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Last week, the U.S. Department of Labor released employment data for all 50 states. Arizona has done reasonably well since March 2011, adding 47,000 non-farm jobs. That’s a growth rate of around 2 percent and puts Arizona among the top 10 states.

The Arizona Republic mentioned these numbers in their annual employment survey of the largest companies in the state and concluded that large employers were helping lead the state into a recovery. The Arizona Department of Administration reported that the biggest absolute job gain was in the leisure and hospitality industry (10,700 new jobs).

But digging deeper into the employment data reveals that Wal-Mart and tourism aren’t the state’s real growth industries.

In percentage terms, the fastest-growing industry was specialty contractors. Tied for second place were the securities and commodities industry and the state public education system, which includes the state universities.

Top Five Industries by Employment Growth

Source: Author’s calculations based on data from U.S. Department of Labor

It’s worth noting that the biggest employer in the state is not Wal-Mart, as the Arizona Republic concludes. The biggest employer in Arizona is the government.

State government as a whole has more than twice as many employees as Wal-Mart in Arizona, and total state and local public education employees outnumber Wal-Mart employees by more than 6 to 1.

The growth in the ranks of public education employees means more resources go to government. Unfortunately, there has been little in the way of an honest appraisal of whether those additional resources will add more value for taxpayers or students. In the meantime, policymakers should recognize that until we have real limits on the growth of government, government will continue to compete with private industries for the title of “top growth industry.”

Stephen Slivinski is an economist with the Goldwater Institute.

Learn more:

Arizona Department of Administration: Job Gains Across All Sectors (PDF)

Arizona Republic: Arizona’s Big Companies Boost Jobs Recovery

Goldwater Institute: Put Arizona on a Real Budget

After well over four years in Arizona, my wife and I have finally sold our property in Texas and we’re ready to buy a house here. I work near downtown Phoenix, but we’d like a little room and we’re not flush with cash, so I’m willing to drive. That means we could choose to live in most communities in the Valley, as long as they’re within about 20 miles of downtown Phoenix. One city in particular, though, is scratched off the list: Glendale.

I personally consider some parts of Glendale to have a lot of potential. There are some nice neighborhoods, some good schools, and drive times would be tolerable. The idea of moving to Glendale, however, looks too much like a crapshoot. If I wanted to gamble, I could go to a casino. But I don’t want to gamble with an asset as big and as important as a house.

The risk comes from the fast-and-loose way Glendale’s leadership has played with taxpayers’ money. The city has used sales tax proceeds to guarantee bonds for sports venues I personally would never use. It is also paying the National Hockey League to keep the Coyotes at Jobing.com Arena. Meanwhile, parks and a library annex, things I might use, will not be funded at levels once expected. Facing a $35 million budget deficit this year alone, the city is literally teetering on the edge of bankruptcy.

Top this off with a sales tax increase that will make Glendale’s the highest sales tax rate in the nation among major cities, and an expected property tax increase, and I cannot predict what my cost of living in Glendale is likely to be. At this rate, the value of any house I buy could be hurt just by being located in Glendale.

I love my family. I’m not taking the chance. I’m not buying a house in Glendale.

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

Learn more:

Arizona Republic: Glendale Leaders Mull Proposed Hike in Property Taxes, Layoffs

Tax Foundation: Glendale Considers Sales Tax Hike to Highest in Nation, Property Tax Hike

Recent news from the solar industry includes headlines about Germany cutting solar subsidies and Arizona-based First Solar laying off 30 percent of its employees.

First Solar’s move comes despite a grant of $16.3 million from the federal government’s Export-Import Bank in 2010 to expand one of its factories in Ohio. To sweeten the pot for First Solar, the Ex-Im Bank guaranteed more than $400 million in loans to St. Clair Solar in Canada to buy solar panels from First Solar. It turns out that the Canadian company was a wholly-owned subsidiary of First Solar, so the U.S. government was subsidizing the company to manufacture and then purchase its own product from itself. Even with those heavy subsidies, First Solar is still dimming.

Like the U.S., Germany has offered generous solar subsidies in the past. But now with substantial solar-energy capacity – perhaps too much to persist without subsidies – and serious economic trouble, Germany is cutting its solar subsidy programs.

Solar companies and governments seem to be learning a basic economic lesson. Duke economist Michael Munger explains, “if an activity is profitable, it produces more in value than it uses up in costs. If an activity is not profitable, it uses up more in resources than it produces in value.” If subsidies bolster a company’s bottom line, then the market signal of a company’s profitability is “fake, and the activity still uses up more resources than it produces in value.”

