Sunday, March 16, 2008

Arizona's reckoning day closer than expected

The nasty budget shortfall faced by Arizona's state government isn't getting any closer to a reasonable conclusion. With the economy slowing, the state just isn't filling its coffers as fast as expected, but government officials are still cutting checks as if there's no tomorrow. That's a problem, because tomorrow is coming along pretty fast. Reports the Arizona Republic:

The state's worsening revenue shortfall means the general fund will run out of cash it can legally spend earlier than the previous estimate of late May, State Treasurer Dean Martin said Thursday.

Martin said his office is fine-tuning its calculations and expects to project a new no-cash date by next week.

But he said the increased size of the current fiscal year's estimated shortfall - raised to $1.2 billion currently from $970 million most recently - likely moves up the date when there's no cash in the general fund to early May or even late April.

There's plenty of blame to share around among the usual suspects. As Republic columnist Robert Robb points out, "Gov. Janet Napolitano's approach to revenue crunches is to preserve spending as much as possible. Napolitano's preferred budget fixes are debt, draining the rainy day fund, and sweeping reserves in non-general fund accounts."

In A Comparison of State Spending Growth Under Arizona Governors, (PDF) a report Robb prepared for the Goldwater Institute in 2007, he wrote that adjusted spending increased during Napolitano's reign by 54%, well above the average of 40% inflicted on the state by her predecessors.

Using adjusted state general fund spending as the fairer comparison, spending during Napolitano’s term increased 13 percentage points more than personal income growth, compared to predecessors’ average of just over 1 percentage point. Napolitano’s rate of increase was equaled during the term shared by Evan Mecham and Rose Mofford, and was approached during Babbitt’s first term.

State spending growth under Napolitano stands out even more when compared to increases in population and inflation. Even with the adjustments, spending under Napolitano increased 29 percentage points more than population and inflation, compared to just 11 percentage points on average for her predecessors. The closest rival for increased spending was Babbitt’s second term, during which spending increased 17 percentage points faster than population and inflation.

But Napolitano isn't the queen of Arizona. She had plenty of help from state legislators -- Republican state legislators -- who collaborated with the governor to drive spending to booming heights in 2006 and 2007, when state government metastasized to exceed 6.5% (PDF) of the state economy. As always, excessive good-times expenditures can't be maintained when the economy cools down -- like now -- creating the need for quick retrenchment.

To give lawmakers credit, they did pass two budget freeze bills, both of which were promptly vetoed by the governor.

But the problem isn't going away just because Governor Napolitano finds it inconvenient to end the binge.

Americans for Prosperity has called for a firm spending limit of 6.4% of the state economy. That might rein in future rollercoaster rides, limiting spending in good times while softening the landing in bad times.

As the Goldwater Institute report makes clear, the state government has just been spending too much damned money, and now the credit card is maxed out. Like it or not, the state will pay the piper, one way or another.



Anonymous Anonymous said...

^^ nice blog!! ^@^

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March 19, 2009 12:12 AM  

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