Just like the rest of the country, Arizona residents have since mid-March hunkered down, self-isolated and followed the advice of medical experts and our political leaders to stop the spread of Coronavirus. The rationale provided to us was that if extreme actions were not taken, hundreds of thousands of people in the Grand Canyon state would perish. Hospitals would be overrun. It might be as bad as the Spanish Flu of 1918.
How do we know Covid-19 might be this horrific? Whenever this question was asked, defenders of the shutdown immediately pointed to the various models proving their case. Two in particular were cited the most—IHME and CovidActNow. Both produced dire forecasts for Arizona and both recommended draconian mitigation strategies. Both have proven to be wildly wrong.
The IHME Model
Designed at the University of Washington, the IHME model has been the most frequently cited the last 3 weeks and was the foundation for the nationwide projections developed by the Trump Administration.
On April 1st, IHME predicted dark days for Arizona. IHME forecasted that by April 15th over 2,500 beds would be needed and that Arizona would be at its ICU and ventilator capacity. At our peak on April 27th, Arizona would have 4,000 hospitalized Covid-19 patients and a ICU shortage of nearly 100 beds. Over 1,300 would be dead by August 1st.
Founded and developed by four volunteers with very questionable credentials, CovidActNow became a frequently utilized source for politicians and governmental entities early on during the pandemic. In Arizona, CovidActNow was the primary model used in March by the University of Arizona College of Public Health to develop their pandemic response recommendations, which were cited by the media and referenced by politicians throughout the state.
On April 1st CovidActNow had concluded that Governor Ducey’s shelter-at-home policy was far too lax and that a much stricter statewide lockdown was necessary:
Without a “strict” stay-at-home policy, CovidActNow declared that Arizona on April 15 would have nearly 1,500 hospitalized, a hospitalization peak of 40,000 by June, and 28,000 dead by mid-summer.
Models vs. Reality
It is embarrassing how poorly both of these models performed compared to reality. As of today (April 15), Arizona has fewer than 500 Covid-19 patients hospitalized and around 100 admitted to ICU, a fraction of the predicted amount. Ventilator use is in decline and the state has already reduced their federal ventilator request from 5,000 to 500.
Fatalities are lagging behind the IHME model and will never approach the laughable figure cited by CovidActNow. There has been no Coronavirus hospital crunch. In fact it has been just the opposite–healthcare workers have been furloughed due to all of the empty hospital beds.
The excuses to explain away the modeling errors have been coming as fast as the downward revisions being made to both forecasts. Defenders of the modeling claim that the lower projections only prove that the current policies are working and thus fewer deaths and hospitalizations have been the result. The flaw with this argument is that both models as of April 1 were based on the mitigation efforts that are in effect today. This argument is simply an attempt to move the goal posts and avoid any discussion about why the models missed so badly.
Others have suggested that it is not really the fault of the modeler’s–Covid-19 projections are difficult and that a lack of data and changing assumptions hampered their effectiveness. These are all valid points, except that none of these issues were ever brought up when the public was being sold on their reliability and used as the justification for a nationwide shutdown of the economy.
Some are even saying that it doesn’t really matter that the models were wrong and that everyone should just be thankful that it is not as bad as they thought. This argument is not only wrong, but offensive. Thousands of people have lost their jobs, their livelihoods, and some will lose their lives because of the actions taken based on these models. If the goal is to completely erode all public trust and credibility in our institutions, this is the quickest way to do it.
Unfortunately, what has transpired up to this point cannot be undone. Mistakes were made, yet rather than dwelling on them we need to start working toward solutions that address our overreaction.
The top priority should be to reopen Arizona in a safe and healthy way. Governor Ducey has announced that he is developing a plan to open up the economy; our hope is that it coincides with the expiration of the existing stay-at-home order on April 30th (if not sooner).
Of course, this doesn’t mean that Arizona should not take any precautions or that there won’t be certain restrictions when the shutdown ends. The models were useless, but that doesn’t mean we don’t have data showing that Covid-19 is a real danger to certain segments of the population (predominantly seniors and those with chronic illness). The Club believes a solution exists somewhere between doing nothing and the current draconian shutdown.
The other lesson that should be learned is a healthy amount of skepticism when politicians start using forecast modeling as their justification for their radical policy prescriptions. The public might have been fooled this time by the so-called experts and their doomsday modeling, let’s just make sure it doesn’t happen again.