In the end, doing away with subsidies may lead to a brighter future for solar energy. Subsidies have shielded solar companies from competition and sometimes protected flawed business models. It’s too soon to tell whether the solar industry can be a viable long-term energy producer in a cost-effective and economically efficient way. But we may never know if we continue to protect it – and other energy sources – from competition.

Stephen Slivinski is senior economist for the Goldwater Institute.

Learn more:

Washington Examiner: Firm sells solar panels – to itself, taxpayers pay

Washington Post: Solar industry faces subsidy cuts in Europe

Prof. Michael Munger: Truly massive solar fail

Goldwater Institute: Government subsidized energy is just the same old song

Amid calls for increased state spending and fears of 2014 program cuts, some are calling for extending 2010’s sales tax increase indefinitely. However, Arizonans should understand how much their state and local governments cost before we let them charge us even more.

The graph below shows state and local governments’ direct expenditures as a percentage of private GDP for four states and the 50-state U.S. average from 1985 through 2009. This cost-of-government measure reflects government’s affordability to taxpayers.

Some states with high incomes and GDPs can conceivably “afford” more government. One of the most affordable state and local governments in the country in 2009 was Connecticut’s, partly because incomes (and GDP) in Connecticut is high. Currently, as can be seen in the graph, liberal New Jersey’s governments were more affordable than ours.

The percentage can go up because government spending rises or because GDP has fallen. GDP in Arizona has fallen lately (as it has in virtually every state) and this graph demonstrates that Arizona’s state and local governments have failed, worse than most, to shrink with Arizonans’ ability to afford them. Even before the recession, though, since 1999 the general trend has been less affordable government in Arizona.

In 1990, Arizona’s government burden as a percentage of private state GDP was the highest of all 50 states. The following decade saw tax cuts that shrank Arizona’s government burden until we were below the U.S. average. As a result, our economy boomed.

Now Arizona’s state and local governments are again above average in cost. Our government burden is closer to that of California than Texas, and the difference between the two states is striking. California’s unemployment rate is nearly 11 percent; Texas’ is above 7 percent, but only because so many people are moving there.

The numbers show that Arizona has failed to keep government small and economic growth high. We seem more focused on being a tired, flaccid has-been like California instead of an energetic economic leader like Texas.

Our state legislative leadership has it right: Resist increasing spending. Reduce the risk of raising taxes later. And lower the burden of government.

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

Learn more:

American Legislative Exchange Council: Rich States Poor States (PDF)

Joint Legislative Budget Board: (Legislative) Budget as Introduced (PDF)

Office of Strategic Planning and Budgeting: The Executive Budget Recommendation (PDF)

It’s federal tax day, and many wonder why they owe the government so much money. And those who receive refunds might wonder why the federal government kept so much in the first place.

Yet the shared experience of filling out tax forms – or paying someone to do it for us – should also have us wondering if there’s a better way.

Although a big part of the tax bite stems from functions government has taken on that could easily be handled by the private sector, the costs of complying with the federal tax code are nothing to sneeze at either. According to the Internal Revenue Service’s own calculations, U.S. taxpayers and businesses spend 6.1 billion hours a year complying with federal tax statutes. Translate that time into hours worked instead, and it amounts to more than three million full-time workers, or about 2 percent of current U.S. employment. By comparison, the number of employed Americans between 2008 and today has dropped by about 4 million.

All of this at a cost of $163 billion – money that could have been spent starting businesses, putting more money into savings, or paying household bills.

And these estimates don’t include state-level tax compliance. Although filling out federal tax forms is something every taxpayer in each state has to do, the residents of nine states don’t have to file out a state income tax form. That’s because those states don’t have an income tax.

Those states benefit in more ways than just the cost of time and money spent on filling out tax forms and engaging in tax planning. For instance, those states tend to have higher net job creation rates – about 10 percent higher than those with an income tax between 2000 and 2007.

Why? Because income tax systems penalize work and investment. On the other hand, consumption taxes – like sales taxes – encourage wealth creation.

Arizona policymakers should head toward a broad-based consumption tax that could eliminate some of the current system’s complexity and unlock economic growth.

It’s certainly something that must have crossed the minds of beleaguered taxpayers this week.

