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The Capitol Buy-Back: Not a Bad Idea

February 7, 2012 By 6 Comments

By Byron Schlomach, Ph.D.

When I first heard Governor Brewer’s proposal to retire debt on the state’s capitol buildings, I thought it was a bad idea. The main reason: early-payoff penalties. There just was no good reason to bear such costs.

It turns out that early payoff penalties are not an issue. The state has to deposit a lump-sum of $106 million into an account that is held by a third party, over which ownership is exercised by the creditors who lent the state the $81 million secured by the capitol buildings. The cash substitutes for the buildings as collateral and we get back the deeds, free and clear.

The $106 million accounts for all the interest and principal we were going to have to spend to pay off the loan over the next 20 years. There is no pre-payment penalty.

Some might say that getting back the capitol buildings’ paper is just symbolic nonsense for the sake of the state’s centennial. And sentiment is a bad reason to pursue any policy. But this is more than a feel-good idea.

The biggest advantage to this early payoff, though, is that it avoids the temptation to spend temporary money on ongoing programs – the ones that it looks like we can afford now, but that we might not be able to afford later. We did that for several years before the recession, and look where that got us.

It’s not safe to assume we’ve entered into a long-term, steady economic expansion with steady government revenues to accompany it. So, while we have a temporary surplus, let’s pay down the state’s debt.

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

Learn more:

Office of the Governor: The Facts about a Capitol Buy-Back

Goldwater Institute: Living Debt Free: Restoring Arizona’s Commitment to its Constitutional Debt Limit

Filed Under: Arizona Politics, Economics, Spending, State Budget, State Economy, State Government

Arizona State Treasurer, Doug Ducey, Doubles Investments in Local Arizona Banks and Credit Unions

January 24, 2012 By Leave a Comment

FOR IMMEDIATE RELEASE: January 24, 2012
CONTACT: Kevin Donnellan

PHOENIX – As Arizona’s responsible banker and chief investment officer, State Treasurer Doug Ducey announced that in 2011 the office doubled its investment in local banks and credit unions through its deposit bid program. There is currently more than $100 million invested with ten Arizona banks, up 100 percent from the year prior.

“We made great progress expanding our relationship with community banks and credit unions in 2011, and will commit again in 2012 to investing up to $250,000 each month, per qualifying institution,” stated Treasurer Ducey. “Our goal is to protect the tax payer’s money and maximize yield. Local banks and credit unions with competitive rates help us do that while giving the state an opportunity to put tax dollars to work in our own backyard.”

Participating banks in the program include Alliance Bank of Arizona, Alerus Financial, Arizona Business Bank, First National Bank of Scottsdale, M&I Bank, Meridian Bank, Metro Phoenix Bank, Pinnacle Bank, Republic Bank of Arizona and West Valley National Bank.

Each month, the Treasurer’s Office entertains bids from local banks and credit unions for the placement of up to $250,000 in cash per institution for either one-month, three-month, six-month, one-year, two-year or five-year products that are fully insured with the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Share Insurance Fund (NCUSIF).

Minimum qualifications for bidders require:

  • Arizona deposits of at least $10 million
  • For banks a Capital Leverage Ratio of at least six percent in the previous quarter
  • For credit unions a Prompt Corrective Action Net Worth Ratio of at least six percent in the previous quarter

Local institutions are encouraged to quote rates for all maturities they offer. Once bids are received, the Treasurer’s Office will notify each institution if their bid is accepted. For 2012, bids can be emailed to cdbid@aztreasury.gov by the close of business on:

January 25th, February 23rd, March 26th, April 24th, May 24th, June 25th, July 25th, August 27th, September 24th, October 25th, November 26th and December 21st.

Additional information can be accessed by visiting www.aztreasurer.gov/localBankProgram.html.

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Filed Under: Elected Officials, Press Release, State Budget, State Government Tagged With:

Eliminating state capital gains tax could spark an entrepreneurial surge

January 19, 2012 By 1 Comment

By Stephen Slivinski

An important driver of job growth is investment. Without investment, new businesses may not flourish or even see the light of day. And venture capital investment in technology start-ups is one of the highest-profile sources of new business births.

Tax policy can either obstruct the new capital that businesses need or it can step out of the way and allow thousands of flowers to bloom. A number of studies have shown that taxes on capital gains – the return an entrepreneur or investor receives on their investment – have been shown to be a barrier to entrepreneurship and the job growth it creates.

Capital flows where it can find high returns and low barriers to allocation, and businesses in states with lower capital gains taxes receive more investment than their higher-tax counterparts. A 1998 study by Harvard University professors Paul Gompers and Josh Lerner concluded that entrepreneurial activity is sensitive to the taxation of capital gains. In particular, the authors found that a reduction in capital gains taxes is associated with an increase in venture capital funding in a state.

