Kick the problem down the roadby Robert Robb on May. 11, 2009, under Opinion
The state budget for next year that passed out of the House Appropriations Committee last week illustrates that a nominally balanced budget can be achieved without a tax increase.
Whether that is the best course of action is a very difficult question.
As always, some historical perspective is valuable.
After the last recession, state revenues stabilized in 2003. State general fund spending that year was $6.6 billion.
State spending peaked in 2008, at $10.5 billion, or a 60 percent increase in just five years.
The House budget for next year comes in at $9.3 billion. So, that’s a real decrease of more than 11 percent in two years.
But since 2003, it still represents an increase of 41 percent. That’s more than 5 percent a year.
The proposed budget cuts are not small, and certainly not painless. But the proposed end result hardly amounts to a barbaric return to poor houses and one-room schoolhouses.
Instead, the House budget reduces state spending to around where it would have been if it had grown more prudently during the days of plenty.
On the other hand, state general fund revenues are expected to fall $2 billion short of funding that spending. The House budget makes up for that by using federal stimulus money and stealing money from other accounts.
Given that there is still a $2 billion shortfall even after reducing spending growth to a modest level indicates that profligate spending during the Napolitano era is hardly the exclusive culprit.
Nor would the problem not exist if tax cuts had been eschewed during the days of plenty. If state income and state property tax rates were as they were in 2003, they might produce an additional $600 million in revenue, still leaving a $1.4 billion hole.
Simply put, state revenues have run into a severe cyclical downturn that exceeds everyone’s blame game. The conventional wisdom from all sides of the ideological spectrum is pretty much useless and pointless in confronting this situation.
So, what to do?
The House budget is based upon the point of view that the worst thing to do in the current circumstances would be to increase taxes. There is considerable merit to that position. Raising taxes in an economic downturn is a monumentally bad idea.
The House budget illustrates that avoiding a tax increase is doable.
It steals $265 million from cities and counties, which is monstrously unfair and shouldn’t be done. They have their own budget woes and are handling them much more responsibly than is the state.
The other maneuver getting some gas, using excess school district balances, is completely justified. These are funds that should have been used to reduce property taxes and that the districts cannot legally spend anyway.
The money taken from the cities and counties could be replaced, including by deferring some payments if necessary. So, the state could get through next year OK without increasing taxes or borrowing.
But, given a structural deficit of $2 billion, the very same problem faces the state in 2011, with considerably less federal stimulus money to cover it up.
Gov. Jan Brewer says the Legislature should bite the bullet this year and really fix the problem with a tax increase. She’s being less than candid about how much of a tax increase that would take and for how long. But hers is also a position with considerable merit.
The problem – the imbalance between spending and revenues – isn’t going away, and the House budget doesn’t do much to shrink it.
If the Legislature bit the bullet this year, it would make for a much more stable environment for state government and politics.
There are no rights and wrongs here. There are no responsible vs. irresponsible positions. Ideological conventions don’t get you to an end game.
You kick the state government problem down the road until what you hope is a more propitious time to deal with it. Or you fix state government’s problem at a very bad time for the state’s private sector economy.
I’d kick the problem down the road. But I’m not going to reproach those who reach a different conclusion.
Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: firstname.lastname@example.org