Stephen Slivinski is senior economist for the Goldwater Institute.

Learn more:

Internal Revenue Service: National Taxpayer Advocate 2010 Annual Report to Congress (PDF)

Goldwater Institute: Investing in Arizona

PHOENIX, Ariz., April 10, 2012 — They had no way of knowing yesterday that today’s release of one of America’s most important economic indicators would show a possible stall in the nation’s recovery, but Rules Committee members of the Arizona House of Representatives proved very prescient in passing Senate Concurrent Resolution 1012.

“Today’s release of NFIB’s Small-Business Economics Trends report should remove any lingering doubt that the full House should pass SCR 1012 and get it on the November ballot for voters to have their say,” said Farrell Quinlan, Arizona state director for the National Federation of Independent Business (NFIB), America’s largest small-business association. “Combine today’s report with next week’s tax filing deadline and it’s beyond debate that the House needs to act now to send the strongest possible message to Arizona’s job creators that help is on the way.”

For almost 40 years, NFIB’s SBET has been one of the nation’s bellwether economic barometers, used by Federal Reserve chairmen, Congress, and presidential administrations. Release of today’s report shows its Optimism Index falling two points overall in March after six months of gains. Small business in no small matter, because Main Street enterprises employ the majority of working Americans and generate most new jobs—not big businesses, and certainly not big governments or labor unions.

“The mood of owners is subdued—they just can’t seem to shake off the uncertainties out there,” wrote NFIB’s chief economist, William Dunkelberg, in today’s report. “What we saw in March is painfully familiar – this was the same pattern of growth followed by months of decline from 2011. History appears to be repeating itself—and not in a good way.”

A capital expenditures category is one of 10 measurements the SBET takes each month, and March showed a sharp drop in new equipment and vehicle purchases. This, according to Quinlan, is where Arizona can step in to help. SCR 1012, also called the Small Business Jobs Creation Act, would unleash small business expansion by resetting the personal property tax exemption for new machinery and equipment purchases to an amount equal to the earnings of fifty Arizona workers (almost $2.4 million). Last month the referendum unanimously passed the Senate 30-0 while an identical bill (HCR 2009) passed the House 47-10 with an overwhelming bipartisan majority.

“You can say you intend to hire more workers, and all you’re doing is expressing a wish or a sentiment,” said Quinlan. “But when we see you adding more machinery, other equipment, and vehicles, the new jobs are sure to follow. That’s why NFIB is amplifying our call for the Arizona House to schedule a vote on SCR 1012 sooner rather than later—before Tax Day and the 100th day of the legislative session, both of which fall on April 17 this year. We need to send a message now that Arizona is open for business.”

# # #

NFIB is the nation’s leading small business association, with offices in Washington, D.C. and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small and independent business owners a voice in shaping the public policy issues that affect their business. NFIB’s powerful network of grassroots activists send their views directly to state and federal lawmakers through our unique member-only ballot, thus playing a critical role in supporting America’s free enterprise system. NFIB’s mission is to promote and protect the right of our members to own, operate and grow their businesses. More information is available online at www.NFIB.com/newsroom.

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Open your wallets even wider, Arizona taxpayers.

You may already know that every American is on the hook for just under $50,000, each person’s piece of the $15.6 trillion in debt run up by the federal government.

But what you may not know is that so much more is owed in your name; about $10,258 for every Arizonan’s share of the $66.5 billion in debt and unfunded obligations borrowed by state and local governments.

In a new report, Debt and Taxes, the Goldwater Institute breaks down that debt. It also enters the strange world of public finance where debt is not debt, governments are not governments and billions of dollars in obligations are supposedly traded without risk.

Most of the debt racked up by state and local governments – about $44 billion – is in bonds issued by the state, counties, cities, school districts and hundreds of other taxing authorities created as stand-alone governments under Arizona law. Billions more comes from shortfalls in pension plans for government workers. There is even $1.3 billion in payments the Legislature simply chose not to make to balance the state’s budget that is just floating around on the books.

The Arizona Constitution is supposed to limit the state’s total debt to $350,000. The tabs that can be run up by local governments have their own caps as well. But the courts have determined those limits only apply to certain types of debt. So governments in Arizona rely far more heavily on borrowing that is not confined by constitutional restrictions or requirements for voter approval.

The Goldwater Institute has developed a series of policy recommendations to curb the ability of state and local governments to bypass voters and avoid constitutional restrictions on issuing debt.