A 2010 study by William Gentry of Williams College came to the same conclusion. His paper noted that “capital gains taxes could distort a number of important decisions of entrepreneurs. These decisions include starting a new business, expanding the business, and obtaining outside financing; the capital gains tax can also affect whether and when an entrepreneur sells his or her business.”

Arizona, like most states with an income tax, treats capital gains as “normal” income and taxes it at the same rate as all other income. But nine states, including New Mexico, tax investment at a lower rate than their standard income tax.

In the material released after the State of the State speech, Governor Brewer indicated she understands that Arizona needs to lower its tax barriers to capital investment – an important step. But the governor and legislature should go further and eliminate the tax on capital gains altogether.

Arizona can be the first state with an income tax to do that and could, as a consequence, end up being a hub for new venture capital activity.

Stephen Slivinski is a Senior Economist with the Goldwater Institute.

Learn more:

American Council for Capital Formation: Capital Gains Taxation and Entrepreneurship

Harvard University: What Drives Venture Capital Fundraising? (PDF)

American Action Forum: Employment Effects of Reducing Capital Gains Tax Rates in Ohio

Filed Under: Arizona Politics, Economic Development, Economics, Jobs/Labor, State Budget, State Economy, State Government, Taxation

A Letter from Arizona House Speaker Andy Tobin

January 12, 2012 By 2 Comments

Many people have asked me whether I believe there is a real chance for bi-partisanship, political civility and statesmanship to prevail in our current political climate. They are surprised when I say yes! The majority of legislation passed in every session at the capital is very much a product of bipartisan cooperation. Though said bills may be characterized as non controversial or “simple” they are numerous and have a real impact on people’s lives.

In times past, bipartisanship was only possible when bountiful state budgets provided ample capital with which to negotiate. This used to serve as the basis for bipartisan statesmanship and “compromise”. Regardless of what it is presently called what is obvious is that the elements of the art of statesmanship and compromise have now changed which must now be accomplished without the use of once seemingly limitless budgets.

It is an irrefutable fact that we no longer have discretionary funds. Those funds have been exhausted and we now find ourselves in debt. We could continue to borrow in order to support our operational costs but at some point we must recognize that such practices will cease to be an option.

Despite our circumstances I believe cooperation in our capital is still possible. In the last three years, we addressed the structural deficit through permanent spending reductions and through tough negotiations to only temporarily raise revenues. With these solutions behind us, it is now time to engage in meaningful policymaking. This will require us to put aside partisan bickering in order to concentrate on what is right and necessary for the good of all Arizona’s citizens.

We do also need to examine the hearts and minds of Arizonans to learn about their desires which with this state will move forward. Some desire their state government to secure everyone’s chances to their pursuit of happiness, individual competition as well as charitable opportunity. Others desire the redistribution of private wealth and increased dependency on the public funds of the state. It is time for the people to decide which philosophy will provide them with the best future.

Despite these conflicting ideological differences, I foresee what can hold us together is not unlike what cements the bonds between the men and women of our military. Our armed forces are comprised of Republicans and Democrats alike. They fight as one to defend our nation’s freedom. This serves as a great example of how people whom ascribe to extremely differing philosophies can still fight for a common cause.

Therefore, if we collectively hold a soft, unproductive economy and an insurmountable debt as our common enemy I propose we find the common ground with which to defeat it. If Democrats can’t agree to cut without raising taxes and Republicans won’t vote for increased taxes then let’s cap the budget where it is and dedicate future revenue increases and spending savings to service our debt and emergency contingencies.

So if bipartisanship is to be known as the act of people being intellectually engaged and ready to fight then surely there is room in the legislature for it. No good will be accomplished and our economic woes will never be resolved if the representatives of the people temper their passions and beliefs while trying to combat our common enemy.

We cannot allow for those whom seek to promote infighting in the pursuit of partisan advancement. The people of Arizona sent us 90 leaders to move Arizona forward. I am proud to honor and serve with this talented and resourceful group of public servants. I expect that in our 100th year of statehood we will live up to our obligation to provide for the common good, the security of the American Dream and to authentically come together to fight our common enemies. This is my New Year’s wish for my beloved Arizona.

Filed Under: Arizona Politics, Conservatives, Culture, Elected Officials, Government, Guest Opinion, Legislation, Political Parties, Political Science, Press Release, State Budget, State Economy, State Government Tagged With:

Arizona House Speaker Promotes Economic Development

January 12, 2012 By Leave a Comment

FOR IMMEDIATE RELEASE: January 12, 2012
CONTACT: Rey Torres

Commends Governor Brewer’s Tax Proposal

STATE CAPITOL, PHOENIX (January 12, 2012) – Speaker Andy Tobin today commended Governor Jan Brewer on her announcement of a series of tax reforms designed to spur economic growth. “I am very supportive of the Governor’s tax reform proposals,” said Speaker Tobin. “The fiscal health of our economy remains the number one issue facing our state.” Speaker Tobin further iterated the importance of promoting capital investment and workforce development as well as reducing the administrative and regulatory burdens placed on businesses.

