Want to get serious about the state budget? Then repeal Prop. 108 (1992)

Posted by AzBlueMeanie:

Recently, three leading Tucson business groups — TREO, the Chamber of Commerce and the Southern Arizona Leadership Council — told a group of 11 Southern Arizona legislators to overhaul the state tax system and improve the climate for high-paying jobs. Business groups seek AZ tax action:

The officials said the state needs more stable tax-revenue sources to prevent creation of what one called a $2 billion structural state budget deficit by 2012 – a deficit that would reach that level regardless of whether the economy grows.

They also said the state needs to do more to diversify its economy beyond dependence on what one official called the consumption-related industries of real estate and retail.

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Ron Shoopman, the leadership council's president, advocated a tax-system overhaul. Potential targets for new revenue could include raising state property and individual income taxes, he said, noting that Arizona has a high corporate income-tax rate but one of the lowest individual income-tax rates in the country.

"We don't want high taxes for the state. We do need enough revenue for us to support programs important for the state's future," Shoopman said in an interview. He told the crowd, "We can't tax our way out of the problem. We can't cut our way out of it. We can't even grow our way out of it."

A week ago Sunday, the Arizona Republic published a series of articles as a Republic special report: "Arizona's Budget Crisis: Teetering on a Cliff."  The Republic correctly notes what we have been telling you here for years, State budget trouble brewing for years:

Under [Gov. Fife] Symington, lawmakers in 1993 passed a $30 million income-tax cut, followed by a $114 million cut in 1994 and $200 million in cuts each of the next three years.

Republican Gov. Jane Hull and Napolitano made more cuts.

In mid-2006, state coffers held a $1.5 billion budget surplus. Napolitano worked with a GOP-led Legislature to pass $500 million in tax cuts and $5 million for corporate tuition tax credits.

Arizona State University's Morrison Institute for Public Policy estimates that tax cuts, credits and exemptions have removed more than $11 billion from the state's coffers since 1993.

At the same time they cut taxes, state leaders increased spending.

Growing populations forced some program costs to swell. Over the past decade, spending for the state's Medicaid program grew to $1.4 billion from $483 million; K-12 education costs grew to $3.2 billion from $2 billion; and Department of Corrections costs grew to $890 million from $549 million.

The bursting speculative real estate bubble and the Great Recession pushed Arizona's economy, built upon real estate and retail sales, off the cliff. This article correcty noted that "Lawmakers can't cut about two-thirds of the general fund because of federal, court or voter mandates."

This point was reiterated in this report, All options on the table to solve budget problem, but not all are viable:

Gov. Jan Brewer and the GOP Legislature have signaled that they will rely heavily on cuts to state-agency spending.

But they can't get there by cuts alone, because much of the budget is protected by voter mandates or federal requirements. Political pressure, especially for education, also will work against steep cuts.

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Cuts aren't the only way to eliminate the deficit, and lawmakers and Brewer will rely on other tactics to bring in more money [fund sweeps], or delay expenditures [budget gimmicks].

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Not everyone sees spending cuts as the only solution.

"The overall problem we have is not an expenditure problem, it's a revenue problem," said George Cunningham, a former state budget chief and now a member of the Arizona Budget Coalition, which argues for alternatives to cuts.

The state's tax burden per $1,000 of income is at its lowest in decades, data show.

To Cunningham, that suggests there's room for a tax increase or a restructuring of the tax code to close loopholes and bring in more revenue.

He believes the public would agree.

You get the idea. We have a structural revenue deficit brought about by short-sighted politically motivated tax cuts. Arizona cannot fix its budget crisis without more tax revenue, and even the business community agrees with this assessment. Arizona desperately needs to reform its tax structure.

But in reading through the various reports and opinions contained in the Republic special report: "Arizona's Budget Crisis: Teetering on a Cliff," it was Dana Naimark, CEO of the Children's Action Alliance as I recall, who was the only author to mention the one ring that controls them all: Prop. 108 in 1992, which amended the Arizona Constitution to require a two-thirds vote by the State Legislature when passing any legislation increasing state revenues through a change in tax allocation, such as an increase in taxation levels or a reduction in credits and exemptions. Arizonans not hearing all options available:

The Great Recession has hit the state's economy and revenue harder than anything since the Great Depression. But they're not telling us something else: More than 20 years of repeated, shortsighted tax cuts now are costing the state nearly $1.7 billion a year in lost revenue. So, it's no wonder we don't have what we need to protect our priorities and accomplish our goals.

And we have structural problems, too, like the requirement for a two-thirds vote – instead of a majority – in each house of the Legislature to pass any revenue increase that's not a one-time gimmick. Show me a cool breeze in Phoenix in August, and I'll show you a two-thirds vote for revenue.

The result of all this is that we never even get a discussion of the real range of choices Arizona has to build a budget that matches our priorities.

I have argued numerous times here over the years that if we want to get serious about fixing the state budget, i.e., addressing the structural revenue deficit, then this state must first repeal Prop. 108 (1992). This undemocratic provision empowers a small number of anti-tax zealots — 11 senators and 21 representatives — many of whom have signed Grover Norquist's tax fairy pledge, The Tax Fairy Pledge signers – Unfit to serve in public office, to prevent any serious discussion of the structural tax reforms this state must undertake. It empowers a tyranny of the minority of anti-tax zealots who are more interested in defunding government and "drowning it in the bathtub" than they are in fiscal responsiblity and good governance.

So if the Arizona Budget Coalition, Arizona's business community, and the media are now serious about real structural tax reforms and restoring fiscal sanity to Arizona, and not just shifting the property tax burden from businesses to residential homeowners under House Speaker Kirk Adam's bogus-named "jobs creation" bill or Gov. Jan Brewer's promised competing measure, then the first thing that must happen is a business-backed committee must file an initiative to repeal Prop. 108 (1992) and start collecting tons-'o-money to gather petition signatures and to wage a hard-fought campaign against an array of anti-tax political action groups certain to oppose it.

Grover Norquist's anti-tax zealots are never going to refer the repeal of Prop. 108 to the ballot as a referendum from the legislature. It is the source of their power — it is their "precious," as Gollum would say. It is the one ring that controls them all (taxes, tax credits and tax exemptions). That ring must first be destroyed if we are ever going to get serious about real structural tax reforms and restoring fiscal sanity to Arizona. Nothing else is possible as long as it remains law.

I am issuing a challenge to the business community and the media in this state to advocate for an initiative to repeal Prop. 108 (1992). Do the right thing.