The Arizona Senate & Medicaid Expansion: A Lesson in Making a Bad Bill Worse

By Christina Corieri

Last week, the Arizona Senate passed Medicaid expansion. Sadly, the proponents were not satisfied with merely passing a program expansion we can’t afford; they actively worked together to kill a series of common sense amendments that would have prevented extra expense and abuse.

One amendment would have activated the circuit breaker if the federal government ever dropped its share of the cost below the promised 90 percent, but every senate Democrat and five Republicans voted the amendment down, signaling that the Feds should feel free to increase Arizona’s costs.

Another amendment would have required an independent audit to ensure hospitals don’t pass the provider tax on to patients. Expansion proponents voted the amendment down, making it easier for hospitals to illegally pass the cost along without fear of being caught.

An amendment was offered to require an annual report on the quality of care provided by AHCCCS, Arizona’s Medicaid program. Although taxpayers have a right to know whether their money is being put to good use, these same senators voted the amendment down. Without this transparency, proponents can continue to assert how well the program works without risking evidence to the contrary.

This coalition also voted down amendments designed to curtail non-emergency use of emergency rooms and ambulances, which result in high, unnecessary costs to the state. Likewise, they voted down amendments to require health professionals and pharmacists to check the prescription monitoring database before authorizing or filling a member’s prescription for a controlled substance such as Oxycodone, Percocet, or Vicodin. These amendments would have saved taxpayers from paying for and enabling addictions to these medications.

While the Medicaid expansion is a costly and misguided policy, these amendments were not poison pills but sensible ways to mitigate some of the costs and prevent abuse. The proponents, however, made a bad bill much worse by rejecting these amendments. Thankfully, the Senate does not have the last word. While we hope the House declines the Medicaid expansion, at a minimum, we hope it supports some common sense amendments that will help protect taxpayers.

Christina Corieri is a health care policy analyst with the Goldwater Institute.


Ten Reasons to Decline Medicaid Expansion in Arizona

By Christina Corieri, Heath Care Policy Analyst, Goldwater Institute

1. Expanding Medicaid will cost Arizona hundreds of millions of dollars.

For the first three years, the federal government has promised to cover 100% of the medical costs for the newly eligible Medicaid enrollees, and yet the cost to Arizona’s General Fund for the first year alone would be $154 million. The costs to the state are a result of the fact that the federal reimbursement rate of 100% applies only to the direct medical expenses of the newly eligible enrollees, not the additional administrative costs. Additionally, the 100% reimbursement rate does not apply to those new enrollees who were previously eligible but either did not know it or otherwise failed to enroll.

The true costs to Arizona have been hidden by projections that reflect only the first three years of the expansion, not the later years when the state’s share increases. The Kaiser Family Foundation estimates that the total cost to Arizona for 2014-2019 could be as high as $739 million depending on how many newly eligible people enroll.

2. A supermajority vote is required to authorize new taxes.

In 1992, Arizona voters passed Proposition 108, which requires approval of 2/3 of both chambers of the Legislature to impose a new tax or fee or to increase an existing tax or fee. There is a narrow exception for “fees and assessments that are authorized by statute, but are not prescribed by formula, amount, or limit, and are set by a state officer or agency.”

The proposed Medicaid expansion disregards the spirit and letter of the law. Because the Governor’s office has explicitly prescribed the assessment amount in the proposed budget, the tax increase doesn’t fall within the exception in the law.

If legislators authorize a provider tax by a simple majority vote, they will circumvent the will of the voters and will be vulnerable to a lawsuit that, if successful, will leave the legislature with an expensive Medicaid expansion that lacks a funding mechanism.

3. The federal government is unlikely to maintain promised funding rates.

President Obama has already proposed cutting the promised reimbursement rate to states in his last two budgets.

The Governor’s office has acknowledged that Washington will likely cut its promised funding level. A publication released from the Governor’s office in January entitled Difficult Choice: Expanding Adult Medicaid Coverage states “it is probable that, at some point, the federal government will choose to reduce reimbursements to the states as a consequence of its own fiscal challenges.” In fact, the circuit breaker, which is intended to protect Arizona from additional costs, is not activated until the federal government cuts the reimbursement rate for the newly eligible enrollees to less than 80% – effectively allowing the federal government to double Arizona’s share of the costs before the state would react.

4. The provider tax, which is the proposed funding mechanism for the expansion, could be limited or eliminated.

A provider tax is a scheme by which states tax healthcare providers in order to draw down additional federal matching dollars. The tax paid by healthcare providers is returned to them via increased Medicaid spending in the state or increased Medicaid reimbursement rates to providers.

There are growing calls from both sides of the aisle in Washington to limit or eliminate the ability to assess a provider tax. Attacks have come from President Obama, Majority Whip Durbin (D-IL), Senator Corker (R-TN), House Republicans, and the Simpson Bowles Commission. If the provider tax is limited or eliminated, Arizona will be left holding the bill.

Eliminating or limiting the provider tax will not trigger the circuit breaker despite the fact that it would leave the expansion in place with no funding source besides the general fund.

5. The circuit breaker may not be enforced by a future governor and future legislature.

The circuit breaker is designed to automatically abolish the Medicaid expansion if the federal reimbursement rate for the newly eligible enrollees ever falls below 80%.