Last year, House Republicans spearheaded Arizona’s Jobs Bill, which laid down the foundation for the state’s economic recovery, and which Governor Brewer signed into law. This year, Speaker Tobin is advocating for additional tax cuts as well as regulatory reforms to cement Arizona’s status as a place businesses want to set up shop.

In addition to the Governor’s tax reforms, Speaker Tobin is proposing a regulatory tax credit. This plan will provide a dollar for dollar tax credit equal to the cost of excessive government regulations. “The cornerstone of job creation is lowering the cost of doing business in our state,” said Speaker Tobin. “This tax credit will supplement the Governor’s other tax reforms to help encourage business expansion as well as new businesses locating across the state.”

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Filed Under: Economic Development, Elected Officials, Press Release, Spending, State Budget, State Economy, State Government, Taxation Tagged With:

Ending the Solar Subsidy Fiasco

January 12, 2012 By Leave a Comment

By Clint Bolick, Goldwater Institute

It’s not every day that the New York Times makes a compelling case against government giveaways. But a recent page-one article underscored that the Solyndra scandal was only the tip of the solar-subsidy iceberg. Huge companies like Goldman Sachs, Morgan Stanley, General Electric, utilities including Exelon and NRG, and even Google are receiving government guarantees that ensure large profits with virtually no risk — except to the taxpayer.

The Times ascribes to the Obama administration a “gold-rush mentality” when Congress expanded green-power incentives in 2009, despite a paralyzing federal deficit. The chief executive of NRG, which received $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for solar projects, gushed that “I have never seen anything . . . in my 20 years in the power industry that involved less risk than these projects.”

A start-up industry with no capital risk to investors? It’s a nifty deal if you can get it—and many have. “It is like building a hotel, where you know in advance you are going to have 100 percent room occupancy for 25 years,” the Times quotes the CEO of SolarReserve. Even some of President Obama’s top advisors have warned of industry “double-dipping.”

Solar may be the most-subsidized industry in American history. Not only are producers subsidized at the federal, state, and sometimes even local levels, but consumers are subsidized to purchase solar panels, utility companies are forced to use and further subsidize solar power, and higher utility rates are passed along to Americans amidst deep recession.

Arizona is immersed in solar subsidies, providing tax breaks and (through the Corporation Commission) mandating that 15 percent of all utility energy be provided through specified renewable sources. Cost and technological feasibility are no object, and every dollar in added costs is passed along to consumers through a utility surcharge.

If the New York Times gets it, shouldn’t sensible, self-styled conservative elected officials? It’s time for government to stop playing Santa Claus to this pampered industry.

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

Learn more:

New York Times: A Gold Rush of Subsidies in Clean Energy Search

Filed Under: Arizona Politics, Economic Development, Economics, Energy, Environment, Spending, State Budget, State Economy, State Government

It’s the Same Old Song

January 11, 2012 By Leave a Comment

By Jonathan Butcher, Goldwater Institute

In 1965, The Four Tops released a follow-up to their hit single, “I Can’t Help Myself (Sugar Pie Honey Bunch)” with a number called “It’s the Same Old Song.” It was, actually, nearly the same song as “Can’t Help Myself,” admits singer Abdul “Duke” Fakir, as he and songwriter Lamont Dozier were in a rush to produce something and “reversed [‘Can’t Help Myself’] with the same chord changes” to write “Same Old Song.”

In Arizona, we’re hearing the same old song about more money for education, now in the form of continuing the “temporary” 1 percent sales tax.

The Arizona Education Network says, “Studies show Arizona continually lags among the bottom of all states in terms of public education funding and academic performance,” as though speaking of money and student achievement in the same breath will somehow link them together.

As history shows, increases in education funding do not lead to higher levels of student achievement. In fact, education funding has been on the rise for decades with nothing to show for all that additional money.

Between 1985 and 2007, federal school spending increased 138 percent, and per-pupil expenditures around the country have more than doubled since 1970, says Stanford University’s Eric Hanushek.

In Arizona, reading scores for 4th graders on the Nation’s Report Card have changed little in the last decade, despite a 47 percent increase in total spending per pupil between 2000 and 2009. Interestingly, even when funding ticked down 4 percent between 2009 and 2010, not only does that make but a small dent in the earlier increases but scores did not change. Suggestions that Arizona’s low achievement levels are a result of funding levels ignore these findings.

Lawmakers should follow Gov. Jan Brewer’s lead and mark Arizona as the nation’s leader in education reform, as the East Valley Tribune reported last week, and keep the state committed to sound fiscal practices and a balanced budget.

Jonathan Butcher is education director for the Goldwater Institute.