When the Covid-19 pandemic hit the US in early March, it
became evident that the government lacked the capability, efficiency and nimbleness
to effectively contain the spread. Critical measures such as developing
accessible and reliable testing turned into a bureaucratic
nightmare, and a lack of critical life saving medical supplies and
infrastructure threatened to overwhelm our medical professional heroes on the
front lines trying to save lives.
Thankfully and in the true American spirit, the private
sector is coming to the rescue. Businesses large and small, entrepreneurs and
citizens have mobilized throughout the country to fight the pandemic.
In Arizona the story is no different. We are fortunate that
so many have been willing to step up to the plate and deserve recognition for
their efforts. Here is a list of some of the businesses working to fight
Arizona Cardinals President Michael Bidwill
donated $1 Million to the Coronavirus Relief Fund, which will go toward PPE for
hospitals, food banks and provide technology to disadvantaged students needing
to transition to online learning.
The Arizona Diamondbacks have
donated over $1 Million to numerous charities to provide food, support for
children of healthcare workers and PPE for medical professionals.
Depcom Power located in Scottsdale donated
10,000 surgical masks, 10,000 N95 masks and over $225,000 toward Coronavirus
Arizona Based Brooklyn Bedding has
repurposed their facilities to make hospital beds during the pandemic.
Honeywell is ramping
up their Phoenix facility and is hiring 500 people to produce N95 masks and
other protective gear.
Several hotels in the Phoenix area are providing
of charge to medical professionals.
We acknowledge that this is not an exhaustive list, so feel
free to email the Arizona Free Enterprise Club at email@example.com and let us know of other
Arizona companies and individuals that deserve recognition for pledging their
time, energy and resources to the Coronavirus effort.
In an effort to save their failing ballot measure campaigns,
a coalition of liberal organizations have gone to state
and federal court to be granted the ability to collect initiative signatures
online. Among the groups looking to change the signature collection process are
proposals to double the state income tax, increase taxpayer funding for
political campaigns, enact same day voter registration on election day and roll
back school choice options for parents and students.
Their main argument is that the Covid-19 pandemic was an
unforeseen circumstance that requires special relief and that since online
signature collection is allowed for candidates, a similar process must be
provided for ballot measures as well. Neither argument holds merit and should
be rejected by the court.
Their lawsuits assert that under the current social
distancing/shelter-in-place requirements, it is not possible for them to safely
acquire the necessary signatures prior to the filing deadline in July. That may
or may not be true, but if lack of time is truly an issue that is a problem that
they created for themselves.
No one disputes that collecting the minimum signatures
required to qualify for the ballot is a tall task (237,645 for statutory
measures, 356,467 for constitutional changes), which is why the constitution
provides 20 months to anyone looking to submit an initiative to the ballot. That is more than enough time to gather signatures
and to plan for any unforeseen circumstance, including a pandemic.
Instead, most of these groups decided to wait until this
spring to go the streets, ignoring the risk associated with such an approach.
The court should not bail them out for choosing not to use the lengthy
collection timeframes afforded to them under current law.
The other obvious problem with their request is that online
signature collection for initiatives would violate the state constitution. While plaintiffs and supporters of an online
signature platform frequently cite that candidates can collect their signatures
online, they ignore the fact that Article
4, Section 1 of Arizona’s constitution prescribes the signature collection
process for ballot measures.
Specifically, the constitution requires that all signatures
collected must be “attached to full and correct copy” of the measure, that
every sheet is “verified by the affidavit of the person” circulating the
petition, and that all signatures collected are “signed in the presence of an
affiant.” For the court to allow such a process to occur would require a
complete rewrite of the constitutional framework for initiatives that was drafted
by our state founders.
Hearings on both cases are scheduled to be heard next week.
Democrat Secretary of State Katie Hobbs, who likely supports all of the liberal
ballot measures being proposed, announced
that she would not defend the law and is ready and willing to create an online
process for ballot measures.
Thankfully the legislature decided to step in and intervene
to defend our election laws against this frivolous lawsuit. Additionally,
Governor Ducey came out strongly
against the suit and made it clear that his office would not use any of his
emergency powers during the pandemic to provide relief. So now it is up to the
courts to decide whether pandemics can be used as an excuse to ignore the rule
Last week the Arizona Free Enterprise Club
released our report detailing the poor performance of the Low Income Housing
Tax Credit Program (full report can be viewed HERE).
The information in the study should provide more than enough evidence for
lawmakers to reject HB 2732, legislation that would give away millions in subsidies
to investors and developers to fund a housing program rampant with fraud.