If circuit breaker is triggered, the sitting governor and legislature would face a media storm as thousands of people who had become dependent on free government health care were removed from the Medicaid rolls. Arizona has already experienced such a media storm when the state did not drop coverage, but merely froze enrollment for childless adults up to 100% of the federal poverty level in 2011.

6. The Woodwork Effect is likely to be much larger than anticipated.

The federal health care law’s higher reimbursement rate does not apply to the costs associated with those individuals who are newly enrolled but who were previously eligible – this is referred to as the “woodwork effect.”

When Arizona passed Prop 204, it was estimated that roughly 129,000 people would fall into this category. But by 2003 it was approximately 250,000 – almost double the original estimate, costing the state hundreds of millions in unexpected money.

7. Uncompensated care is unlikely to decrease.

The Governor’s office has stated that uncompensated care results in a hidden tax of $2,000 per family per year that is reflected in the family’s insurance premium. Proponents of the expansion claim that it will solve the problem of uncompensated care and eliminate this hidden tax.

The same claims were made by proponents of Prop 204, but neither claim proved true. Uncompensated care increased by an average of 9% a year during the first seven years of the Prop 204 expansion according to a study by the Lewin Group. And the average family premium increased from $8,972 in 2003 to $14,854 in 2011 – a 66% increase. There is no reason to believe the results will be different this time.

8. Cost projections are likely incorrect, as Arizona’s last Medicaid expansion illustrates.

The Prop 204 expansion was four times more expensive than the projected cost each year. For example, in 2008, the cost of covering the Prop 204 population was projected to be $389 million, but the cost was actually $1.623 billion.

9. There is no rush because a state can choose to expand Medicaid at any time.

The Centers for Medicare and Medicaid have made it clear that states may opt into the Medicaid expansion at any time. It would be wise for Arizona to wait and see how the expansion plays out in other states before committing Arizona to an expansion that will be incredibly expensive and difficult to roll back.

10.There is no such thing as free federal money.

This “free federal money” is borrowed money which taxpayers must pay back.

By agreeing to the Medicaid expansion, Arizona legislators would be committing current and future Arizona taxpayers to billions of dollars in new federal debt, and each Arizona legislator who votes for the expansion will be complicit in Washington’s spending problem.

Click here to download “Ten Reasons to Decline Medicaid Expansion in Arizona.”

Good news for schoolchildren from the 2012 election

By Jonathan Butcher

Arizona voters were not the only ones that considered ballot measures last week that dealt with schools. Across the country, voters were faced with a variety of proposals, from tax increases to new charter school laws. In three states, children benefited from voter-approved initiatives.

Arizona Proposition 204: Failed

This attempt to raise the sales tax was filled with carve-outs for special interest groups and lacked any meaningful innovations or effective ideas for Arizona children. Now lawmakers can focus on real reform, like successful implementation of education savings accounts, updating the school finance formula so taxpayers stop paying for empty seats in classrooms, and expanding online learning that has been proven to boost student achievement.

Washington State’s Initiative 1240: Passed

The initiative creates the nation’s 43rd charter school law (42 states and the District of Columbia). The measure calls for the creation of a statewide charter school authorizer, much like Arizona’s state charter board. These offices independent of local school districts have been a boon to charter schools in states like Arizona (where the statewide office has authorized nearly 90 percent of Arizona’s charter schools), South Carolina, and Colorado.

Georgia’s Amendment 1: Passed

Georgia already had a charter school law, but parents’ and community leaders’ freedom to create these schools has been under attack by school district officials. This state constitutional amendment restores the statewide charter school authorizer the Georgia Supreme Court ruled unconstitutional in 2011. The passage of this amendment will create more charter schools and give parents and children more choices among schools in their state.

Now that the votes are counted, let’s get to work making sure every child has the chance to go to a school that challenges them and prepares them for life.

Jonathan Butcher is Education Director for the Goldwater Institute.

Learn more:
Goldwater Institute: Ghost Busters: How to Save $125 Million a Year in Arizona’s Education Budget
Goldwater Institute: Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life
Goldwater Institute: A Custom Education for Every Child: The Promise of Online Learning and Education Savings Accounts

The First BBA That Will Check and Balance Washington without Brinkmanship

By Nick Dranias, Goldwater Institute

According to the Financial Times, at least one U.S. Senator has declared the nation should jump off the fiscal cliff rather than compromise on a budget that brings the national debt under control.

No wonder why Thomas Jefferson said over two hundred years ago, “I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for their reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.”

With unbridled fiscal brinkmanship in Washington, no doubt the federal government deserves to have its credit cards cut up. But we shouldn’t forget that there is a legitimate role for a reasonable level of debt in responsible hands. That’s why the Balanced Budget Amendment advanced by the Compact for America Initiative would do the next best thing: It would require a majority of state legislatures to approve any increase in federal borrowing above an initial debt limit. In other words, 26 state legislatures would be required to cosign on the federal government’s credit card. In addition, to ensure the initial debt limit is respected, the President would be empowered and required to designate spending cuts when 98% of the debt limit is reached. Congress would then be required to override those designations within 30 days with alternative cuts.

