Governor Napolitano and Arizona Legislature Draw Budget Battle-Lines

There is a certain irony in the fact that, while there is hardly anything so important in politics than budgets, there is hardly anything more boring. Politicians rely on this fact to ensure that constituents succumb to the soporific effect of endless columns of numbers and jargon before figuring out exactly where their money is going.

I’m hardly superhuman in this regard. I also find hunting through numbers stultifying. But I have dug a few golden nuggets of useful information out of the legislature’s and the Governor’s budget proposals that might hold your interest for a few moments.

What are the differences between the legislature’s $9.8 billion  (Download may16budgetproposal.pdf)

proposal and the Governor’s $10.2 billion (Download 2007DetailBook.pdf)

proposal? A lot more than just the obvious $400 million dollars, but a large slice of it can be explained by just a few key fiscal facts and their ideological dispositions.

The legislature is hungry for tax cuts. More than anything else, they want to wring several hundred million in tax cuts out of the budget to carry back to their districts in conservative triumph. They will sacrifice any other principle – fiscal responsibility, future budget stability, state services – on the altar of tax cuts. They seek over half a billion in tax cuts over the next two years.

The Governor has several political goals in mind with the budget, a key one being securing her legacy with the all-day Kindergarten program, but her budget also puts on display her bona fides as a true fiscal conservative. The Governor is investing major political capital not in new spending, but in paying down program deficits from prior budget fudging, and socking substantial sums away in the Budget Stabilization Fund.

Well over $300 million of the difference between the legislature’s budget and that of the Governor, is that Napolitano wants to put aside a good chunk of the short-term spike of revenues we’ve experienced this year into the Budget Stabilization Fund. Napolitano recommends almost $350 million be placed in the fund, while the legislature wants to save less than $10 million.

The Budget Stabilization Fund was implemented because of the highly cyclical nature of Arizona’s economy. It makes a great deal of sense to stash money in the fund in a good year (such as this one) to compensate for downturns that can decimate state revenues with declines of up to 30% in some sectors. The legislature seems heedless of the possibility of worse times ahead, and are trying to lock in multi-year budget cuts that could leave our state government in a structural deficit much like our federal government, but without the ability to borrow the shortfall.

It has long been a practice in Arizona for the government to borrow from some programs, especially capital funds, to fund operations. Often funds are fiddled from one fiscal year into another to free up a little more cash. Unfortunately, the legislature never seems as enthused about repaying such funds as they are about filching them. The result is chronically under-funded capital acquisition programs that hurt Arizona’s citizens. Again, Napolitano is choosing doing the right thing over the easy thing by providing repayment for many of these raids in past budgets. In contrast, the legislature’s budget looks around in mock confusion and says, wide-eyed, “who, me?”

Finally, our Governor and the legislature demonstrate their competing visions of fiscal restraint and concern for the taxpayer with their differing priorities in cutting taxes. Whereas the legislature wants income and property tax cuts that will disproportionately favor the wealthiest Arizonans, Napolitano’s roughly 100 million in tax cuts incentivize employers providing their workers with health insurance, high-technology research, consumers of more efficient vehicles, and educational purchases. Moreover, the legislature wants cuts extended over two years, threatening a serious deficit should there be an economic downturn. The threat of multi-year cuts is made worse because any cut in taxes would require a supermajority vote in order to raise new revenue, making such cuts a risky gamble that puts the state’s fiscal solvency at the mercy of an ideologically deranged minority.

There are quite a few more questions in the details of both plans that take more than a casual reading of the budget proposals to parse. For those, I have turned to expert guidance and will share anything interesting I learn from my inquiries in later posts.

One thing is for sure, this budget is likely to be more contentious than ever with a Gubernatorial election this year. The GOP will be out to score as many points as possible with this budget process, and I wouldn’t be at all surprised to find them putting the welfare of our State’s citizens second to the goal of politically embarrassing the Governor in an election year. The differences between their positions couldn’t be more clear, despite the reams of numbers that obscure them. I think that when people look at our Governor’s priorities and philosophy as reflected in her budget priorities in this year, as well as past years, they’ll decide that her pragmatic and truly conservative approach fits best with our State’s vital interests.