We have a budget . . . the way forward

By now you have heard that the Arizona legislature worked out a “compromise” budget on Monday night — a compromise between the right-wing and the far-right-wing of the GOP, to the exclusion of the Democratic minority (and the one-third of Arizona voters who are Democrats, and a good-size chunk of the one-third of Arizona voters who are No Party Preference). The budget compromise reportedly had the support of lame-duck Governor Jan Brewer who worked with House GOP leaders.

The budget passed in the Senate on a vote of 18-11-1. In the House, the budget passed on a vote of 36-19-5. Only one Democrat voted in favor, Senator Leah Landrum-Tylor (LD 27), in exchange for a line item appropriation of $125,000 for the Arizona Commission on African-American Affairs.

The budget has been sent to the Governor and awaits her signature.

The Arizona Republic editorializes today, Incomplete budget shorts Arizona’s vital needs:

[I]t still isn’t good enough.

It is the product of straining over relatively small funding disagreements rather than boldly discussing big holes in the vital state responsibilities of education and infrastructure. It is incomplete, offering only a promise to look at the needs of children later.

A task force developing recommendations to revamp the child welfare system isn’t expected to finish until May. Instead of creating a budget for the agency now, lawmakers put in writing their “intent … to re-examine the budget” when the recommendations are complete.

It’s a promise that assures a special session. But this funding “commitment” can be overturned by a majority of the Legislature. Brewer, who made child welfare her top priority, will have little leverage in a special session if she signs this budget now.

She’ll also have little credibility among GOP lawmakers if she doesn’t sign it. Her office worked with the House on the compromise.

As House Speaker Andy Tobin pointed out, the agency formerly known as Child Protective Services received funding increases in the past 18 months to add more than 500 employees.

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t won’t be cheap to fix this agency. Lawmakers also rejected [Democratic amendments] to add funding for child-care subsidies, despite a huge need and a clear link between the lack of child care for working parents and child neglect, which makes up the majority of child welfare cases.

In addition to skipping past a child welfare crisis deeper than the Grand Canyon, the compromise budget reflects recession-era thinking that falls short of what Arizona needs to move beyond mere recovery and into prosperity.

For example, Brewer sought $13.5 million to fund testing for the new Common Core standards, which require more complex evaluation. But after gnashing their teeth over whether the standards themselves would take Arizona off the edge of the flat Earth, GOP lawmakers grudgingly provided only $8 million for testing. Glaciers move faster toward a goal.

Similarly, the state has not made up for recession-era cuts to K-12 and higher education. The budget shorts both, failing to invest in the future. Transportation infrastructure needs are growing after years of diverting gas taxes and vehicle registration fees to the state’s general fund.

The state has a budget surplus now but faces a structural [revenue] deficit in coming years as previously approved tax cuts fully kick in. GOP lawmakers see their reluctance to spend more now as a prudent way to prepare for the future. Yet the compromise budget includes $35 million in additional tax cuts but no new revenue.

This is the game the GOP has played every year since 1992. The GOP cuts taxes so they can campaign on the First Commandment of GOP politics, “Thou shalt cut taxes,” which creates a structural revenue deficit for vital services in the state budget.

The problem is compounded by Prop. 108 enacted by voters in 1992, which requires a two-thirds super-majority vote of each chamber of the legislature to enact new taxes or to increase taxes, or to reduce or eliminate tax exemptions or tax credits. (The legislature has not increased taxes since passage of Prop 108 in 1992. The voters have through citizens initiatives or referendums).

In the past, this structural revenue deficit could be offset by rapid population growth in the state of Arizona (the state’s population has more than doubled between 1980 and 2014). We can no longer rely on rapid population growth to paper over this structural revenue deficit. AZ gains 74,000 people, but some counties see populations shrink:

If it weren’t for new people moving to Arizona, some counties actually would be losing population.

New figures today from the U.S. Census Bureau show there were more people who died last year in four counties than were born there. Mohave County had a net “natural loss” of 731 residents last year, with Yavapai County not far behind with deaths exceeding births by 726.

Gila County had 148 more residents die than were born there. And tiny La Paz County nearly broke even with a net loss of 52.

The new report also finds that Maricopa County had the second highest absolute growth rate of any county in the entire country, adding 68,800.

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At the other extreme, Cochise County lost a larger percentage of its population than anywhere else, not only in Arizona but the entire country.

But that 1.7 percent decline was not due to natural losses, as births still exceeded deaths in Cochise County by 465. Instead, the county shed more than 2,700 residents who the Census Bureau reports decided to move elsewhere, whether another county, another state – or out of the country entirely.

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Overall, the Census Bureau figures that more than 26,000 people move to Arizona last year from other states, with another close to 10,900 coming here from other countries.

That brought total growth in the state last year to 75,475, bringing the state’s population estimate to 6,626,624, a 1.2 percent year-over-year growth rate.

Statewide, the natural growth – births minus deaths – was just 35,720. But Arizona also inherited 26,417 new residents from other states and another 10,864 who move here from other countries.

This low rate of growth is not enough to offset 22 years worth of GOP tax cuts. The structural revenue deficit is now a detriment to necessary planning and spending on vital services, education, transportation and infrastructure. The day of reckoning has arrived.

The Grand Canyon Institute report from February 2013 is a must-read. Full Report: The Effects of Tax Reductions In Arizona: Significantly Reduced Government Revenue and No Apparent Impact on Economic Growth.

Arizona desperately needs to overhaul its tax system. But so long as Prop. 108 remains a part of Arizona’s Constitution, achieving a two-thirds super-majority in each chamber of the legislature for any tax reforms will remain almost impossible. Vested interests who want to maintain their tax advantage only need a tyranny of a minority of anti-tax zealots to block any tax reforms.

The voters of Arizona need to repeal Prop. 108 to disempower the tyranny of a minority of anti-tax zealots, and to restore democracy to Arizona with simple majority rule. Only then can we overhaul the tax system an restore some semblance of fiscal sanity to the budget.