Unlike the current national debt brinksmanship, the Compact for America Initiative is designed to force Washington to agree upon a budget that can command a wide national consensus long before the midnight hour arrives. The Compact for America would keep the nation’s credit rating from being held hostage to a game of chicken between the President and Congress. With the states serving as Congress’ fiscal control board, and the buck stopping at the President’s desk, the Compact for America Balanced Budget Amendment Initiative would powerfully check and balance Washington.

This initiative is just the sort of powerful, yet pragmatic reform that could only be originated outside of Washington, D.C. It’s time for the states and the people, led by their Governors, to seize the day.

Nick Dranias holds the Clarence J. and Katherine P. Duncan Chair for Constitutional Government and is director of the Joseph and Dorothy Donnelly Moller Center for Constitutional Government at the Goldwater Institute.

Learn more:

Financial Times: Don’t Fear the Fiscal Cliff

Compact for America: Home page

U.S. Debt Clock: Home page

New Report: Education Savings Accounts expand opportunities for families

A revolutionary school choice program in Arizona known as “education savings accounts” is expanding educational options in unprecedented ways for families whose children’s needs have not been met by traditional public schools. Meanwhile, legislators in Florida, Utah, and Iowa have considered enacting the program in their states.

In a new report released Tuesday, Goldwater Institute Education Director Jonathan Butcher charts the origin and successes of Arizona’s first-of-its-kind education savings account program, and outlines a roadmap for any state looking to create a program of its own.

Conceived of by the Goldwater Institute in 2005 and first approved by the Arizona Legislature in 2011 for special-needs children, education savings accounts allow families to receive 90 percent of the funds the state would have spent on a child in a public school. Those funds may be used for private school tuition, homeschooling, virtual schooling, school materials, or other educational expenses.

More than 150 Arizona families of special-needs children took advantage of the program in its first year. This school year, 400 children are using an education savings account. Beginning in 2013, the program will be expanded to children in failing schools, children of active-duty military families, and children adopted out of the foster system. This expansion will make over 200,000 Arizona children—or 1 in 5—eligible for the program.

Today’s report features stories of children whose lives have been positively changed by education savings accounts. Nathan has autism and was still unable to form sentences at six years old. He struggled in his large kindergarten class where his busy teacher could not meet his special needs. Nathan’s mother applied for an education savings account, and was able to enroll Nathan in a specialized school that serves autistic children. Thanks to his education savings account, Nathan has blossomed, learning to speak and ask questions, and his future looks bright.

“The program is a boon to families, because they’re able to meet their children’s specific educational needs, and it’s a boon to taxpayers, because the program is a net-savings for the state,” said Butcher. “Education savings accounts are by far the most innovative school choice program to date.”

Nearly 40 states contain a constitutional provision known as the Blaine Amendment, which prohibits the direct transfer of government funds to private schools and has made crafting school choice programs that enable children to attend private schools challenging. Education savings accounts do not pose these constitutional challenges because, when a family receives an account, the funds become privately held and administered. When the Arizona teachers’ union brought a legal challenge to education savings accounts earlier this year, the court found the accounts did not violate the state constitution.

For any state legislature considering education savings account programs, Butcher outlines how to determine eligibility, funding sources, allowable expenses, and fraud prevention. The Goldwater Institute will continue to work with policymakers throughout the country to encourage adoption of the program.

To read “Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for Life” please visit:

The Goldwater Institute protects America’s greatest inheritance—the liberty and economic freedom of the individual—by holding government accountable and standing up for regular taxpayers just like you. Learn more about the Goldwater Institute at

Proposition 204 Could Cost Arizona’s Private Sector 15,000 New Jobs

By Stephen Slivinski, Goldwater Institute

The supporters of making the temporary 1-cent sales tax increase permanent – which is what the passage of Proposition 204 would do – claim that what they are proposing isn’t a tax hike, it’s simply an extension of an existing tax.

The permanency of Proposition 204 would only be so innocuous if you assumed that nobody changed their behavior on the expectation that the tax would go down. But businesses have to make decisions today based on assumptions about the future. If they believed that the sales tax rate would go down in 2013, as current law states, we can assume they would have made long-term business plans and hiring decisions based on that.

Economic models make predictions about future growth based on these sorts of assumptions, too. Ample empirical evidence already supports the conclusion that rising tax burdens can shrink employment growth. As such, an unexpected tax increase – which is the best way to describe Proposition 204’s halting of an expected tax cut – should be expected to dampen job growth.

The State Tax Analysis Modeling Program developed for the Goldwater Institute by economists at the Beacon Hill Institute based at Suffolk University in Massachusetts, integrates just those sorts of assumptions. The model is based on historical data on how tax burdens have changed economic patterns in Arizona. When you take into account the unexpected $1 billion tax load that would exist as a result of Proposition 204, you discover that overall private employment growth could be lower by at least 15,000 jobs each year than it otherwise would be as a result of the higher and newly-permanent sales tax rate.

There will be job growth as a result of Prop 204, but likely only at the construction firms that receive government contracts as a result of the tax hike and the education bureaucracy. The state would be better off with 15,000 jobs created across all parts of the economy than more jobs created that are dependent on the growth of government.

Stephen Slivinski is a senior economist with the Goldwater Institute.

