Doug Ducey, the ice cream man hired by Koch Industries to run their Southwest subsidiary formerly known as the state of Arizona, recently penned an op-ed for The Arizona Republic aka the “McMedia” (for its daily reporting on the reality TV stars ‘The McCains”), extolling his recently passed state budget. Gov. Ducey: Why this year’s budget is so smart.
It is the GOPropaganda from Ducey’s office that we have all come to expect, artfully defending the indefensible.
Ducey was actually responding to recent criticism from The Republic’s libertarian former shill for the “Kochtopus” Death Star, the Goldwater Institute, and the Arizona Chamber of Commerce, Robert Robb. (There is a disturbance in the force of the “Kochtopus”).
On June 7, Robb wrote Arizona says the 2020 state budget is balanced. But is that really true?
Gov. Doug Ducey often brags that the state budget is balanced. What does that mean? And is it true?
Note: The Arizona Constitution requires the state budget to be balanced.
The legislative budget staff defines “structural balance” to mean the relationship between ongoing revenues and ongoing spending. One-time revenues and one-time spending items [are to be] excluded.
That calculation continues to be part of the budget presentation and analysis to this day.
The calculation was flawed from the beginning. One-time revenues do need to be excluded. But there will always be one-time spending items. For state finances to be truly sustainable, ongoing revenues have to be reasonably expected to cover both ongoing spending and some amount of one-time spending as well.
In addition to being flawed, the structural balance as calculated by the legislative budget staff is also subject to political manipulation and mischief. If some item of spending gets labeled as “one-time,” it disappears from the structural balance calculation.
That appears to have occurred massively in the budget the Legislature just adopted and the governor signed.
Lawmakers are playing labeling games
In this year’s budget, operational spending labeled as “one-time” constituted $276 million. For the budget adopted for next year, that soars to over a half billion dollars.
Budgets are presented in three-year planning horizons. After next year, in fiscal year 2021, “one-time” operational spending is projected to plummet to less than $100 million. And dip even more the following year to a mere $55 million.
There are some spending items in next year’s budget that are truly one-time expenditures. But there are big bucks in things more appropriately treated as recurring expenses.
For example, the budget allocates an additional $62 million in grants to schools for major repairs, but labels it a one-time expense. 2020, however, won’t be the last year some schools in Arizona will need major repairs.
In a different slight-of-hand, the Legislature gave the universities an additional $35 million in operating funds. But it treats them as “one-time,” and thus excludes them from the structural balance equation. But those funds are no different, and no more at risk, than the other $700 million plus of general fund appropriations to the universities.
We’ll spend more than we get from taxes
The political need for this legerdemain is easily demonstrated. The budget document purports that there is a structural balance next year of a positive $310 million. But, in reality, the budget spends nearly $300 million more than the state anticipates receiving in ongoing revenue. The difference is made up with a carryforward surplus from this year.
The future projections would be even bleaker without playing the one-time spending game. If one-time spending in fiscal 2021 and 2022 were to be what it was in reality this year, $276 million, not only would the purported structural balance go away. There would be an actual projected deficit. The state wouldn’t have the money to pay the bills.
I don’t think this is a cause for alarm. Projected revenue growth continues to be highly conservative, much lower than the state is currently experiencing.
And there will be a billion dollars in the rainy day fund, although that’s not supposed to be tapped except during a recession.
But, unless revenue growth indeed is more robust than projected, the state will spend next year more than it takes in. That’s not really balanced.
On June 12, Robb followed up with Arizona’s state budget was unconstitutionally enacted (again):
The state budget isn’t just one piece of legislation. There is the general appropriations bill, colloquially known as the “feed bill,” which lists state departments and agencies and how much money they are appropriated for next year.
Then there are eight “budget reconciliation bills,” or BRBs. These enact a hodgepodge of changes to various state programs purportedly associated with the budget. And this year, there was also an “Omnibus Tax Provisions bill.”
The budget reconciliation bills, and this year’s omnibus tax bill, are blatantly, and shamelessly, unconstitutional.
