Arizona $37 billion in Debt Despite Constitutional Debt Limits

Goldwater Institute
Press Release

Phoenix–On January 1, millions of Americans resolved to get out of debt. A new report from the Goldwater Institute shows that state and local governments need to join the crowd.

The State of Arizona has taken on an unprecedented amount of debt, $6.3 billion, despite a strict debt limit of $350,000. When local government debt is included, the total amount of debt for all levels of Arizona government swells to $37 billion. That’s about $6,000 for every man woman and child in Arizona. In just four years, from 2004 to 2008, state and local debt in Arizona increased by more than $10 billion.

Our state’s framers knew the perils of government debt. They watched the state’s debt explode while Arizona was still a territory and saw the strain it put on taxpayers. When they wrote the constitution, they purposefully included a strict debt limit of $350,000 on state debt. Despite this clear limit and additional limits on local government debt, Arizona state and local governments combined are now $37 billion in debt.

A new report, “Living Debt Free: Restoring Arizona’s Commitment to its Constitutional Debt Limit,” by Goldwater Institute Senior Fellow Benjamin Barr, explains how politicians have used gimmicks to disguise new government debt, often simply by renaming debt a “lease.” The report also explains how judges have failed to enforce the constitutional debt limit by creating new definitions of debt and relying on precedent from other states that do not have the same constitutional limits as Arizona.

“It’s unacceptable for the Legislature or the judiciary to simply ignore the constitution,” Nick Dranias, Director of Constitutional Policy at the Goldwater Institute said. “There will always be pressure to spend more, which is why our framers created the debt limit. Everyone should be concerned when judges and government officials read taxpayer protections right out of the constitution.”

Debt allows government spending to grow virtually unchecked because it eliminates pressure on elected officials to set spending priorities. And, it costs taxpayers more to pay for government services with debt than with cash on hand. In 2008, for example, Arizona taxpayers spent $696 million on state debt interest payments alone. That’s more than the state spent on the Department of Health Services which administers behavioral health, disease prevention and control, and community public health programs and regulates the state’s childcare and assisted living centers, nursing homes, and hospitals, among other things.

The state’s mounting debt, combined with its current fiscal problems, is leading to calls for reforms that will help keep Arizona solvent. Politicians and judges need to return to the plain language of the state constitution to ensure that taxpayers have the protection the constitution promises. Judges should consider the substance, not the form, of an agreement to determine if it creates debt. To help judges in that effort, the legislature should pass a law that provides a definition of debt that applies to all government spending. If all else fails, the constitution could be amended with new language clarifying the definition of debt and the limits placed on state and local governments.

Living Debt Free” is available online or by calling (602) 462-5000. The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.


Comments

  1. When releasing these figures about ‘debt’ it might be useful to contextualize what the state’s assets are. In terms of cash and security holdings the state has over $78.5 billion. Of course this doesn’t include the value of the state’s trust lands.

  2. Yeah right. says

    Why should they do that?

    After all, that would interfere with their magnificent fund raising machine.

    I would be kinder if they actually accomplished much of what they blather about, but so much is just plain dumb, that the better points are just lost.

    Where in the State Constitution does it limit municipal or political subdivision debts?

    Just interested in the facts, not fund raising propaganda.

  3. This is why:

    “In 2008, for example, Arizona taxpayers spent $696 million on state debt interest payments alone. That’s more than the state spent on the Department of Health Services which administers behavioral health, disease prevention and control, and community public health programs and regulates the state’s childcare and assisted living centers, nursing homes, and hospitals, among other things.”
    ……………..
    Debt carries interest obligations.
    Everyone whines about raising teachers salaries – but lo! look at the money spent to stay current on interest payments ALONE that could have provided a source of funds for schools, health, roads or not sucked out of taxpayers in the first place so they could invest in businesses or other useful activities.
    Phoenix sure is pretty, with incredible highways and overpasses that are works of art, with magnificent landscaping, but what about the rest of the people in the state? Enjoyed many an “Arizona Massage” on state-maintained washboard since moving here.
    But now that cities like Phoenix are all purty and loaded with amenities, the money’s gone, worse, it’s a honking big deficit with growing interest payments to make to keep from defaulting. No fancy upgrades for roads or services for anyone else in the state, with worse weather conditions to deal with.

    Poor governance for years and the chickens are coming home to roost.

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