Learn more:

East Valley Tribune: Brewer wants to revamp public education funding, expand private school options

Rolling Stone: The Four Tops Turn Fifty

Arizona Education Network: Arizona Voters Support Sales Tax Continuation to Fund Public Education

National School Choice Week

Arizona Auditor General: Arizona School District Spending

Filed Under: Arizona Politics, Education, State Budget, State Economy, State Government, Taxation

It’s time to square up the state’s debt

January 10, 2012 By 3 Comments

By Nick Dranias, Goldwater Institute

Governor Jan Brewer has declared that one of her priorities in the coming session is to pay down the state’s debt. The idea, mirrored by leadership proposals in the state house and senate, is both timely and refreshingly frank.

By any straight-face test, the state has continuously violated the Arizona Constitution’s mandate that current-year expenses be funded largely on a “pay as you go” cash basis — not through debt. Now that the state anticipates as much as $650 million in surplus tax revenue, it is time to square Arizona’s fiscal policy with the state constitution.

Enabled by legal precedents that embraced fiscal gamesmanship decades ago, the state has long skirted the Arizona Constitution’s $350,000 debt limit using a variety of budget tricks. Officials have sold and leased-back buildings, used credit lines and warrants to cover huge gaps between spending and revenue, and rolled-over liabilities from one budget year into the next.

While last year’s budget was relatively gimmick-free, hundreds of millions of dollars of past fiscal gimmickry remain on the books.

An unretired debt is a tax on future generations. Our state’s founders largely banned debt to protect those voiceless future generations from taxation without representation.

Arizona’s “pay-as-you-go” constitutional policy properly imposes political accountability on current politicians for their fiscal choices. For this reason, constitutionalists, tax hawks and fiscal responsibility mavens should agree with Governor Brewer and legislative leadership: Use the surplus to retire the state’s unconstitutional debt.

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:

Arizona Republic: Plans for Arizona Budget Vary

Goldwater Institute: Living Debt Free: Restoring Arizona’s Commitment to its Constitutional Debt Limit

Filed Under: Arizona Politics, Debt, Economic Development, Economics, Government, Legislation, Spending, State Budget, State Economy, State Government

Governor Brewer Delivers State of the State Address, Unveils Policy Agenda for 2012 and Beyond

January 9, 2012 By Leave a Comment

FOR IMMEDIATE RELEASE: January 9, 2012
CONTACT: Matt Benson

Releases Bold Plan to Boost Economy, Reform Education and Modernize Government

PHOENIX – Governor Jan Brewer today unveiled for 2012 and beyond a detailed policy agenda designed to prepare the State of Arizona for its second century. The policy agenda accompanied the Governor’s delivery of the Centennial State of the State address.

“Arizonans can take heart in how far this state has come from the darkest days of the recession and fiscal crisis, but now is no time to lose focus,” said Governor Brewer. “Every one of us benefits daily from the wise foresight and dedication of Arizona’s founders and great leaders of the past. Now, we have an obligation to make the tough choices that will set a prosperous course for Arizona’s second century.

“That means clearing the unnecessary obstacles to economic growth, and building an education system worthy of your children’s limitless promise. It means modernizing state government to ensure it is both efficient and effective, and protecting the rights of Arizona citizens against a federal government that has lost its way.”

The policy agenda reinforces and furthers the Governor’s Four Cornerstones of Reform, a blueprint to:

  • improve Arizona’s economic competitiveness;
  • bring needed reforms to K-12 and higher education;
  • modernize state government; and
  • push back against a federal government that has exceeded its constitutional authority.

Additional policy initiatives in areas like economic development will be announced in the days ahead as Governor Brewer issues her state budget plan for Fiscal 2013.

1st Cornerstone: Economic Competitiveness 

The economy continues to be a top concern for Governor Brewer, though the outlook has brightened considerably in recent months. The State of Arizona added nearly 46,000 jobs between 2010 and 2011, and its job growth ranked 7th-best nationally.

Governor Brewer now asks the Legislature to build upon last year’s signature economic initiative –

the Arizona Competitiveness Package – with a new effort to prepare unemployed and underemployed Arizonans for new careers and aid small businesses by simplifying the state tax code. The Governor also reiterated her support for the proposed I-11, a planned interstate highway that would promote tourism and trade between two of the country’s fastest-growing metro areas: Phoenix and Las Vegas.

Additional economic initiatives include:

  • Creation of a community-college scholarship program to help adults re-train and transition into careers that fulfill local needs.
  • A requirement that individuals enrolling in a taxpayer-funded job-training program undergo drug testing.

2nd Cornerstone: Education 

Arizona already has the framework in place for comprehensive education reform with the Arizona Ready initiative. This plan establishes more rigorous standards for students, teachers and schools, provides new methods for parents to gauge student achievement and monitor school performance, and sets yearly benchmarks to track Arizona’s education improvements between now and 2020.

Funding is part of the education equation, as Governor Brewer recognized with her successful push for Proposition 100 in 2010. She always pledged that the 1-cent tax would expire after three years. And it will, in 2013, as the Governor reinforced today.

