidly with the economy without ever reaching the annual cap. As a result, Arizona is now in the midst of one of the worst fiscal crises in the country. The state budget expanded by 17 percent in 2006 and just two years later faced a $1.5 billion deficit.

“If a limit based on population growth and inflation had been in place since 2001, the state could have had a $500 million budget surplus instead of a billion dollar deficit when the recession hit in 2007, which would have meant fewer budget reductions now,” Dr. Schlomach said.

Read “Put Arizona on a Real Budget: New Spending Limit Can Restore State’s Fiscal Health” here.

The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.


Comments

  1. kralmajales says

    Hell ya Scholmach.

    Start with the unconstitutional SB 1070 which is going to require massive spending. What is your position on THAT?

  2. Stephen Kohut says

    S1070 is constitutional. It mirrors 50 year old Federal statutes and the adjudicated standards for lawful contact, reasonable suspicion and the production of proof of identity when requested by a law enforcement officer. If S1070 is unconstititional than so are the federal statutes. No issues at all except for the cries from proamnesty backers.

  3. kralmajales says

    This goes farther than the federal statute which does not include reasonable suspicion as a standard. It also allows people to sue our local police officers, which is just plain silly…and litigious to your tort reformers out there. Finally, I didn’t say anything above about unconstitutional, I was talking about the unfunded mandate that the state has placed on our police, which are now suffering massive budget cuts because the state and localities have lowered taxes.

    Are you willing to pay in your country property taxes Stephen for the massive effect this is going to have on our criminal justice system? Oh…I bet not…and I bet most of you don’t. You’ll say cut waste and I will offer that there is no amount of waste in the system that will replace the amount of spending this new bill will require.

  4. VoiceInTheWild says

    Look at the Brewer administration – how many of the 300 or so political appointees are making in the high five digit or low six digits?

    Brewer filled every Napolitano vacancy and brought in some characters that were making less – and then gave them state jobs that boosted their incomes beyond what they were making historically in private sector.

    Another is city governments. Overpaid at many levels. In Phoenix, employees can sell back up to two years of their unused vacation. Private sector – don’t use the vaction – you lose it. Military – can’t caryy more than 30 days leave on the books.

    All the more reason I am voting NO on 100.

  5. Yeah, right. says

    Guess Mr. S missed the spending limit already in the Arizona Constitution. The fact we spend less than the limit should be instructional to Mr. S., but he makes a good living off of peddling horse crap to suckers in business.

  6. Yeah, right. says

    Of course, what he really missed is the relentless tax cuts that gutted the rainy day fund, along with the moronic inability to raise taxes and cut loopholes when revenues went south.

    Epic Fail as analysis.

    18 years of tax cuts, and we need a better spending limit?

    Lack of reality here.

  7. Stephen Kohut says

    Yeah wrong,

    The tax cuts did not do in the rainy day fund. That was Jayno spending like a drunken sailor, or maybe an Obumma clone, into a recession. The recession cut revenues. Jayno spent. Bye-bye rainy day fund. Jayno sent more. Hello $3B budget deficit. You can have your own opinion but not your own facts.

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