State officials need to look beyond crisis
As Arizona's governor and the Legislature battle over how to balance the state budget in the wake of huge revenue shortfalls, it would be a good idea for them to look toward the northeast.
Unlike Arizona, and many other states, Colorado isn't having a big budget problem. In fact, residents of that state actually received tax rebates in 1997 and 2002 totaling $3.2 billion.
Most states got into trouble when the economy tanked after 9/11 because they had been fiscally imprudent during the good years preceding the downturn. Instead of keeping a tight rein on spending, they added programs and spent all the extra revenue coming into the state treasuries.
When the downturn came, there was no money for all these extra programs that had been added but there were vocal special interests who demanded there be not cuts in their programs. That was a recipe for strife and animosity because most states are required to have balanced budgets. It was either cut programs or raise taxes, both of which are unpopular.
Colorado took a different approach. In 1994, that state enacted the Taxpayer's Bill of Rights, a constitutional amendment that limits spending growth to the amount of population growth plus inflation. Even better, it requires that any surplus revenues be immediately refunded to taxpayers. It cannot sit in the state treasury waiting for lawmakers to dream up ways to spend it.
The Colorado requirement puts meaningful limits on the growth of government, provides tax relief for residents and puts the state in a strong fiscal position compared to other states, according to Michael New, author of a Goldwater Institute study on state taxation.
He noted that in Arizona during the past 20 years, per capita state expenditures have consistently exceeded the rate of inflation and between 1990 and 2000 the general fund doubled in size.
Unfortunately, at least part of the problem is Arizona voters themselves who have repeatedly approved initiatives and tax increases to fund special interest programs through ballot initiatives. Usually, these new laws prohibit cuts in the programs and that limits the ability to regulate state spending in difficult times.
A lot of attention is focused on dealing with the current state fiscal crisis, but it is also a good time to look at keeping it from happening again since spending restraint seems to be the first victim of the political process.
That is why Colorado's approach - a constitutional amendment which mandates strict fiscal limitations and tax rebates - is so attractive. Another approach would be to require a "super majority" - a two-thirds majority vote - in order for lawmakers or voters to raise taxes beyond an established limit.
If we don't take this opportunity now, there is likely to be more irresponsible spending when the economy turns around.