However, Governor Brewer will remain part of ongoing discussions about proper funding for education in Arizona, and believes the current model does little to encourage innovation or performance on the part of teachers, professors and administrators.

Governor Brewer’s education plan includes initiatives to:

  • Implement performance-based funding for Arizona’s institutions of higher education, while reviewing and reforming Community College State Aid.
  • Produce a searchable database so that every parent can research the license and any disciplinary actions taken against their children’s teachers, and reform the teacher decertification process.
  • Lead a campaign this year to encourage involvement by parents in their children’s education.

3rd Cornerstone: State Government

The citizens of Arizona deserve a lean, effective and efficient State government.

Governor Brewer will create a Government Transformation Office, housed within the Department of Administration, which will be responsible for identifying process improvements and best practices to minimize redundancies and improve customer service. Governor Brewer also will pursue reforms that modernize the State personnel system, making it easier to hire and reward the most talented employees, while removing red tape that hinders removal of the least productive workers.

The State of Arizona has an obligation to vulnerable Arizonans, including the mentally ill and children under state supervision or care.

For the seriously mentally ill (SMI), planning already is underway for a pilot program that will integrate physical and behavioral health services for Medicaid-eligible SMI individuals. This approach is expected to result in fewer hospitalizations and less reliance on the crisis system.

In recent days, Governor Brewer was provided a series of recommendations by her Arizona Child Safety Task Force. While she continues to review those recommendations, the Governor proposes several child-safety initiatives for immediate adoption. They include:

  • Involvement of law enforcement in all Priority 1 investigations that contain allegations of criminal conduct.
  • Improvement of CPS caseworker training, both pre-service and continuing, including the training of CPS workers in law enforcement techniques.
  • Overhaul of the abuse hotline to improve screening, decrease wait times and expedite high-priority calls.
  • Introduction of Quality Management initiatives throughout CPS to streamline processes and improve outcomes for children.
  • Enhance transparency and accountability.

4th Cornerstone: Renewed Federalism

The State of Arizona has a long history of pushing back against federal overreach, and will continue to be a national leader among states seeking a return to a system of cooperative federalism. Governor Brewer will maintain the defense of SB 1070, and will remain a vocal opponent of mandates under the federal health care law. Both landmark cases will be heard this year by the U.S. Supreme Court.

With this past fire season the worst in Arizona State history, mismanagement of federal lands came into frightening focus as yet another area in which the federal government has neglected its duties. Strategic thinning can both reduce the risk of massive blazes and be an economic benefit to rural communities. With today’s State of the State Address, Governor Brewer called upon the federal government to stop its needless delay of the 4 Forest Restoration Initiative, a breakthrough, collaborative plan to restore 2.4 million acres across the Kaibab, Coconino, Apache-Sitgreaves and Tonto national forests.

“We are all blessed to be Arizonans, and I am honored to have a hand in guiding this state into its second century,” said Governor Brewer. “Working together, and drawing upon the grit of Arizona’s founders and judgment of the giants of our past, I’m confident Arizona’s next 100 years can be even more fruitful than the last.”

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Filed Under: Economics, Education, Elected Officials, Government Reform, Jobs/Labor, Legislation, Press Release, State Budget, State Economy, State Government Tagged With: ,

Governor Brewer reacts to S&P credit upgrade, calls it one more sign of recovery for State of Arizona

December 21, 2011 By 19 Comments

FOR IMMEDIATE RELEASE: December 21, 2011
CONTACT: Matthew Benson

Standard and Poor’s Upgrades Credit Outlook for State of Arizona
Latest Indication that the Arizona Comeback is in Progress

PHOENIX – One of the nation’s largest credit ratings services, Standard and Poor’s, announced today that it has upgraded to “stable” its outlook on the State of Arizona’s fiscal condition. S&P also upgraded to “stable” its outlook on the State’s certificates of participation and lease revenue debt.

State of Arizona finances previously carried a negative outlook from the credit ratings service.

“This is fantastic news, and serves as one more indication that Arizona is on the comeback trail,” said Governor Jan Brewer. “The last three years haven’t been easy. But I’m happy to say that the difficult decisions I’ve made, together with the Arizona Legislature, have helped put this state back on solid financial ground. For the first time in years, Arizona has a growing economy and a state government it can afford.”

In announcing the credit outlook revision, S&P pointed to the State of Arizona’s diverse economy, continued population growth, moderate debt burden and expectations of a sizable budget surplus in fiscal 2012.

“We base the outlook revision on what we view as Arizona’s improving fiscal outlook,” S&P credit analyst David Hitchcock explained in today’s report.

The S&P announcement is just the latest sign of the state’s improving economy and financial position. In other recent news:

- Arizona added 12,800 jobs in November, driving down the state’s unemployment rate to 8.7 percent. The rate is the state’s lowest since February 2009.

- Arizona has added an estimated 45,800 jobs so far this year. The state’s job growth from October 2010 to October 2011 ranked 7th best nationally, according to the U.S. Bureau of Labor Statistics.