Why should you care? State Treasurer Doug Ducey said it best:

“Taxpayers should care about it because it’s an obligation that they or their children are going to have,” Ducey said. “People should be concerned about the amount of debt, the type of debt, and the fact that there is no overall plan to pay down the state debt.”

Mark Flatten is an investigative reporter with the Goldwater Institute.

Learn more:

Goldwater Institute: Debt and Taxes: Arizona Taxpayers on Hook for $66 Billion Tab Run Up by State, Local Governments

Goldwater Institute: Recommendations for Reform

Tax policy is often like looking at a pointillist painting – stare closely at only a section, and you don’t have a sense of the whole picture. But when you back up, the picture comes into a focus.

Governor Brewer recently signed into law HB 2123 which will help policymakers and the public stand back and take a much-needed look at all the elements of the tax code at once.

The law creates a tax reform commission for Arizona that will be required to issue a report by October. The commission will take a look at how well or poorly the current system works overall relative to desired economic outcomes and the need to fund the government.

I know what you’re thinking, “oh good; another government commission.” But, other states, such as Georgia, have convened a similar sort of commission, and in many cases, the committee hearings and the resulting reports have motivated a healthy debate about the best sort of tax system the state should have. And that’s a good thing.

Too often, tax changes are made on an ad hoc basis or by voters at the ballot box based on political whim. Additionally, tinkering in one part of the tax code – usually by making exceptions for certain types of businesses – can lead to unintended consequences and pressures to keep taxes high on other business and industries.

Fundamental tax reform necessarily starts with a broad approach. The piecemeal fashion the Legislature and voters pursue now leads to relatively high tax rates and a narrower tax base. In other words, high taxes on some, low taxes on others, and a growing constituency of beneficiaries – whether it be special interest lobbyists, tax accountants, or legislators hoping to woo a certain type of business or industry – entrenches the current tax system and might even make it worse.

The first step in reforming the tax code is to view it in its entirety. Commissions are a common way to do that and they also help policymakers and the public understand what’s broken and – perhaps most important – whether any taxes should be substantially reformed, reduced, or terminated to help create jobs and raise family incomes.

Stephen Slivinski is senior economist with the Goldwater Institute.

Learn more:

Goldwater Institute: Arizona must choose the right path on tax policy

Goldwater Institute: Unleashing Entrepreneurial Forces: States Can Spark Business Creation, Attract Venture Capital Investment, and Increase Job Growth by Eliminating Taxation of Capital Gains

Goldwater Institute: Investing in Arizona: How the Legislature Can Get Arizona’s Economy Moving Again by Reducing the Barriers to Investment and Job Creation

Arizona Democrat’s Washington Allies Remain Desperately Committed to their Fatally Flawed National Energy Policy 

WASHINGTON — Kyrsten Sinema’s Washington Democrat allies promised jobs and energy independence when they passed their massive $800 billion stimulus, but it became increasingly clear that gambling with taxpayer dollars was going to cause more harm than good. Despite the obvious lessons learned from the unprecedented spending spree, would Sinema also cling to these failed stimulus spending policies like her prospective Democrat leaders after they gave Americans the Solyndra bankruptcy scandal and record-high energy prices?

“Kyrsten Sinema can now see exactly how her Washington Democrat leaders’ stimulus spending spree led to failures like the Solyndra bankruptcy instead of economic recovery and energy independence,” said NRCC Communications Director Paul Lindsay. “With this in mind, will Sinema join her Democrat allies’ efforts to continue the same energy policies that gave Americans the $535 million Solyndra bankruptcy, record-high energy prices and broken promises?” 

A former FBI agent hired to investigate the Solyndra bankruptcy concluded the Obama Administration was well aware of the risk when they decided to gamble with millions in taxpayer-funded stimulus loans:

“The Department of Energy was fully aware of the risks in backing Solyndra Inc., a start-up company that pocketed a half-billion dollar DOE loan but never turned a penny in profit before shutting its doors, concludes a former FBI agent hired to examine the company’s books… 

“In fact, records show, the Energy Department supported the Solyndra financing in the early days of the Obama administration in the face of criticism from officials within several wings of government — the Office of Management and Budget, the U.S. Treasury and DOE. ‘This deal is NOT ready for prime time,’ one OMB employee wrote March 10, 2009, government emails show. Ten days later, energy officials announced Solyndra was in line to be the first company to secure a green energy loan guarantee.” (Ronnie Greene, “Department of Energy knew of Solyndra risks, former FBI agent finds,” iWatch News, 3/29/12) 

