Nevada Taxpayers
Association
Annual Meeting
Kevin McCarthy
ATRA
Source: The Brookings Institution- Governmental Research Association Annual Conference.
Arizona Conditions
► The
impact of the recession on Arizona public
finances has eclipsed that of most states.
► Actual On-going General Fund Revenues (In Millions):




FY
FY
FY
FY
2007:
2008:
2009:
2010:
$9,850
$8,765
$6,967
$6,410
Difference FY 2007-FY 2010 = ($3,410) or 35%
ARIZONA'S ON-GOING STRUCTURAL DEFICIT
Excludes beginning balance, one-time revenues & expenditures
$11,000
$10,500
Millions of $
$10,000
FY ’07 Actual
Revenues
$9,850
($313 million
over budgeted
revenues)
$9,460
Base Revenues
$10,613
$10,515
$9,881
($429)
$9,500
$9,000
Expenditures
($1,345)
$10,086
$9,537
$9,881
$9,268
$8,500
($2,789)
($3,481)
$8,000
$7,500
$7,000
$6,500
$77 million
(budgeted
surplus)
FY ’08 Actual
Revenues $8,765 $1,321 less than
Budgeted Revenues
$6,400
07
08
Adopted
June ‘06
Adopted
June ‘07
1.047
09
529
($3,181)
$7,116
$6,000
Beg. Balance (in millions)
$9,581
10
Fiscal Year
10
$6,400
10
Adopted
June ‘08
Adopted
Sept. ‘09
Updated
Oct. 22,
‘09
Updated
Nov. 23,
‘09
1
(478)
(478)
(478)
*FY 2008 on-going spending of $10,515 includes $370 million in SFB cash financing, as well as $250 million in K-12 school aid not included in the
FY 2010 on-going spending of $9,881.
Arizona Tax Research Association
Budget Solutions to Date?
► Gimmickry
abounds:
 Debt financings (sold the Capitol to ourselves)
 “Rollovers” – shift school state aid payments into future
years
 Raiding non-general fund revenues
► Some
budget cuts to state agencies. Education
and health care largely spared
► Statewide property tax increase this year
► Temporary 1-cent sales tax increase on the ballot
in May
Major Impediments to Deficit
Reduction
► Voter-approved
spending partially limits
policymakers options
► Supermajority required for a general fund
tax increase
► Federal stimulus money comes with strings
attached - “maintenance of effort”
Major Impediment - Politics
► Political
courage necessary to directly solve
the problem
► Most policymakers opt to blame someone
else for the crisis
 Democrats spent too much money
 Republicans cut too many taxes
► 2010
General Election – many players
seeking to gain advantage from the crisis
Are there any solutions?
► In
Arizona, state and local government budgets
are dominated by the salaries and benefits of
public employees. The deficit can’t be solved while
insolating those employees from the recession.
► “Current Services” budgeting guarantees deficits
when the economy slows. The deficit can’t be
closed w/o reversing the formulas and budget
assumptions that drive spending.
► Nothing meritorious about debt financing spending
that lawmakers are unwilling to cut. Cut
Spending or Raise Taxes