- State revenues continue to outpace projections, and the Governor’s Office of Strategic Planning and Budgeting now estimates a combined surplus of $1.3 billion between the remainder of this fiscal year and next.

“Our mission isn’t accomplished, but today’s announcement from S&P is validation that we’re on the right path,” said Governor Brewer. “We’re going to keep state government small, efficient and effective, and continue working to put in place the conditions for private enterprise to flourish and grow. I believe that 2012, Arizona’s Centennial year, is going to bring more great news for the people of our state.”

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Filed Under: Economics, Elected Officials, Jobs/Labor, Press Release, State Budget, State Economy, State Government Tagged With:

Senate Leadership calls for end to 53/47 contribution rate for state employees

December 21, 2011 By 10 Comments

FOR IMMEDIATE RELEASE: December 21, 2011
CONTACT: Mike Philipsen

Majority Leader to author bill that will put money back into teachers’ paychecks

(Phoenix, State Capitol) —Senate President-elect Steve Pierce and Majority Leader Andy Biggs announced today a bill will be offered in the upcoming legislative session ending the recent 53% employee/47% employer contribution rate split. That split went into effect in July, as part of the FY 12 budget. The change plugged a $40 million hole in the budget and reduced employee paychecks.

The bill will return the contribution rate split to 50/50, and increase the paychecks of teachers and other state employees by $20-40.

“Last session we made a commitment to Arizonans to deliver a balanced budget. The 53/47 split helped that happen, but many members agreed it was one of the toughest decisions they had to make. Conditions have changed, and I am comfortable now running a bill to repeal 53/47,” says Majority Leader Biggs.

“The truth is, the economic landscape is very different from March, when these budget negotiations were taking place. Because of our fiscal discipline and an improving economy, revenues are coming in at a much higher clip, and we can reverse this contribution rate change,” says President-elect Pierce.

“Republican leadership continues to put a high priority on strengthening education during these difficult times. We held K-12 reductions to about one percent last year. Today’s announcement is another way to honor the hard work of our district and charter school teachers,” says Pierce.

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Filed Under: Government Reform, Legislation, Press Release, State Budget, State Government Tagged With: , ,

A state with prosperity, lower taxes is possible

December 18, 2011 By 7 Comments

If we could start from scratch and redesign Arizona’s state-government programs in the interest of efficiency, effectiveness and fairness, they would look very different than they do now.

Ideally, state government would provide genuine public goods (in the strictest sense of the economic term “public good”) and provide a social safety net, with minimal harm to taxpayers and minimal drag on economic growth.

Government support for K-12 and college education (which now take up over half of the state budget) would be voucherized, with money going directly to families to empower them to shop among competing private and non-profit schools.

The vouchers would be means-tested so that low-income families received bigger vouchers, with a formula for extra subsidies for children diagnosed as having special needs.

If K-12 vouchers were deposited into tax-exempt education-savings accounts, families would have a strong incentive to bargain for lower tuition and to save and invest excess funds for future education, health and retirement purposes.

AHCCCS/Medicaid, which currently takes up a quarter of the state budget, needs radical reform. By correcting flaws in the federal tax code, we could encourage the vast majority of citizens to buy portable health-insurance coverage through tax-exempt health-savings accounts, with means-tested government support for the poor (including block-granted federal dollars).

For people who are too sick to be easily insurable in low-premium, high-deductible HSA plans, the government could maintain high-risk pools in coordination with private charities.

Along the same lines, unemployment insurance would be based on contributions to private, individual accounts so that individuals saved their own money when they were working and spent their own money when they lost their jobs, thus creating strong incentives to quickly find new jobs.

Many state highways and roads (which often involve public-good holdout problems) could be made self-funding through long-term private concessions to finance, build, maintain and operate new roads and new highway lane-mile capacity.

With the above reforms, Arizona’s general-fund budget would be $9 billion a year. Ideally, that would be funded with a broad-based retail sales-tax rate of less than 4 percent — no personal or corporate income taxes, and no local education property taxes (which currently take up at least half of people’s property-tax bills).

As long as we’re talking about the ideal world, let’s go further and assume that the federal government was limited to its proper functions under Article 1, Section 8 of the U.S. Constitution.

With a federal government one-fifth of its current size and funded by a 5 percent national retail-sales tax (eliminating federal income, capital gains, dividend and death taxes), Arizona taxpayers could readily afford to replace and reform many of the federal entitlement programs.

By paying for those functions with an additional statewide sales tax of 5 percent, we could limit the total combined federal, state and local sales-tax rate to about 15 percent.

With a total tax burden about 15 percent of GDP, Arizonans would have the most efficient, most pro-growth tax system in the developed world, resulting in real annual per capita economic growth around 3 percent.

At that rate, Arizonans would double their real wealth every 25 years.

The tough question is not whether this would be good for Arizona.