And Democrats remained committed to their stimulus energy flops after they managed to achieve little except burning through taxpayer money:

“Week after week, Romer would march in with an estimate of the jobs all the investments in clean energy would produce; week after week, Obama would send her back to check the numbers. ‘I don’t get it,’ he’d say. ‘We make these large-scale investments in infrastructure. What do you mean there are no jobs?’ But the numbers rarely budged.” (Jordan Weissmann, “There Are Way Fewer Green Jobs Than You Think,” The Atlantic, 3/26/12) 

Will Sinema Learn from the Democrats’ Solyndra Stimulus Disaster? http://ow.ly/a3agd #powerfailure

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Consensus continues to grow regarding the need for e-fairness legislation as two prominent conservative bloggers recently voiced their support for the Marketplace Fairness Act. Neil Stevens’ post over the weekend on the conservative blog RedState explains how he’s come around on the idea of e-fairness legislation.

From Neil Stevens’ post on RedState:

“Also, we’re back to discussing the Marketplace Fairness Act. As we’ve discussed before, this is a bill that would give Congressional approval to an interstate compact between the states to collect sales tax across state lines, requires member states to harmonize their tax rules to fit in with the interstate system. The bill is gaining Congressional support this time around. In theory I’m fine with this. It’s Constitutional and it’s reasonable. I disagree with Overstock.com’s complaints of complexity, because the compact imposes restrictions on the way the states can tax items, and also creates mechanisms to ease collection of the taxes.”

In yesterday’s post on Hot Air, Jazz Shaw goes even further – saying he’s no longer “on the fence” about the Marketplace Fairness Act – especially after yet another conservative voice, Maine Governor Paul LePage (R), declared his support for it.

From Jazz Shaw’s post on Hot Air:

“As I’ve stated before, I was on the fence about this one for a long time. Even leaving aside the “taxes are bad” thing, anything which could impede online commerce just strikes a sour note with many of us. I had also considered the possibility that maybe this could be worked out at the state level, but a recent attempt in Illinois to do just that produced… nothing. But after sifting through all of the pros and cons, I have to admit that it may be time to just get it over with and do this.

The reason? Like it or not, fiscal conservatives must, at a minimum, believe in a level playing field. Equality of opportunity, not results… remember? After looking over the new Ryan Plan Part 2, I’m reminded that as we tighten our belt at the federal level, more and more things will need to be pushed back down to the states. Each of them will have to manage their budgets as they see best, and for the majority of them a state sales tax is part of their revenue stream. While it may be depressing, the feds need to provide each of them a chance to compete evenly…”

It may be time to just bite the bullet and pass this legislation.”

The survival of our Republic depends on the fate of Obamacare

(PHOENIX, AZ) – The Arizona Republican Party released the following statement on the two-year anniversary of Obamacare:

Two years ago, our Republic took an enormous hit to its Constitution when Barack Hussein Obama signed into law the most intrusive, most costly, freedom crushing entitlement program in our country’s history. That law, Obamacare, was not supported by one single Republican in the US Congress.

Last week, the Congressional Budget Office shocked the nation by revealing that the cost of Obamacare has doubled in cost to a heart-stopping $1.76 Trillion dollars over 10 years! That reality will financially destroy this country.

This election year, in addition to jobs and the economy being the most important issue to voters, the repeal of Obamacare is the single-most important public policy issue driving Americans to the polls. The Arizona Republican Party is working diligently to ensure that the repeal of Obamacare takes place.

Every Republican seeking election in Arizona is committed to repealing Obamacare. “It’s fundamentally inherent to our party position for Republicans to repeal and replace this horrible law with real non-political solutions,” said Republican Party spokesman, Shane Wikfors. “If Republicans fail in this mission it will mean the end of American freedom and prosperity as we know it,” he said.

“This is a matter of life and death – of pure survival,” said Arizona Republican Party Chairman, Tom Morrissey. “This law will either kill this great Republic or Americans must elect a President and Congress who are committed to terminating this law. This is our last chance,” Morrissey remarked.

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On March 12, the state senate in Oklahoma passed a bill that would immediately turn the state’s income tax into a flat tax, cut the tax rate in half, and strip away the extraneous tax credits and special carve-outs. Then, over a 10-year period, it would slowly phase the income tax out of existence by cutting the rates each year until they reach zero.