Learn More:

Goldwater Institute: Proposition 204 – Not as Advertised

Goldwater Institute: The Construction Industry Actually is “Doing Just Fine”

Goldwater Institute: Arizona’s Secret Growth Industry

Goldwater Institute positions on Arizona’s 2012 Ballot Initiatives

With so many initiatives on the ballot this year, it can be hard to keep them all straight.  Here is a helpful guide you can use when casting your ballot.

Prop 114 – Goldwater Institute has No Position

Prop 114 would amend the state constitution to prevent crime victims from being subject to a legal claim for damages for causing death or injury to a person who is harmed when engaging in, attempting to engage in, or fleeing after having engaged in a felony offense.

Prop 115 – Goldwater Institute has No Position

Prop 115 makes various changes to the way judges are selected. Currently, potential judges are selected by a State Bar committee and then a short list is sent to the Governor from which to choose. This law would have the State Bar give one recommendation to the Governor, and the Governor’s office would produce the rest of the potential names themselves. This change will give the Governor more power to select judges and takes away power from the State Bar. It would also increase the term of office for Supreme Court justices and Appellate and superior court judges to eight years. The judicial retirement age is also increased from 70 to 75.

Prop 116 – Yes

Prop 116 would amend the Arizona Constitution by increasing the value of personal property used in agriculture, trade and business which is exempt from the personal property tax. The threshold of taxation would be raised from $70,000 to $2.4 million, exempting almost all small businesses from the personal property tax. This will be good for economic growth and for the business climate in Arizona.

Prop 117 – Yes

Prop 117 would limit the growth of the primary taxable value of real property – like houses and land — to no greater than 5 percent each year. Prop 117 would simplify the property tax system and more strictly limit property taxes. This proposal will also insulate taxpayers from dramatic increases in their tax bills that result from major fluctuations in the real estate market.

Prop 118 – Goldwater Institute has No Position

Prop 118 amends the state Constitution to change the formula used to calculate the amount of the annual distribution from the permanent state land fund to its beneficiaries for a nine-year period beginning fiscal 2012-13. The new formula distributes 2.5 percent of the average monthly market values of the fund for the immediately preceding five calendar years. The largest beneficiaries of revenues from this fund are elementary, middle, and high schools in Arizona.

Prop 119 – Goldwater Institute has No Position

Prop 119 would allow exchanges of state trust land when the exchange is related to either protecting military installations or managing lands so they can be leased or sold.

Prop 120 – Yes

Prop 120 would amend the state constitution with language asserting state sovereignty and authority to manage the land and natural resources of the state of Arizona.

Prop 121 – No

Prop 121 seeks to eliminate party primaries and instead send the top two vote-getters in a primary to the general election, regardless of party. The Institute opposes Prop 121 because it will limit voter’s choices in the general election. To learn more about Prop 121, click on the links below:

Prop 204 – No

Prop 204 would increase the state sales tax to fund education. But there is no guarantee in the Proposition that the money raised will go to the classroom. In fact, instead of a “dedicated” revenue source for education, not even 75 percent of the money raised will be spent on public schools, while a variety of special interest groups will benefit from the rest. This proposition will send more money to schools without a focus on improvement. The Goldwater Institute opposes Prop 204. To learn more, click on the links below:

Lessons from Texas on Building an Economically Healthier Arizona

By Byron Schlomach, Ph.D., Goldwater Institute

During the recent recession, the experience of Texas provides a marked contrast to that of Arizona. Arizona’s gross domestic product (GDP) fell at more than double the rate in the nation while Texas’s GDP barely fell at all. Texas’s employment in 2011 was at an all-time high and even greater than in 2007; by contrast, Arizona’s total employment in 2011 was 10 percent below its peak. Although most of the nation has seen hard times like Arizona has since 2007, Arizona’s economic challenges did not begin with the Great Recession. In fact, Arizona’s inflation-adjusted per capita income has lagged the nation’s for decades and stands steady at around 87 percent of the national level. While Arizona’s per capita personal income growth was fifth lowest among the states, Texas’s was seventh highest despite a large influx of people without jobs.

Arizona performs poorly because it taxes and regulates as if it were a state with natural advantages that can absorb bad public policy. In a comparison of several economic policy indexes between Arizona and its six neighbor states, Arizona outranks only California and New Mexico. These policy indexes include measures of economic freedom, business friendliness, tax systems and burdens, and cost of living. Texas ranks first in one measure, ranks second in two measures, and receives eight top-10 rankings.

Although many think oil and gas are the secret of Texas’s success, energy production is half the relative size of Texas’s economy now compared to what it was in the 1980s. The real secret is Texas’s policies. Those policies include no personal income tax, relatively low business taxes, a mostly simple tax structure that is fairly easy to enforce and comply with, gentle regulation that allows its natural advantages to be exploited, and private ownership of most of the state’s land.

Arizona has its advantages, including mineral wealth, balmy winters, stable geology, an outsized allocation from the Colorado River, and an advantageous state constitution that protects individual property rights and liberties. Arizona’s natural disadvantages are significant and very costly, though. They include lack of access to a water port, remoteness from the majority of Americans who live near and east of the Mississippi River, relatively limited labor and energy resources, and geological features that are visually stunning but topography that presents a surface transportation nightmare. Lawmakers need to take these issues into account when formulating policy and not add costs in a state that is already at some cost disadvantages.