The tough political question is how we get there from here.

Tom Jenney is Arizona director of Americans for Prosperity, which seeks to educate citizens about economic policy.

Filed Under: Spending, State Budget, State Economy, State Government, Taxation Tagged With:

Coalition of Job Creators Launches Statewide Media

December 5, 2011 By 9 Comments

FOR IMMEDIATE RELEASE: December 5, 2011
CONTACT: Colin Shipley

Calls for the Arizona Legislature to Stop Killing Jobs by Raiding the HURF

(PHOENIX, AZ) We Build Arizona, a statewide coalition of job creators, launched a media campaign calling upon the Arizona Legislature to stop killing job creation by raiding the HURF. Over 43,000 jobs in Arizona have been lost due to the legislature’s raiding of these funds.

“A good transportation system is needed to manage future economic growth,” said Ryan Mackey of We Build Arizona. “The politicians in the Arizona Legislature have been raiding the HURF for 11 years and it must stop so we can put Arizonans back to work and keep Arizona families safe on our roads.”

The statewide media campaign includes television, radio, social media, and direct voter contact to educate Arizonans on how the politicians in the Arizona Legislature have cost our state over 43,000 jobs while putting the safety of Arizona driver’s at risk.

“The raiding of the HURF didn’t start because the economy went south,” said Gary Haydon of We Build Arizona. “The politicians in the state legislature have been using the HURF for their own political benefit, not for what it is intended. If they are unwilling to fix their mistakes, then we will take their raiding of funds and killing jobs directly to the voters by placing an initiative on the 2012 ballot.”

We Build Arizona is a statewide coalition of businesses and organizations dedicated to creating jobs by protecting and growing state and local infrastructure funding. The coalition consists of the American Council of Engineering Companies of Arizona, Arizona Builders’ Alliance, Arizona Chapter, Associated General Contractors, Arizona Transit Association, Associated Minority Contractors of America, Friends of Transit, and Tucson Utility Contractors Association.

To view the television ad and listen to the radio ad, please visit www.WeBuildAZ.org.

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Filed Under: Advertising, Media, Press Release, Spending, State Budget, State Government, Taxation, Transportation Tagged With:

Monuments to education funding

November 2, 2011 By 7 Comments

by Jonathan Butcher
Goldwater Institute

Reid Buckley, brother of the late political commentator William F. Buckley, Jr., used to ask audiences, “Do you know how high a pile one million bucks would make in thousand dollar bills?” After a pause, he would answer: “Seven inches.” Then he asked, “Now: do you know how high a pile one billion bucks would make in thousand dollar bills?” Again, after a pause: “Well, twenty-eight feet higher than the Washington Monument.”

In 2011, the Joint Legislative Budget Committee estimates Arizona taxpayers will fund K-12 education with over $8 billion in state and local dollars. Imagine eight Washington Monuments stacked on top of one another.

In a revealing moment of honesty, the Arizona teachers union and other opponents of education reform told the Arizona Capitol Times that they are crafting a new message on education funding that deals with fiscal responsibility. Tugging on peoples’ heart strings with the idea that more money for education is always right isn’t working.

“The education community is going to have to think of a new message,” said Democratic lobbyist Mario Diaz. Pay careful attention to the discussion: Unions and others are admitting it’s difficult to believe more tax money for public schools is always necessary but convince everyone else that they are really interested in the state’s fiscal health.

It must be challenging to convince taxpayers every year that all schools need is money when 44 percent of state 4th graders read below a “basic” level and Arizona sits in the bottom half of U.S. states in terms of high school graduation rates.

Arizona students don’t need new marketing campaigns—they need quality teachers and quality schools.

Did your school get an A on the new state report card? Excellent, carry on. But chronically failing schools should be closed, and parents and lawmakers should use open enrollment, charter schools, tax credit scholarships, and education savings accounts to immediately change the direction of a student’s educational future.

Jonathan Butcher is education director for the Goldwater Institute.

Learn More:

Goldwater Institute: My school got a D—now what?

Arizona Capitol Times: Message to lawmakers – education system is economic engine

Arizona Department of Education: School letter grades

Filed Under: Education, Spending, State Budget

Pension reform or bust

October 20, 2011 By 2 Comments

by Byron Schlomach
Goldwater Institute

After a devastating series of prize-winning articles by Craig Harris in the Arizona Republic, the legislature took a first step to reform the state’s pensions systems last session. The changes – more tweaks than full-scale reforms – limited some of the worst abuses.

Public employees have to contribute more to their own retirements now and double-dipping (being on the payroll while also drawing a pension) has been limited. The real reform – eliminating pensions and moving to a 401(k) benefit with new employees – remains to be accomplished.

Shifting public employees into 401(k)s has become an issue in the Phoenix mayor’s race, as well as for the state.

