A vibrant economic future for Arizona’s businesses requires smart government investments. Factors such as an educated workforce, public safety, infrastructure, health care, social services and highways all play a role in supporting business. All rely on government finance.
And as the 2017 legislative session is getting underway, an important question to pose is this: What is the best way to collect and invest precious government finances? The Arizona Town Hall took on this topic recently with an intense statewide discussion of diverse stakeholders. Investing in education surfaced as an imperative, as did the need to alter our government finance system to better weather economic downturns.
Arizona’s current finance system depends heavily on sales and income taxes. One of the biggest challenges to appropriate budgeting is that government revenue and the demand for government services are counter-cyclical. When the economy declines and government revenue goes down, the demand for government services goes up. We end up cutting the very initiatives needed to dig us out of downturns, such as developing a high-performing workforce that leads to more state revenue through higher wages, economic growth and increased consumer spending. Existing legal and policy constraints stand in the way of changing this repeating cycle. Welcome to Arizona’s Groundhog Day.
As professionals in the sectors of education and workforce development, we agree with the Town Hall findings that educating our workforce is “THE” economic imperative. After three days deliberating the financing needs for a strong future, just a few of the recommendations give you a look at the need for structural change:
• Arizona’s government financing system should follow a set of comprehensive, guiding principles including transparency, openness, fairness, simplicity, stability, accountability, and predictability.
• A long-range strategic vision that aligns citizens’ spending priorities with their willingness to pay for them should be implemented.
• We should broaden the tax base, simplify the tax system and not rely so heavily on income and sales taxes.
• The Rainy Day Fund should be strictly managed to alleviate shortfalls during economic downturns.
• Taxation should treat urban and rural constituencies equitably and be vertically and horizontally equitable. The overall tax structure should also minimize regressivity.
• Arizona should modernize its processes for tax collection to allow the state to keep up with changes in consumer buying habits such as Internet-based sales and a service economy.
• Future tax cuts should be required to sunset if they fail to meet the expected return. Some past tax cuts don’t seem to have generated anticipated economic benefits.
• Fund sweeps and unfunded mandates on local governments must stop. Local jurisdictions should be given greater flexibility in generating revenue to manage programs they are mandated to provide.
• Look at creative alternatives to meeting our financial needs including tax increment financing, public sector consolidation, and examining changes to existing property tax policies.
• Lobby the Federal government to fully fund payment in lieu of taxes (PILT), especially in rural counties with mines, forests and other natural resources.
All these structural changes in our laws and policies will lead to funding for our schools and the facilities in disrepair, investing in our teachers, advancing the need for a focus on trades and entrepreneurs. The recommendations also provide for multi-year budgeting to level out the ups and downs of funding for our critical infrastructure needs, including transportation and other priorities. A short-term balanced budget must be juxtaposed on long-term strategic goals that shape an educated citizenry. We urge you to play a role by reading the full report of the recommendations (http://www.aztownhall.org ) and committing to connect with others championing a long-term look at Arizona’s future.
Paul Brierley, Arizona Town Hall Board Member, John Courtis, Yuma County Chamber of Commerce, and Linda Elliott-Nelson, Arizona Town Hall Board Chair, were participants in the 109th Arizona Town Hall on Financing Arizona’s Future.