The reports author, Everett Stamm, has
followed up by writing an op-ed explaining why Arizona would be better served
to look at other solutions to address housing affordability rather than funding
a risky program with a track record of failure.
of Oversight and Spiraling Costs Hinder Low Income Housing Tax Credit Program
Americans are increasingly unable to cope
with the ever-increasing costs of housing. Rising costs in Arizona,
and across our nation,
should be of interest to policymakers. One program that’s being used is the
Low-Income Housing Tax Credit program. This program has been one of the largest
suppliers of affordable housing throughout the past 30 years, but has had
consistent struggles with increasing operational costs and questions over
accountability and transparency. I’ve published a
report with the Arizona Free Enterprise Club analyzing these concerns and
recommending solutions for policymakers to consider.
What is the Low-Income Housing Tax
The Low-Income Housing Tax Credit (LIHTC)
program operates by offering federal tax credits to developers who construct
new, rehabilitated, or refinanced rental housing that meets affordability
requirements set by the U.S. Department of Housing and Urban Development. This
program uses federal tax credits but is administered by the relevant State
Housing Finance Authority. In Arizona, this would be the Arizona Department
Each state is granted the larger of $3.1
million or $2.70 per capita to distribute in a competitive allocation process.
The competitive allocation process awards projects tax credits to new
construction at approximately 70% of the cost of the project. There is also a
non-competitive process for rehabilitation projects already being financed
through federal bonds, awarding tax credits at approximately 30% of the project
cost. Only the 70% tax credits come out of the amount allocated to the
Rising Construction Costs
Looking through national level data, we
found the LIHTC program had around a 10% year-over-year cost increase in the
amount of tax credits required to build one unit of affordable housing
(adjusted for inflation). Additionally, our report investigates compares LIHTC-financed
housing to equivalent privately financed housing in Arizona and Washington
state. We found housing construction financed with the LIHTC program correlates
with significant increases in cost per square foot in Washington and increases
in both cost per square foot and cost per unit in Arizona.
Lack of Oversight and Accountability
The LIHTC program provides a considerable
amount of discretion to State Housing Finance Authorities during the
competitive allocation process. The United States Government Accountability
Office (GAO) published a report
in 2018 summarizing these concerns. Their report criticized the lack of
standardization, and sometimes complete absence, of cost management measures
set by state HFAs and the high
risk of fraud due to lack of oversight. Notably, the report found only 2
out of 57 LIHTC allocating agencies had limits on the development cost per unit
and only 6 out of 57 LIHTC allocating agencies limited the amount of tax
credits that could be issued per unit in a project. Additionally, just last year
a group of lenders entered into a settlement with the US Department of Justice
after an investigation revealed market manipulation by investors and developers
utilizing the LIHTC program.
Our report discusses the concerns over cost
and accountability of the LIHTC program in much greater depth, including
suggestions on alternative ideas such as tenant-based
programs to address the issue of housing affordability. The full report can be viewed HERE
as well as other reports by the Arizona Free Enterprise Club at www.azfree.org.
Everett Stamm resides in Washington DC
and is author of the report ‘Analysis of the Low-Income Housing Tax Credit
Program in Washington and Arizona’
Utilizing data provided by the National Transit Database, a new study by
transportation policy expert Randal O’Toole shows that public transit has been
consuming more energy per passenger mile than the average light truck or
SUV since 2016.
Passenger vehicles, planes and
transit have all been steadily improving in energy efficiency over the last
decade. Yet of the three modes of
transportation, only public transit has seen a decrease in energy efficiency
per passenger mile. This is because
public transit is the only mode of transportation to see a steady
decline in overall ridership that has wiped out any gains
made through energy efficiency. Transit continues to move fewer and fewer
people while transit agencies continue to pour billions into systems to
maintain the same miles of service.
In other words, transit’s decline
in ridership is outpacing its increase in energy efficiency.
The only exception to this rule is
New York City, whose commuter rail by far moves the most amount of people than
any transit system in the country. Even
the second most used commuter rail line, Maryland’s DC Metro, uses 25
percent more energy per passenger mile than the average light truck in
Being such an energy hog also
means that transit is less greenhouse-efficient in 93 out of the largest 100
urban areas across the country – including Phoenix. Even more astonishing is the fact in 90 out
of the 100 largest urban areas in the nation, it is more greenhouse-friendly to
drive a light truck than take public transit.
