What’s Holding Back Economic Development in Arizona?

By Ed Dravo

Year after year, legislative session after legislative session passes without meaningful policies to address our economic problems. Once one of the leading states in economic growth we are now a perennial laggard. By growth I mean rising incomes and not a larger body count. If it’s larger numbers that moves you, Arizona has made the grade; that is until recently. Now more people are leaving the state than entering.

In a story written by Eric Toll for the Phoenix Business Journal two corporations employing over 3000 people earning double existing state wages passed on Arizona (Phoenix, specifically) as a place to relocate. The state made the semi-finals but failed when the selection committee passed their findings to senior management. Toll inquired off the record for the reasons for our being shunted out of the finals. Each company provided a different reason. Company A’s management committee felt uncomfortable moving to a state that re-elects someone like Arpaio (not because they wanted a more diverse culture as whitewashed in an AZ Republic editorial piece). Company B rejected us because management was afraid of raising their children in a place that repeatedly ranked alongside Mississippi and Alabama for public education. A third reason was the difficulty finding employees with training in sophisticated skill sets-read job training.

This was not the only bleak story about the Arizona economy in recent weeks: The paltry amount of venture capital raised is a big concern and NAICS, the organization ranking employment categories, has jettisoned Arizona’s listing as a high tech manufacturing state. That era pretty ended in the 90s when call centers were touted as great catches.

RetireesThat elephant is named retirees. It’s their refusal to approve funding for things like education and infrastructure improvement. There is a common element that drives all the negative outcomes. It’s all important but invisible, the proverbial elephant in the room. This behavior became apparent long ago when Sun City retirees refused to pass bond issues funding primary schools in their districts, resulting in the need for legislative relief or children would be deprived of an education. This was hardly the concern of people who moved into the district to escape cold winters and financial responsibilities.

The retiree enclaves along the Colorado, Prescott Valley, Fountain Hills, N Scottsdale, westernmost Phoenix, and the I-10 corridor north and south of Tucson represent a formidable voting block. They routinely elect legislators who enliven the monologues of late night hosts for brazen acts of civic indifference if not outright hostility to the general public. According to Bill Hart with the Morrison Institute at ASU, retirees, anyone 65 or over, will increase to 30% or more of the overall population in twenty years. With their committed voting habits that translates to a 60% majority on issues they agree on.

What’s especially harmful about the retiree vote is nearly 40% are from out of state. Their community involvement ended when they severed their roots and moved to Arizona. The lack of community spirit is so weak in Arizona the Flinn Foundation study reveals community giving is twice as a low as the next lowest state in our economic peer group. In other words, out of 10 states if the 9th lowest charitable giving was $50 per person, Arizona gave $25. That’s one those numbers you hate repeating because it reflects on you.

And so does the Arizona Legislature, but on matters economic the state legislature has very little legislative authority in supporting business. The only public body engaged in economic development was the old Commerce Department, now the Arizona Commerce Authority, a quasi public/private organization with no authority. What the State of Arizona can do and doesn’t is provide the framework that businesses want to support their production. Things like an educated workforce, an interesting and reasonably cultured environment. People aren’t machines, they are programmed from their surroundings. Local support for cultural projects is a must in today’s marketplace to attract the talent that manages businesses. Opposition to those efforts undermines economic development.

Local efforts most frequently drive business initiatives and if the voting constituency in a district wants a return to a previous era are they going to sabotage economic advancement going forward. Economic stagnation as being practiced is a developmental strategy only beneficial for the RE industry and medical services

It’s not coincidental that as the elderly have increased as a percentage of Arizona’s overall population, educational attainment, per capita income and high tech employment levels have fallen. Our universities, a significant presence in a state our size, can’t retain graduates, most leave the state for jobs elsewhere while employers claim educational needs for skilled positions are unfilled.

Governor Ducey and other officials angling for higher office will not disappoint the retiree population. They will easily sacrifice the business community, public servants, and the general population because retirees votes are the currency that buys victories. But who wants a business model that thrives on social neglect?

Winter is nearly on us and soon Arctic winds will sweep through the empty plains of the Midwest, pushing the elderly south, continuing to depopulate that region. After two decades of reaping the elderly harvest, for Arizona to maintain the status quo it’s going to be harder and harder with fewer and fewer of the population left after each freeze. Could this be the wake up call to becoming committed to growing actual businesses and not vacationers that overstay their welcome?