The experience of Texas shows that Arizona can best exploit its comparative advantages with lean, unobtrusive government. The state should adopt Texas-style policies that (1) lower taxes and keep them low; (2) simplify the tax system, especially sales taxes and property taxes; (3) restructure the tax system to eliminate income taxes; (4) reduce business property taxes; (5) reduce regulations such as licensing, land use planning, and zoning; (6) sell state trusts, increasing the stock of private land; and (7) reduce the size of government and end state revenue sharing with local government.

Read “Lessons from Texas on Building an Economically Healthier Arizona” 

New Report: The Myth of Education Cuts and Why Money Can’t Buy an A+

A popular myth claims we severely underfund schools in Arizona. For years, teachers unions and other education interest groups have led a successful “crusade” in the media and the state capitol to spread this idea. “We have reduced education funding levels to the point where they’re really not sustainable for our students and our teachers,” says Ann-Eve Pedersen, who is leading a voter initiative to raise taxes to increase education funding.

Here are some key facts about education spending in Arizona:

1. When you add up all funding sources, Arizona now spends $9,233 per student, a 9 percent increase from 2000, after adjusting for inflation.

2. During the worst years of the recession, 2009-2011, operational per student spending only decreased 5 percent.

3. When you look back just a few years, from 2006 to 2011, per student spending increased by 10 percent, even accounting for the 5 percent dip during the recession. Federal data show that any cuts to operational dollars have been restored by funding increases.

4. This year alone, education spending in the state budget increased by $28 million dollars.

5. Between 2006 and 2011, 183 of 218 Arizona districts experienced an increase in total per student spending. Only 31 school districts saw a decline in total spending during that time period.

6. According to the state auditor general, these consistent funding increases have not led to more money being spent in the classroom. In 2011, Arizona districts only spent 54.7 percent of their funds on classroom expenses, “a record low since [the auditor’s office] began monitoring classroom dollars 11 years ago.”

Moreover, higher spending per student hasn’t bought students higher test scores. Arizona student achievement has been virtually unchanged for 20 years. Today, nearly 3 out of 4 fourth graders can’t read at grade level. And, although our scores still rank near the bottom on many indicators, Arizona students score as well as or better than students in some states where per student funding is double or almost triple what we spend. In short, there is not a direct relationship between money and achievement.

Voters should reject the latest attempt to raise the state sales tax to increase education funding, and Arizona lawmakers should commit the state to reforms that are proven to increase student achievement.

Click here to read The Myth of Education Cuts and Why Money Can’t Buy an A+

The Misplaced Priorities of the Prop 204 Campaign

Byron Schlomach, Ph.D., Goldwater Institute

When the Prop 204 campaign criticizes Arizona legislators for reducing education funding during the recession, they never explain what else legislators were supposed to do.

At the height of the recession state revenues had fallen by a third. With the money that was left, simple math shows that the legislature could not have maintained spending on education and social programs, which together make up 70 percent of the state budget. If they’d tried, it would have meant zeroing out prisons, the state legal system, State Parks, and several departments that protect public health. Even the 1-cent sales tax increase would not have prevented the closure of fundamental state agencies if the legislature had not reduced education and social service funding to some degree.

Support the NO on 204 Campaign

Even still, during the darkest days of the recession, school funding was only reduced by 5 percent.

By criticizing these reductions, Prop 204 supporters are implying that the legislature should have closed prisons, letting pedophiles roam free, shut down the Attorney General, leaving child support cases unsettled, and hurt kids by compromising recreation and public safety. Looking to the future, the legislature has wisely saved some money to avoid more budget reductions when the federal health care law fully kicks in and state health care costs skyrocket, but the Prop 204 campaign criticizes that, too.

The solution offered by the Prop 204 campaign is to permanently funnel $1 billion annually to schools with no strings attached. Here’s the irony. As education funding was reduced to cope with the recession, schools chose to direct less money to the classroom than ever before. They preferred to fire teachers than reduce the ranks of non-teachers on school payrolls. In 2011, only 55 cents of every education dollar was dedicated to classrooms.

When it comes to questioning priorities, I have to question those of the people running the Prop 204 campaign. Criticizing the legislature because they avoided letting pedophiles out on the street while rewarding with a billion-dollar blank check the very schools that fired teachers rather than bureaucrats sure seems backwards to me.

Dr. Byron Schlomach is the director of the Goldwater Institute’s Center for Economic Prosperity.

Learn more:

Goldwater Institute: Proposition 204: Not As Advertised

Goldwater Institute: The Myth of Education Cuts

East Valley Tribune: Census Shows Arizona School Districts Cut 10,000 Jobs

Will Arizona’s Proposition 121 Hurt or Help Political Parties?

By Clint Bolick, Goldwater Institute

Proponents of Prop. 121, the “top two” Arizona ballot initiative, contend it will lead to the weakening of the two major political parties. But the opposite is true. In fact, it would strengthen them while killing third parties, all to the detriment of voter choices.

Prop. 121 would create an open primary in which all candidates—Republicans, Democrats, independents, and third parties—would run. Only the top two would go on to the general election, and no other candidates would be permitted to appear on the ballot.

In California, this has led to multiple general elections featuring two candidates from the same political party. To Prop. 121’s backers, this is nirvana: the surviving candidates supposedly would have to appeal to independents and voters from the other party. To us, two candidates from the same party looks like no choice at all.