Although many politicians,
construction interests, and transit agencies continue to peddle the narrative
that transit is good for the environment and a worthwhile public investment,
the data just doesn’t support this position.
As personal vehicles become more
fuel efficient and transportation technology continues to be revolutionized
through ride-sharing and autonomous vehicles, outdated modes of pubic transit
such as light rail will continue to decline.
Policymakers should see this writing on the wall and discontinue
dumping billions into obsolete transit systems that poorly serve
The calendar has turned to 2020
and Arizona is once again swimming in the dough. The latest JLBC fiscal update released before
the holidays showed that November revenues were $44 Million above expectations.
Arizona is now $550M above the FY 2020 revenue forecast for the fiscal year
(which ends June 30), and the surplus will grow much larger once the record-breaking
Christmas shopping season is included in the tabulation.
It’s looking more and more likely
that Arizona will approach $1 Billion in excess revenues this fiscal
Where is all this extra money
coming from? There is no doubt that pro-growth policies have contributed to the
surplus, and everyone from President Trump, Governor Ducey and the State
Legislature deserve credit for moving Arizona in the right direction. But it cannot be ignored a large portion of
the 2020 surplus is the result of tax and fee hikes that have been implemented
the last couple of years. Tax increases that were unintended, unanticipated or
much larger than expected.
VLT Registration Fee—$185M in
When the legislature passed and
Governor Ducey signed the VLT registration fee into law in 2018, it did not
take long for voter backlash to occur. Originally promised to be just $18, the
ADOT director announced just
before implementation that the fee would instead be $32. Taxpayers were furious
at this perceived money grab.
Luckily, several lawmakers made abolishing the fee their top priority, and were successful in negotiating a repeal in the budget. The bad news is the repeal does not take effect until July 1, 2021, which means the state will collect at least $463M in VLT fees before it expires.
Online Sales Tax Increase–$65M
it felt like online purchases seemed a little more expensive this
holiday season, it’s probably because in October, Arizona joined several other
states in taxing online sales. This was made possible as a result of the Wayfair decision issued
by the US Supreme Court that overturned previous case law preventing states
from taxing online sales unless the retailer had a physical presence in the
There were many arguments made in
favor of taxing online sales, but one of them WAS NOT to impose a net
tax increase. In fact, virtually every
lawmaker that voted in support of taxing online sales did so with an
understanding that any sales tax increase would be offset with an income tax
Unfortunately for taxpayers, the
income tax cut didn’t come close to offsetting their online sales tax increase.
Arizona is on pace to
collect over $300 Million in taxes from online sales, of which around $150M will
go to the state general fund. That is $65M above the projected
forecast in last year’s budget.
Lawmakers who were reluctant to
support a new tax on online sales did so in good faith that the revenue
estimates being used were reasonable and accurate. No one believes that
undershooting the revenue estimate by such a large amount was malicious or
intentional, and it is understandable that policymakers would be conservative in
their forecast. But they now must face the reality that taxpayers did not come
out whole in this exchange.
Income Tax Conformity–$100M to
$200M in 2020
Though crafting a workable tax
conformity package to comply with the Federal Tax Cuts and Jobs Act turned into
one point of consensus was that conformity should not result in a tax
increase/windfall for the state. There needed to be offsets/tax reductions
designed to make taxpayers whole.
Estimates varied on the size of
the required offset, and the amount settled upon by lawmakers was $220 Million.
Just like the sales tax estimate, this conservative
figure is coming in well under the mark. How do we know it’s going to be more
than $220 Million? Because Arizona also needed to pass conformity legislation
for Tax Year 2018.
JLBC estimated the one-time tax
hike for retaining TY 2018 conformity tax revenues at $155 Million. After conformity was passed in May, income
tax revenue ended up being $240 million above
forecast. Even if one assumes that half of
this windfall is attributable to economic growth, the state received a $120M
boost from conformity.
Tax Hikes Need to be Rolled Back
With Arizona approaching a $1
Billion dollar surplus, there is no excuse to retain these tax and fee hikes.
At a minimum, the recent changes that resulted in unintended tax increases
should be addressed. Taxpayers were told that both conform and reform, and the
taxation of online sales would not result in a net tax hike. This agreement
should be honored.
And if the legislature and
Governor Ducey really wanted to be pro-taxpayer, they could roll back all three
and still have hundreds of millions to spend on other priorities such as K-12,
roads and correctional facility repairs.
The Club urges policymakers to do
the right thing and give the money back to taxpayers.