Tucson and Phoenix must act as one to push against the political impediment of retirees and their elected reps. Already child services, primary education and the universities have been shortchanged by legislation aimed at shrinking public sponsorship of anything-period.

Phoenix’s retirement problem has been long in the making and is becoming Tucson’s. Seeing retirees as economic assets blindsides planners to the reality that retirees vote with the outlying districts in choking funding for anything that doesn’t prolong life; that’s prolong life, not improve life.

It doesn’t take very much imagination to see how advocating policies restricting retirees could be construed as demonizing parents, the very construct of society. What is possible is for everyone to realize how beggar-thy-neighbor attitudes can choke the lifeblood out of communities, something parents don’t want to happen and will work to ensure it doesn’t. That means advocates for business development not shy away from recognizing the problem and there be leaders who negotiate winning positions for all the parties in building and maintaining communities that have bright futures.

Advancing policies that will increase wages and economic output must start with recognizing political priorities. Where do our elected reps stand on making funding available for educational needs, especially at the university level when it comes to economic development and these reps must be held accountable if they don’t serve the interests of commercial businesses and the general population.

Ed Dravo is the principle of Dravo Financial LLC and former columnist for Financial World magazine. He now resides in Tucson, AZ.


14 thoughts on “What’s Holding Back Economic Development in Arizona?”

  1. Well, my my don’t we all get very testy. We have thousands of schools saturated with technology so we can quickly and accurately answer the question as to whether spending on tech has paid a dividend in terms of academic productivity. The answer of course is no, it hasn’t.

    I am not opposed to spending more on education. My ballot is already marked to support the Chandler bond election if I can figure out where to take it in an all mail election. Our school board and superintendent are simply spectacular in the work they do.

    Rather, the lack of a correlation with spending points to a deeper reality in education. I have spent hundreds of hours in the classroom observing highly at-risk students and great teachers teaching them. They are fully as intelligent as we are and capable of moving ten academic years in a single year (150 scale points on the SAT test) yet even top 1% teachers, even top .1 percent teachers, can only move them 30 points in a year. When students are 200 points below standard, 30 points may be spectacular, but it is not noticeable. What would need to be done to get them to their full potential? What is that deeper reality? How would you have to reorganize everything to get that 150 points per year?

  2. While I do agree completely that an electorate that is disproportionately retirees is hindering education funding and economic development, I disagree with the writer’s (perhaps unwitting) characterization of the business community as innocent victims in the whole thing. The fact is that the major business players in this state have been fully complicit in taking Arizona to the hard right place it is today, politically. Business leaders have lobbied for massive tax breaks and funded the campaigns of far right reactionary politicians for decades.

    The revisionist history we get on SB1070 is that right wing legislators, led by the dastardly Russell Pearce, pushed the bill though while business leaders stood helplessly by. The truth is that the AZ Chamber of Commerce helped write the final bill, getting employment enforcement language stripped out and then making the deliberate choice to go “neutral” on the bill while endorsing every single pro-SB1070 statewide candidate. They were warned, loudly and repeatedly, about boycotts and economic devastation but GOP victories, and the tax cuts and favorable regulations that would result, were too important to them.

    In 2014 business leaders allowed the religious bigotry bill HB1062 to get all the way to the Governor’s desk and bring international shame upon Arizona yet again, before they finally intervened to quash it, almost a day late and dollar short.

    There are many good and responsible business people in Arizona, and Mr. Dravo seems to be among them, but there is also a decided tendency among many business-oriented people here to absolve their own community’s considerable complicity in creating the problems here while pointing the finger at various groups of rank and file voters.

  3. The so-called settlement is like a burglar breaking into your house, stealing your wallet, and then giving the money in wallet back to you and saying, “See! You have tons of more money now!” I would ask Huppenthal why do corporate CEOs need $24 million stock payouts? They should work for free! I had a religious leader once tell a group of teachers complaining about a private school class size going from 25 to 40, saying”if you have love in your hearts you could teach even 50 children”. Can’t beat that logic. Of course all school board members already work for nothing maybe legislators should, too. I asked one of our esteemed current State Seantors, if she agreed with market based solutions. Of course she said. Then I asked, “how many teacher candidates for a job would we have if entry level teachers were paid $70,000 a year. Correct, Hundreds! But “market based solutions” are only in selected markets, not teachers.

  4. As someone of retirement age I really resent you placing blame on retirees.
    I for one am sick & tired of school districts asking for over-ride bonds every election. Sure, it might only amount to $35.00 or so on our tax bills, but that is in addition to 100s of $$ already on my tax bill for school districts.
    Education is one thing, constantly going to the public asking for more & more handouts is ridiculous. I have a 75 year old friend that pays over $1200.00 for existing school bonds as of the current tax bill. How much more should he have to pay?