Constitution says one subject per bill only
The state Constitution says that individual bills “shall embrace but one subject and matters properly connected therewith.” The only exception is the feed bill. But, according to the Constitution, “(t)he general appropriations bill shall embrace nothing but appropriations for the different departments of the state … .”
So, unless it is just a list of agencies and numbers, bills can cover but one subject.
Here are some of the more egregious violations of that rule in the BRBs.
The Budget Procedures BRB sets forth, among many other things, the internal charges between state agencies, such as for rent or services. Then there is this non-budget humdinger: permission for state political parties to opt out of the state’s presidential preference primary in 2020.
The Health BRB has a myriad of provisions, most of which move money around in some way or another. It would be hard to say they “embrace but one subject,” but they are at least arguably budget related. But then there is a requirement that unlicensed behavioral health workers be at least 21 years old to provide services in an inpatient facility.
Tax changes aren’t appropriations
Tax changes clearly are not appropriations and thus the one-subject rule unarguably applies. Nevertheless, the Omnibus Tax Provisions bill includes both income tax alterations to conform to federal changes and a broader application of the state’s sales tax to internet purchases.
These two provisions became politically interrelated, since lawmakers went further with the income tax changes due to the anticipated greater revenue from the internet sales provision. But they are clearly two distinct subjects, and the one-subject rule was precisely designed to prevent this kind of legislative logrolling.
Another revenue provision, repealing the public safety car registration fee two years hence, was buried in the Criminal Justice BRB, along with a provision exempting corrections officers from jury duty until 2022.
An entirely new program – providing schools additional money for each student who obtains a technical certificate – was established in the K-12 Education BRB, which also makes substantial changes in Gov. Doug Ducey’s results-based funding program, not to mention adjustments to various components of the school finance formula.
The Human Services BRB allows the Department of Economic Security to reduce income eligibility for child care assistance if there is a funding shortage. And to drug test Temporary Assistance for Needy Families recipients. Find the “one subject” in that.
And the winner is …
My award for the most egregiously unconstitutional provision goes to the Higher Education BRB. The bulk of the BRB makes changes to Ducey’s Arizona Teachers Academy, offering free tuition to those who pledge to teach in Arizona schools. But it also contains a provision prohibiting community colleges from compensating employees for time spent working for their union.
Not only is that a policy matter, not an appropriation, it can’t even really be argued to be related to the state budget – since the state offers no general operating funds to the community colleges in the two largest counties, Maricopa and Pima.
These BRBs have turned into mini-legislative sessions, negotiated entirely behind closed doors. They trample on both the state Constitution and democratic norms.
Someday, some aggrieved party is going to sue over some BRB provision, claiming that it was unconstitutionally enacted. Here’s hoping the courts will have the gumption to uphold the democratic norms the state Constitution was intended to prescribe and protect.
This raises the obvious question, why don’t you sue, Robert Robb? You annually pontificate on this topic. Why not you? Or why not your old bosses at the Goldwater Institute? They like people to believe the illusion that they litigate on behalf of the taxpayer. Why don’t they sue?
Part of the reason is this decades old incestual relationship between the tentacles of the “Kochtopus,” e.g., the Goldwater Institute, the Arizona Republican Party, and some in the media. Together they have made Arizona a wholly owned subsidiary of Koch Industries.
I do not often agree with Robert Robb, because he is so frequently wrong, but on this “structural balance” issue I agree, on other grounds.
I have explained for years that Arizona has a structural revenue deficit as a result of some 27 years now of annual GOP tax cuts that become permanent because of Prop. 108 (1992), which requires a two-thirds vote of each legislative chamber to increase taxes, or to repeal tax exemptions or credits. This is the GOP’s “weapon of mass destruction” to prevent the state from ever raising enough tax revenue to meet the actual needs of Arizona’s citizens.
As I recall, and I might be mistaken, Robert Robb has either supported or made excuses for Republicans after the fact justifying every one of those tax cuts. So Robb has been a part of the problem his entire career. He is hardly one to complain.
While Robb focuses on the narrower issue of balance in this year’s state budget, he ignores the larger, more pressing issue of Arizonan’s needs not being met because of a structural revenue deficit due to GOP tax cuts.
More about that in another post.