Nor would this necessarily produce two Republicans in Republican-leaning districts or vice-versa. To the contrary, the more candidates who run in a primary from the same political party, the more they will split their party’s vote—improving the chances that the other party’s candidates will move on to the general election.

This year in Congressional District 9, which has a slight Republican registration edge, there were fewer Democrats than Republicans running in the primary, so that under Prop. 121 the top two candidates moving to the general election would have been two liberal Democrats, Kyrsten Sinema and David Schapira, rather than Sinema and her Republican opponent, Vernon Parker. Which scenario offers a real choice? To ask that question is to answer it.

The only way to prevent a multiplicity of candidates from one party splitting the primary vote is to pressure candidates not to run; and the only entity that can do that is strong political parties. Thus Prop. 121 would lead to stronger political bosses and fewer electoral choices.

As for third parties, this measure’s impact is even clearer: it would make them extinct. Except in the rarest circumstances, neither Greens nor Libertarians—or even Independents—ever would appear on a general election ballot.

Though Prop. 121 calls itself the “Open Elections” initiative, it is anything but. Good thing for its backers there’s not a law requiring truth in political advertising.

Clint Bolick is director of the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.

Learn More:

Arizona Week: Clint Bolick debates Paul Johnson on Prop. 121 (video)

Goldwater Institute: Prop 121′s Dirty Little Secret

Arizona University Students Unknowingly Contributed $120,000 to Prop 204 Campaign

Arizona university students have contributed over $120,000 in cash and funded countless man hours to support the Yes on Proposition 204 campaign, which would permanently raise the state sales tax, yet most of them probably don’t even know they’ve made a contribution. In fact, many of them may not even agree with the initiative.

In a Special Investigation released Thursday, Goldwater Institute Investigative Reporter Christian Palmer explains how the Arizona Students Association broke its own rules earlier this year when the student-funded 501(c)(4) organization applied its money and manpower to aid the Quality Education and Jobs Committee, a political committee formed to launch the statewide ballot initiative now called Prop 204.

This week, four students who sit on the ASA board as Arizona State University representatives resigned their positions, citing their inability to speak out against ASA internal politics, including how the organization’s funds are spent. Another representative resigned his ASA board post earlier this month.

One former ASA board member told the Goldwater Institute that when he tried to speak out against the organization’s actions last year, professional staff threatened to sue him.

Founded in 1974, the ASA is a student group representing the 130,000 students who attend ASU, Northern Arizona University and the University of Arizona. According to the ASA’s mission statement, the organization works to “make sure that higher education in Arizona is affordable and accessible by advocating to elected officials and running issue campaigns to engage students.” The ASA reaped more than $585,000 from Arizona university students in 2012. Over the course of the past five years, the group has received $2.6 million in fees.

The Goldwater Institute found that the ASA doesn’t have to get approval from students before it determines how to spend funds, but it is required to get approval from its board of directors, which is comprised of elected representatives of the student body. However, those directors’ one-year terms make board turnover nearly constant, which means significant power resides with the ASA’s professional staff members. According to former ASA board members interviewed by the Goldwater Institute, members of the ASA’s professional staff knowingly ignored the organization’s bylaws in order to help Prop 204.

This controversy emerged last spring, when several board members refused to support Prop 204, and took steps to ensure the ASA did not endorse the initiative. Having repeatedly failed to secure that endorsement from a majority of the board, the ASA’s professional staff proceeded to earmark organizational resources for the initiative campaign, including cutting a $20,000 check to the campaign, despite the fact that ASA internal financial policies require the board to review and approve all expenditures of $300 or more.

In June, having been almost entirely repopulated by newly elected board members, the ASA board voted to contribute $100,000 to the Yes on Prop 204 campaign, making the ASA a larger contributor to the campaign than the teachers’ unions and school boards association and second only to a contractors’ group.

The ASA’s contributions to the Yes on Prop 204 campaign raise legal questions about whether their actions constituted unconstitutional “compelled speech” on behalf of its student funders. The U.S. Supreme Court has ruled in cases on similar issues that people cannot be forced to fund political speech with which they disagree. Because all students are required to pay the fee to the ASA and the process for obtaining a refund isn’t advertised and is cumbersome, the fee may violate the First Amendment rights of university students.

The Goldwater Institute is examining these recent events and is considering legal action on behalf of ASU students.

To read Welcome to the Real World, please visit:

‘Won’t Back Down’—A Must-See Movie

By Jonathan Butcher, Goldwater Institute

Mark your calendar for Friday, September 28, when the feature film Won’t Back Down hits theaters. Based on real events in California, the movie depicts a group of parents’ efforts to reform a failing school.   Hollywood stars Maggie Gyllenhaal (The Dark Knight, Away We Go) and Viola Davis (The Help) play two devoted mothers who gather signatures for a petition to take over their children’s school, one that has underserved students for years.

California is one of four states with a “parent trigger” or “parent empowerment” law that allows parents to petition to convert a traditional school into a charter school or replace school leadership. Under these laws, at least half of the parents in a failing school must support the transition. California, Texas, and Mississippi passed laws in 2010 and 2011, while Gov. Bobby Jindal signed Louisiana’s law earlier this year.

