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Guidelines useful in tackling Az budget deficit



With a budget deficit for fiscal 2010 projected in the $3 billion range – one of the largest in the nation as a general fund percentage – Arizona clearly will need to reduce expenditures.

The Arizona Chamber of Commerce and Industry urges the Legislature and governor to immediately make significant spending cuts in nonessential programs and activities.

Just as lawmakers increased programs in flush budget years, they must now take corresponding action in lean years. Reductions are imperative to realign the state’s commitments to available revenues and to minimize the deficit in subsequent years.

When evaluating what to cut, the Legislature should analyze the impact on the private sector’s ability to help the state grow its way out of the deficit.

Greater specificity and additional guidance are needed. The Chamber is working on an updated document on how best to close the massive hole.

Part of our process is to review the body of work that has been completed by other organizations and fiscal policy experts. Our goal is to integrate the best thinking with our own original ideas in order to offer policymakers the most useful guidance.

An outstanding piece of work to guide us comes from the Arizona Tax Research Association.

Led by President Kevin McCarty, ATRA’s recommendations are a must-read for anyone interested in solving not only our current deficit, but also our state’s structural shortfall.

Education is a longstanding priority for business. Employers choose to locate where they can access a qualified work force, and the quality of the work force is directly linked to the quality of the education system.

We believe expenditure reductions to education must be structured in a way that does not harm student achievement.

Further, we contend that a complete redesign of the state’s school finance system is in order, though this must be a longer-term objective.

ATRA’s recommendations are focused on adjusting outdated funding formulas, eliminating programs that do not improve academic achievementand ensuring resources are better focused on student learning. Some of ATRA’s key recommendations are:

• Update spending formulas. Contrary to what many believe, less than 40 percent of all spending in Arizona is voter protected.

• Don’t exaggerate the state’s obligation to adjust for inflation under Proposition 301, a voter-passed initiative to increase funding for education.

• The state should minimize its exposure to homeowner rebate and 1 percent cap costs by phasing out local school district levies that are outside the public school equalization system. For fiscal 2010, this exposure is expected to be $414 million.

• Move from prior-year growth to current-year funding, which could save $29 million.

• Eliminate early kindergarten for 4-year-olds, to save $26 million.

• Reduce or eliminate redundant funding through dual and concurrent enrollment for community colleges, high schools and Joint Technological Education Districts, which could save $4.4 million

• Eliminate state aid to community colleges for recreational classes, such as Single Again, Humor and Play, and Coping with Stress.

• Eliminate aid for out-of-state university students (28 percent of the full-time student equivalent in the university system is classified as out-of-state).

• Reform the state’s retirement programs, which are among the most generous in the country.

From 2000 to 2008, taxpayer costs for the retirement portion of the Arizona State Retirement System increased 951 percent! To this end, the Arizona Chamber supports a defined contribution option for new state employees.

While closing Arizona’s budget deficit is an enormous challenge, the strong and specific recommendations provided by ATRA will help our policymakers as they look for spending reductions.

In the process, Arizona’s budget will be put on a path to true solvency. Look for a complete set of updated budget recommendations from the Arizona Chamber later this month.

Glenn Hamer is president & CEO of the Arizona Chamber of Commerce & Industry.

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