Tucson CitizenTucson Citizen


Citizen Staff Writer

PHOENIX – Well, there was some good news. When I looked up in the gallery, I didn’t see people climbing over the railing and throwing themselves to the floor 20 feet below.

But other than that, things looked grim as legislators and those hoping to be legislators gathered in the state House chamber last week to get a look at the state’s economy.

Actually, grim is too cheery a description. “If everything goes well, it will be a bad year” was economist Elliott Pollack’s view of 2009. If everything doesn’t go well, 2009 will be “terrible,” he added. “Good won’t be in the equation for 2009.”

So that’s the outlook: If things are good, it will be bad; if things are bad, it will be terrible.

Look back several months as people were deciding whether to run for the Arizona Legislature. Way back then, it probably seemed like an OK idea.

But on this day last week, not so much. As current legislators sat at desks on the floor of the House chamber, legislative candidates were invited to sit in the gallery, so they had some idea what a victory would net them.

The first clue of what lay ahead came as state Sen. Carolyn Allen, a Scottsdale Republican, gave the invocation: “Lord, we have problems in this state and in this great nation,” she said.

Well, that’s putting it mildly.

As Pollack, an economist at Arizona State University, spoke, he raced through a 147-page PowerPoint presentation. The title on each slide changed, but the squiggly lines on his graphs were pretty much the same.

Consumer spending on durable goods. Retail sales. Median price of resale homes. Mortgage equity withdrawal. Dow Jones stock prices. Savings rate.

It didn’t matter. There was a 15- or 20-year trend line with some moderate blipping up and down along the way. Then, near the right side of the graph, the blips got more exaggerated, followed by an unbroken downward jerk at the end.

A couple of charts were different, with an upward tick at the end. U.S. exports. Percentage of banks reporting tougher loan standards. Number of vacant homes for sale. Foreclosures.

Pollack did his best to make the presentation entertaining. There were some twitters and gasps when a slide titled “Predictable danger ahead?” showed a photo of a baby in a tiny washbasin scrubbing the head of an enormous reticulated snake that encircled him.

Only slightly less alarming was a series of charts showing that Arizona has plunged deeper in the financial well than much of the rest of the nation.

Through three decades and four recessions, Arizona has almost always had more jobs created than all but a couple of states. In three years, we were No. 1 in the nation. In 1988, when the savings-and-loan crisis hit, Arizona dropped to 38th. But within five years, we were back at No. 5.

As recently as 2006, Arizona was No. 2 in creating jobs. Then in 2007, we dropped to 22nd. So far this year, we’re at 46th – down there with Ohio and Michigan and the heart of the Rust Belt.

“Embarrassingly, we are doing worse than Cleveland,” Pollack said.

Phoenix is the economic engine of Arizona, but that engine has seized up. Phoenix is likely to have two consecutive years in which the number of jobs is lower than in the previous year – something that hasn’t happened since the Great Depression.

The gloomiest news was – no surprise – housing. During the first half of 2008, Pollack said, more than 4 of 10 resale homes sold had been foreclosed. In Phoenix, foreclosures leapt from 5,000 to 27,000 annually in two years.

Homebuilding has slowed to a crawl – down 60 percent in a year. But in 2010, Phoenix still will have 30,000 excess homes, Pollack said.

All of this means, of course, big problems for the state’s budget. The budget deficit may be $1 billion in less than nine months. A year later, it may be twice that much. Or more.

Those are problems the men and women on the floor of the House and in the gallery last week will have to fix.

Yes, it probably seemed like an OK idea to run for the Legislature back then. Now, not so much.

Mark Kimble appears at 6:30 p.m. Fridays on the Roundtable segment of “Arizona Illustrated” on KUAT-TV, Channel 6. He may be reached at mkimble@tucsoncitizen.com or 573-4662.



Sales tax revenue change, by sector

July retail sales

change total category from FY08 sales tax

General merchandise -4.8% 30%

Motor vehicles -28.8% 22%

Housing and furniture -10.6% 14%

Other -3.3% 34%

Source: Joint Legislative Budget Committee report

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