    • Well, that’s a good question, “how much is enough?”

      As of right now, Arizona is last in the nation in per pupil funding, last in teacher’s pay, last in infrastructure investment, and last in administrative expenses, largely because of cuts made at the state level, every year for the past 15. In addition, for the last 6-7 years, the state has failed to even keep up with inflation, and we just keep cutting. In order to make up for some of that revenue, schools need to pass bonds and overrides, to fill in the voids left by the cuts at the state level.

      Until the state properly funds the schools in a way that allows them to keep up with population growth AND inflation, the local districts will continue to need bonds and overrides to fill those voids.

      But that STILL doesn’t address the underlying question…

      What we really should do is figure out the “how much is enough” number, just so every body is on the same page, and then we can determine which portions should be provided by the state, and how much through local bonds and overrides (if any).

  5. There is no correlation between education spending and education quality. Zero, zip, zilch. As expected from this, there is also no correlation between education spending and economic growth of a state.

    This finding holds in correlations across countries, across states, across school districts within states, across schools within districts and across classrooms.

    This hypothesis has been tested to an extreme degree. A federal judge told Kansas City schools “let your dreams run wild” and gave them billions to fund their plans – to no effect.

    Bloomberg increased spending by an eye popping ten billion in one school district, New York, to over 23 billion. This was the ultimate test of money theory. They used this money to give an extra 10,000 warm bodies high school diplomas but these students crashed and burned when they went off to college. They had the diploma but lacked the characteristics of high school graduates – the money produced no improvement in academic gains.

    The number one asset you have in education is not money – its people. Parents, students, teachers, leaders. We have a number of school districts that, despite the financial stress in education, have improved these assets every single year – Chandler, Vail, Phoenix Union, Peoria and Mesa just to name a few. Districts like Phoenix Union and Phoenix Elementary don’t get the credit they deserve because their demographics are so tough.

    • This is very strange. I hear Republicans argue all the time that people respond to incentives and that the number one incentive is money. Wouldn’t that mean that to get good people into positions in schools we need to increase the incentive; in other words put in more money.

    • Oh, Thuckster, you poor pathetic little fool. If what you said were correct, it would mean, at a minimum: (a) There is no correlation between the availability of current technology equipment and education quality, since equipment costs money to purchase; and (b) increasing teacher salaries so as to increase the pool of individuals willing to consider a career as a teacher would not bring about any improvement to the overall quality of the teaching profession and, therefore, the quality of education. I could go on, but why bother? You haven’t changed since your days as Thucydides. You’re still a dummy try hard, and always will be. You get lost in statistics, like the ones you quoted here, and rattle them off as if you know what you’re talking about, but the sad reality is that you can’t think your way out of a paper bag.

    • If money has no bearing, then surely we can reduce per pupil spending to $0.00 and still expect the same results. Rather I think what you’re trying to say is, “After reaching an approximate threshold, investment in education has diminishing returns.”

      This is probably true, and I don’t think anybody would argue against that.

      The issue at hand, however, is that Arizona’s investment in education is so clearly below that threshold that it has developed into a statewide issue with negative economic consequences, now recognized by both sides of the isle.

      We can, and probably should, argue about where that threshold should be for our state, but we are certainly not meeting or exceeding that threshold today.

  6. And the travesty for which Ducey, Biggshot and Gowan have now convened their minions is further evidence that Arizona is a bastion of GOP oppression driven by extreme myopia.

    An education plan that STILL doesn’t provide any additional funding to public k-12 education and that thumbs the collective noses of the GOP oppressors at the future of our state.

    Disgusting and overwhelmingly disappointing.

    And the education stakeholders are playing the role of abused spouse telling the oppressors they promise to never call the cops again if the oppressors will just stop beating them.

    • Yup, it’s a terrible settlement. The school districts already won, but the Arizona Supreme Court is not going to order that Biggs and Gowan be jailed for contempt of court, until they cough up the money. They could keep thumbing their nose for years to come on appeal after appeal. Yes the school districts could have held out for more and better, or the Dmocratic alternative, and many wanted to. But until at least one house of the Arizona legislature turns, or you can guarantee with this bunch a count to 16 and 31 with no veto, this crap sandwich is what the school districts get. Either that or wait for years more for the money owed by law.

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