The Arizona State Senate passed a “parent empowerment” bill last March, though the measure eventually stalled in the House. Lawmakers in at least 20 other states are considering the reform idea.

Two weeks ago, Businessweek explained how the parent empowerment law has given parents in Adelanto, California new hope. Doreen Diaz joined with other Desert Trails Elementary parents in 2010 and petitioned to turn their school into a charter school. With the help of Parent Revolution, a non-profit based in Los Angeles, Doreen gathered signatures and began a grueling battle with school and district leaders.

While the fate of Desert Trails remains unresolved, Doreen insists drastic action is needed to help its students. “I hope that more people see [Won’t Back Down] and are inspired to stand up and fight,” Doreen says. She can point to McKinley Elementary, where parent engagement spurred the creation of a charter school nearby—a school that outperformed McKinley in the first year it was open—or the dozen states considering parent empowerment laws.

I hope Won’t Back Down inspires lawmakers to give parents the freedom to turn failing schools into success stories.

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Jonathan Butcher is the education director for the Goldwater Institute.

Learn more:

Goldwater Institute: Momentum Building for Parent Empowerment

Bloomberg Businessweek: In California, Public School Parents Stage a Coup

Parent Revolution: STAR Test Results Show Celerity Outperforming McKinley in All Subject Areas

IMDB: Won’t Back Down

The Hidden Cost of the Income Tax

By Stephen Slivinski, Goldwater Institute

Decades of experience have shown us that high taxes dampen economic growth. State policymakers hoping to encourage job growth are right to worry about their state’s tax load on the private sector.

What needs more attention than it gets now is what a state taxes. As it turns out, most states actually rely on the very tax that slows job growth the most: the income tax.

Most states, for instance, assess higher income tax rates on those with higher incomes. Not only does that penalize those who are most successful in the private sector, it inhibits job growth by making small businesses – which are typically the creators of the largest share of jobs in most states and pay their income taxes through the personal income tax code – pay higher taxes the more they grow.

States with graduated-rate income taxes, like Arizona, also tend to see government revenues grow faster than personal incomes and that means the government gets richer faster than the private sector. That’s always bad for long-term economic growth.

The best way out of the trap is to eliminate the tax that is the most damaging to economic growth. Eliminating the income tax in Arizona could not only remedy these problems but also help launch the state into the ranks of the economic powerhouses like Texas. This policy change could still create more than 20,000 new jobs in the first year because it gets rid of the hidden economic costs associated with an income tax.

Every state has natural advantages and disadvantages that policymakers cannot control. But they can control tax policy. Getting rid of the income tax is the only policy bold enough to fundamentally boost long-term economic growth in Arizona.

Stephen Slivinski is a senior economist at the Goldwater Institute.

Learn more:

Goldwater Institute: A New Tax Plan for a New Economy: How Eliminating the Income Tax Can Create Jobs

Cato Institute: State Income Taxes and Economic Growth

National Taxpayers Union Foundation: The Economic Impact of the Adoption of a State Income Tax in New Hampshire

Arizona Should Not ‘Exchange’ Health Care Freedom for Government Control

By Christina Sandefur, Goldwater Institute

This summer’s Supreme Court ruling in NFIB v. Sebelius effectively made states the ultimate guardians of healthcare freedom. Although the Court allowed the federal government to tax individuals who do not obtain government-approved health insurance policies, the decision puts states in a position to prevent the federal takeover of the nation’s healthcare industry.

The most effective way states can defend their citizens’ healthcare freedoms is by refusing to establish state-run health insurance exchanges. The federal healthcare law devised these bureaucracies to facilitate the sale of federally-regulated health insurance. But a state need not set up an exchange – if it declines, the law authorizes the federal government to create one in that state.

Some state policymakers have been sold the false bill of goods that setting up their own exchanges would shield their citizens from federal control. But Washington bureaucrats have the final say even in state exchanges about which doctors and insurance plans can participate, and which benefits must be offered. What’s worse, states that create exchanges must surrender to the federal government sensitive information about their citizens’ healthcare choices.

There are other reasons to decline to set up a health insurance exchange, too. Through the state-run exchanges, private insurance companies will receive billions of dollars in direct taxpayer-funded subsidies. But these subsidies are not doled out in federally-run exchanges if states refuse to participate. Additionally, a state exchange would impose crushing burdens on local businesses. Employers of more than 50 people that do not provide federally-approved health insurance could be forced to pay fines of at least $2,000 per employee per year. But no such penalties exist if a state declines to set up an exchange.

States that set up exchanges are putting their taxpayers on the hook for carrying out these federal mandates. While federal funding for “startup” assistance is available now, after 2014, states will be fully responsible for shouldering the costs running their exchange.

Florida, Wisconsin, Texas, and other states across the country have rejected exchanges. Arizona should join these states in protecting healthcare freedom by declining to set up its own exchange. To learn more about this and other steps states can take to maximize individual choices in healthcare, download the Goldwater Institute’s latest Policy Memo: Next Steps on Health Care Policy.

Christina Sandefur is an attorney with the Goldwater Institute.