At both levels, it is often claimed that giving new employees 401(k)s costs taxpayers more in the short run. But if that’s true, it is an admission that the current system is unsustainable and underfunded and we’re all being ushered down a primrose path to eventual financial ruin. After all, a properly funded pension system should not be a Ponzi scheme, ever dependent on new members in order to stay afloat. Instead contributions by current members, at any given time, should be sufficient to cover future pensions.

Think pension-induced financial ruin can’t happen? Then read the article “California and Bust” from the last issue of Vanity Fair magazine. The Golden State illustrates the risk of pension systems. They become larded with new benefits by politicians anxious to please voting public employees during good times. Then they become difficult to sustain during bad times.

Our state pension systems are in a sad state even with banner rates of return last year, and beneficial assumptions make them appear to be in better shape than they actually are. Job one for reform is doing the same favor for taxpayers that corporations did for stockholders years ago: put new government employees on 401(k) retirement benefits.

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

Learn More:

Goldwater Institute: Defusing the Pension Bomb: Making Retirement Plans Solvent for All Public Workers

Goldwater Institute: $50 Billion Tidal Wave: How Unfunded Pensions Could Overwhelm Arizona Taxpayers

Arizona Republic: Phoenix mayoral election 2011: Pension reform

NewsHouse: Arizona Republic political reporter receives first Toner Prize

Vanity Fair: California and Bust

Filed Under: Government Reform, Spending, State Budget, State Government

Overpayments still rampant in Arizona’s unemployment insurance program

September 29, 2011 By Leave a Comment

by Stephen Slivinski
Goldwater Institute

Recently, the U.S. Department of Labor released data on how much each state “overpays” in unemployment insurance (UI) benefits.

Overpayments, as a practical matter, are common. Either through lack of enforcement of eligibility requirements or through poor verification procedures, states sometimes improperly send unemployment checks to those who may not be eligible.

If there are strong verification procedures in place, overpayments can be greatly reduced. Yet, it appears that in Arizona, those safeguards are either absent or ineffective. Arizona had the fifth highest overpayment rate in the U.S. between July 2010 and June 2011, overpaying by $132 million. That’s an overpayment rate of 21.6 percent — almost twice the national average of 11.2 percent.

Why does that matter? Arizona has borrowed more than $300 million from the federal government since March 2010 to pay benefits to the state’s unemployed. If the state had been more diligent, the amount borrowed could have been almost cut in half.

Overpayments also put a strain on employers. Unemployment insurance is funded by taxing employers and if the fund doesn’t take in enough money to pay unemployment checks, taxes on employers go up too. There is a direct cost to employers that could be reduced if the state had better unemployment eligibility verification in place.

The unfortunate thing is that this is no surprise: An audit of the Arizona Department of Economic Security’s UI division concluded that “the Division’s accuracy rate in determining whether claimants are eligible for UI benefits is significantly below [U.S. Department of Labor] standards and national averages.” That audit occurred in 2005 and there hasn’t been one since.

Much can be done to reduce overpayment of unemployment benefits and reducing the cost of this program to those who fund it, starting with another audit of the eligibility verification process.

Keeping government-imposed costs of employing workers low should be part of Arizona’s economic development strategy. But the legislature must fix our broken unemployment insurance system.

Stephen Slivinski is senior economist for the Goldwater Institute.

Learn More:

Goldwater Institute: Policymakers should audit, not expand, the unemployment insurance program

Wall Street Journal: Billions in unemployment benefits paid in error

Office of the Auditor General: Performance Review of Arizona’s Unemployment Insurance Program (2005)

Filed Under: Government Reform, Spending, State Budget, State Government, Taxation

Doug Ducey Statement On Increasing Taxes on Municipal Bond Investments

September 28, 2011 By Leave a Comment

FOR IMMEDIATE RELEASE: September 28, 2011
CONTACT: Kevin Donnellan

PHOENIX – “The Arizona State Treasurer’s Office manages $3.3 billion of local government tax dollars for more than 150 Arizona cities, towns, counties and special taxing districts. Higher taxes for municipal bonds during this artificially created low interest rate environment will increase the cost of financing for municipalities. Those costs will ultimately be passed along to city, county and state taxpayers.

“The goal for our economy should be long-term, sustainable job creation, not increases in short-term revenues. We need real reforms and real reductions in spending, not tax increases that will only continue to fund our already bloated and out-of-control federal government.

“President Obama rolled the dice in 2009 with a $862 billion stimulus package that failed to prevent unemployment from rising over 8.0 percent. Today, Arizona is faced with 9.3 percent unemployment and a national rate of 9.1 percent. In the business world we call that a negative return on investment. The President now sees it as an opportunity to double-down with another $447 billion stimulus gimmick.

“Raising taxes on municipal bond investment will not help create jobs. The President’s proposal will bring more volatility into the markets and take more money out of the private sector; neither of which will have a positive return for Arizona or our national economy.”

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Filed Under: Debt, Economics, Elected Officials, Press Release, Spending, State Budget, State Economy, State Government Tagged With:
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