Arizona: It’s Time to grow up and get our act together
by Marc Pascal
Arizona’s state and local governments are rapidly disappearing into the desert’s financial quicksand.
The state budget for 2010-11 is being drafted by Republicans who for years repeated their empty mantras of “more cut taxes” and “reduce government spending” in response to every situation. Faced with a billion-dollar fiscal deficit and refusing to restore temporary tax cuts, the Legislature is simply gutting all state spending on education, infrastructure, and social programs without considering what all 5.5 million Arizonans need.
Arizona’s population will continue to grow while being located principally in the two metro areas of Phoenix and Tucson. Geographically, Arizona is fortunate to be in a year-round warm, sunny location, and adjacent to California (still one of the driving forces of the U.S. and global economies). It also possesses many beautiful natural resources to ensure it is an international tourist destination for decades to come.
We cannot operate in some perpetual delusion that this State has only about 2.5 million residents to serve. The state legislature and governor must represent the best interests of all Arizona residents, whether or not they pay taxes or make campaign contributions. Rigid ideologies should be cast aside in favor of coming up with solutions that actually work.
It may be convenient to blame former Governor Janet Napolitano for everything, including not predicting the worldwide recession, for previously allowing spending to increase with the growth in Arizona’s population, and for permitting the Legislature to mindlessly cut taxes in the past. Everyone needs a scapegoat to deflect the unpleasant task of assuming responsibility.
Now that Secretary Napolitano is running the Department of Homeland Security, we can objectively realize that for more than a decade, Arizonans of both political parties have collectively created this fiscal mess by principally encouraging real estate development, not diversifying the economy, and designing a state tax system that is unbalanced and irrational.
Having lived in and traveled to many different states across the U.S. for most of my adult life until coming here in early 2006 with my family, I am amazed at the short-sightedness of some Arizona residents who vehemently complain that taxes are too high. If anything, taxes are way too low in comparison to most other states. Certainly being in the bottom 10 of states in per capita public school funding does not indicate that we are lavishing any funds on our future global competitiveness. Being one of the lowest in average weekly unemployment compensation suggests we are no where close to being a compassionate state.
Why is there a permanent and senseless fear by Republicans that businesses and people are suddenly going to leave the state for other locations if taxes go up one cent? Is that their only personal criteria for having moved to, or for remaining in Arizona?
This state’s tax system was not my major concern when I moved my family here in 2006. Businesses and households relocate here because of the entire way of life offered by Arizona. The same analysis applies to all states and countries with which Arizona competes.
Fortunately some sanity reigns at the Governor’s office and the Legislature. Unlike other conservative states, we have decided to take federal stimulus money. Now is the time to aggressively pursue those funds using our Congressional Delegation and anyone else with Washington connections to maximize the return of federal dollars back to Arizona. However, this fix should be viewed as only temporary. It should provide Arizonans the time to reorganize our permanent taxing and spending priorities into a rational format.
Arizonans must rethink our state and local tax policies from the ground up. We have to raise more revenues in good times, and actually save some for the times when revenues may go down. However, we should principally concentrate on revenue sources that retain some stability regardless of the overall economy. We have to find a rational and equitable mix of income, property, sales, excise, and business taxes. We cannot rely upon visitors to pay for public services for which all residents should bear the tax responsibility.
We have to pay for the necessary public services for a state of over 5.5 million residents, particularly if we intend to continue growing economically and collectively become competitive workers, professionals, and business enterprises in an inter-connected global economy. This means first adding the reasonable costs of our transportation, educational and energy infrastructures; the costs of public safety, government administration, and environmental protection; and new programs to encourage future growth and diversification of our overall economy. After that total amount is established, then the state taxing system has to be designed to fund those needs, and levied on those who can best afford to pay – not the other way around as is currently being pursued by the Republican Legislature.
For fiscal discipline, financial accuracy, and budgetary transparency, the state should maintain 2 budgets as do many other states: (1) An Operating Budget for the continuing expenses of state employee payrolls, the costs of public services and healthcare programs, regular purchases of supplies and equipment, and ongoing maintenance needs; and (2) A Capital Budget that covers the bonds issued for pay for new roads, bridges, schools, mass transit and governmental buildings. The necessary link between the 2 budgets would be that specific revenue sources (earmarks of certain annual tax receipts) are allocated to paying the principle and interest costs on long-term debts issued under the Capital Budget.
This recession actually provides a great opportunity for people of all political persuasions to rationally and honestly discuss what type of state we want to live in, not just for next 2 years but more importantly, for the next 2 decades. The current Arizona Governor and Legislature, with input from as many thoughtful and knowledgeable Arizonans as possible, must commence immediate efforts to reform this state’s entire tax and organizational structure to ensure we are competitive in a 21st Century global economy. Otherwise, the 2010 Elections may bring about significant changes in the allocation of political power that will no longer favor the Republican Party’s long-standing control of this state.
3/2/09 – Marc Pascal (JD/MBA) Phoenix, AZ – 602-478-8697, [email protected]
Marc Pascal has J.D. and M.B.A. degrees from Case Western Reserve University in Cleveland, Ohio 20 years ago. He worked for many years as an in-house legal counsel for several large business enterprises and later started 4 new ventures with partners. He now lives in Phoenix with his wife and young son. He is an independent business and management consultant who provides consulting services to various privately-held business enterprises in the Phoenix area.