Learn more:

Goldwater Institute: Ten Reasons Arizona Must Reject Exchanges

Arizona Republic: A Welcome Mat for Obamacare in Arizona

New York Times: Liking It or Not, States Prepare for Health Law

Eliminating Arizona’s Income Tax Could Create 20,000 New Jobs in First Year

Phoenix, AZ—Eliminating Arizona’s state income tax could put 20,000 people to work in the first year alone and business activity in the state could rise by an additional $419 million each year, finds a new Goldwater Institute policy report released Thursday.

And Arizonans would have more money in their pockets to save, spend or invest.

In A New Tax Plan for a New Economy: How Eliminating the Income Tax Can Create Jobs, Goldwater Institute Senior Economist Stephen Slivinski argues that the income tax makes Arizona less attractive than our neighbors when companies want to expand and create new jobs, it takes hard-earned money out of worker’s pockets, and creates instability in state revenue levels. Slivinski recommends that lawmakers eliminate the income tax outright and shift to a broad-based sales tax.

“We are falling behind neighboring states in economic recovery, and just tweaking Arizona’s tax code around the edges will not bring about the long-term job growth that we need,” said Slivinski. “Eliminating the income tax is the only proposal bold enough to dramatically boost new economic growth and drive widespread job creation.”

Slivinski argues that Arizona’s tax structure is outdated, weighing the state down and getting in the way of long-term economic and job growth. Arizona lost nearly 300,000 jobs during the recession and has an unemployment rate of 8.3 percent, among the highest in the nation.

According to Slivinski, eliminating the state income tax would make Arizona more attractive to companies who want to expand. When job-creators can keep more of their earnings to reinvest in their businesses, they are more likely to expand and hire new workers. Under this tax plan, Arizona workers will enjoy not only more opportunities to find work, they will also keep more of the money they earn.

National economic data shows that states without an income tax see substantially stronger economic growth than the national average and states with income taxes. In Texas, for example, where there is no income tax, the state gained over 400,000 new jobs between May of 2007 and May of 2012, and the state has regained all the jobs that it lost during the recession.

Besides creating jobs and letting families keep more of their paychecks, eliminating the income tax will also help stabilize the state budget. Having a budget dependent on income taxes make state revenues more vulnerable to economic ups and downs, according to Slivinski. Income taxes make up nearly half of all state revenues and they are much more volatile than sales taxes. During a boom period in the economy, as incomes spike, so too does tax revenue, which allows for large increases in government spending. But when a recession hits and incomes dive, so too do tax collections and there is a big reduction in state revenues. This was a major cause of the most recent budget deficits and sent policymakers scrambling to cover the new spending they took on during the boom period.

In his report, Slivinski shows how to eliminate the income tax, keep the sales tax at the rate it is now, and still bring in the same amount of government revenue we see today. The report also recommends reforms to maximize this tax plan’s effectiveness, including unifying the sales tax base statewide and creating a constitutional amendment to stop state and local governments from creating an income tax in the future.

“By taking steps to eliminate the income tax, Arizona will signal to job-creators around the country that we are open for business and committed to making our state competitive,” said Slivinski. “The faster a plan to eliminate the income tax is enacted, the stronger the economic boost our state will receive.”

To read Stephen Slivinski’s biography, click here.

To read the report, click here.

The Goldwater Institute protects America’s greatest inheritance—the liberty and economic freedom of the individual—by holding government accountable and standing up for regular taxpayers just like you. Lear more about the Goldwater Institute at

Judicial Watch takes its eye off the ball

By Clint Bolick, Goldwater Institute

Judicial Watch, the Washington, D.C.-based group that describes itself as a conservative watchdog, has taken on all types of government corruption and waste.

Among them is the scandalous practice of union release-time, in which government employees are given paid time to perform union work, including lobbying and campaigning.  Judicial Watch condemned Miami-Dade County, Florida Mayor Carlos Alvarez for allowing “public transit workers to be excused from their regular duties while still collecting taxpayer salaries.” Among Judicial Watch’s bill of particulars against the mayor was the “1,300 union police officers who make over $100,000 at the department Alvarez worked in and headed for years.” Outrageous, said Judicial Watch.

So imagine our shock when Judicial Watch announced it would try to intervene in the Goldwater Institute’s challenge to release time in Phoenix—to defend the practice that diverts six full-time police officers and thousands of hours of police time for “union business,” including lobbying and campaigning.

Why the sudden shift in principle?

The explanation appears to lie in Judicial Watch’s recent hire of Mark Spencer as its “Southwest Projects Coordinator.” Before joining Judicial Watch, Spencer was the Phoenix police union’s president and lobbyist, where—you guessed it—he was on release time, receiving the pay and pension benefits of a full-time police officer while riding a union desk.

Release time is widespread among Arizona municipalities (Scottsdale is a notable exception). Phoenix’s release time provisions in contracts with its seven government worker unions cost taxpayers $4 million per year, according to a Goldwater Institute investigation released last year.

Seems like just the type of scandal Judicial Watch would sniff out—if it hadn’t compromised its mission.

Clint Bolick is Vice President for Litigation at the Goldwater Institute.

Learn More:

Goldwater Institute: Money for Nothing: Phoenix Taxpayers Foot the Bill for Union Work

Goldwater Institute: Cheatham v. Gordon

Judicial Watch Release: Judicial Watch, Phoenix Police Officers Seek to Protect Officers’ Employment Agreement

Judicial Watch Blog: Union Workers Campaign For Mayor On Taxpayer Time