In Need of State Spending Limit

There are many line items in the state budget, both on revenue side and the expenditure side.  As a matter of practice, when looking at the budgets from fiscal year to fiscal year, we like to look at net ongoing revenue vs. the appropriated operating budget.

Net ongoing revenue is the most conservative estimate for what state government can reasonably count on having.  It doesn’t count any one-time revenues like carry-forward balances, fund-transfers, agency sweeps, sale lease-backs, and other one time revenue gimmicks.  Similarly, the appropriated operating budget includes the vast majority of ongoing government expenditures.  It doesn’t count supplemental spending, adjustments, repaying government transfers, litigation payments, or other one-time expenditures.

What we see from fiscal years 2006 through 2011 is not just disturbing, but it explains how Arizona policymakers have saddled Arizona taxpayers with nearly a near $2 billion budget deficit, and increases in both sales and property taxes.  As revenues exploded, government spending did its best to catch up.

Growth in government spending should be limited since the bigger government gets, the more it crowds out private sector investment.  Arizona now spends over $250 million a year just on debt service alone.  That’s money that could be better used somewhere else.

What this graph shows most vividly is that Arizona needs real spending restraints.  These spending figures were adopted (meaning voted on and signed by the governor).  Adjustments were made, but lawmakers essentially adopted budgets they knew they couldn’t reasonably cover.  A spending limit would not have prevented the near 40% decline in revenues Arizona has experienced, but it would have mitigated the size of the deficits, curbed our growing debt, and certainly would have prevented the three-year, $3.75 billion hike in sales and property taxes.

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