Meanwhile, in Arizona, special interests filed a ballot initiative for November that would extend the “temporary” sales tax increase passed by voters in 2010. Additionally, the initiative will lock-in automatic future increases in education spending, burdening taxpayers with ever-higher tax bills. Passage of this initiative will also guarantee that Arizona’s average state and local sales tax rate remains the second highest in the nation.

There is another path, however. The Speaker’s “jobs bill” (HB 2815), which has already passed the House, would eliminate the capital gains tax in Arizona, something no state with an income tax has yet done. In addition, the House has also passed HB 2123, which creates a tax-reform commission that will consider proposals to eliminate the income tax altogether, and issue recommendations by October.

This year, voters and policymakers will have a clear choice on what path tax policy in Arizona should take. Should we choose the path of high tax rates, a tax base with all sorts of special carve-outs, and business as usual at the Capitol? Or should we choose the path that lowers tax rates, makes the tax code more sane, and sets the state up for robust job growth and entrepreneurial activity that could make the state an economic powerhouse?

The choice is clear. Oklahoma has taken its first step down the right path. Arizona should too.

Stephen Slivinski is a senior economist with the Goldwater Institute.

Learn more:

Wall Street Journal: The Heartland Tax Rebellion

Oklahoma State Senate: Statement on the Passage of Tax Reform Bill SB 1571

Goldwater Institute: Unleashing Entrepreneurial Forces: States Can Spark Business Creation, Attract Venture Capital Investment, and Increase Job Growth by Eliminating Taxation of Capital Gains

Goldwater Institute: Investing in Arizona: How the Legislature Can Get Arizona’s Economy Moving Again by Reducing the Barriers to Investment and Job Creation

I’ll be blunt. Last year’s tepid reforms to the state’s pension systems were not enough.

Those reforms were probably about as far as the legislature could go and keep the pension systems in place for all future and existing public employees. But the only reform that can begin to dig us out of the financial hole pension systems represent would move all new employees to 401(k) plans. So far, that has been more than the legislature has wanted to bite off.

In the meantime, even the modest reforms passed last year have been under legal assault. The state recently lost a lawsuit in its bid to require employees in the Arizona State Retirement System (ASRS) to contribute a greater share of the pension system’s costs. Another lawsuit by judges would block any increases in their share of pension system costs and block modest limits on cost of living adjustments.

Judges participate in the Elected Official Retirement Plan (EORP) where employee contributions have been held to 7 percent of salary for at least a decade. Meanwhile, taxpayers are now contributing an average rate of almost 30 percent of salary, up from 7 percent a mere 10 years ago.

At least ASRS participants see their contributions rise and fall with taxpayers’. These judges are insisting that they not face any of the risk of their own retirements, even while they are still working.

Representative Kavanagh has proposed HCR 2060, a constitutional amendment to explicitly allow increases in EORP member pension fund contributions and to allow reductions in cost of living adjustments. This is minimal protection for taxpayers, especially when the judges who decide whether reforms are legal have a conflict of interest with the taxpayers they are sworn to protect.

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

Learn more:

Arizona Capitol Times: Judge overturns Arizona pension law change

Arizona Republic: Put-upon judges to defend their cushy pensions — in court

General Motors is moving 19,000 salaried workers off its pension plan to a 401(k) plan. The move will help reduce the risk GM’s pension poses to the company and investors, including the federal government – i.e., the American taxpayer. GM’s unfunded pension balance is currently $8.7 billion. GM’s profits in 2011 were $7.6 billion.

The new retirement plan makes sense for the company and for employees, who can now take an ownership stake in their retirement savings.

State governments would do well to consider taking similar steps. Arizona’s pension systems have a combined unfunded balance of $16 billion – an official total that is arguably low. State General Fund revenues stand at $8.4 billion, a position far more precarious than GM’s.

Moving state employees to 401(k)-style retirement plans not only makes fiscal sense, but would greatly reduce the risk to taxpayers, who, unlike investors in private companies, cannot simply opt-out of the risk by selling stock.

Dr. Byron Schlomach is Director of the Center for Economic Prosperity at the Goldwater Institute.

Learn more:

Joint Legislative Budget Committee: Historical General Fund Revenue Collections (PDF)

DailyFinance: General Motors Meets on Revenues, Misses on EPS

New York Times: G.M. Changes Pensions for Salaried Workers