Education Funding
K-12 M&O only
All funding sources (state, local, federal)
Source: JLBC
2001 $3,899,678,400
2002 $4,437,848,500 +12.8%
2003 $4,749,655,600 +8%
2004 $5,076,776,500 +6.2%
2005 $5,397,481,900 +5.8%
2006 $5,825,724,000 +7.4%
2007 $6,416,123,000 +10.3%
2008 $6,702,879,600 +4.6%
2009 $6,575,512,200 (1.4%)
2010 $7,001,179,100 +6%
Total Increase is 79%
The Goldwater Institute published a smart piece this morning highlighting the importance of two November ballot initiatives that need to pass in order to prevent an even bigger budget hole. You can read it here.
Propositions 301 and 302 would take approximately $450 million from two programs previously approved by voters. As the Institute points out, the legislature has already counted those funds as part of the 2011 budget. If one or both of the initiatives fail, policymakers will need to make up those funds. How? Byron Scholmach, the author of the Goldwater piece, argues that additional cuts – most notably from K-12 – will have to be made. We agree that should be the first place to cut. Thanks to federal stimulus dollars, K-12 has largely been exempt from the approximate $1.1 billion in real budget reductions that have already taken place. While other agencies saw real reductions, K-12 funding from all sources (state, local and federal) reached its high point in 2010 at $7 billion. And that was a 6 percent increase from 2009. In other words, any reductions in K-12 have been more than made up by other funding sources.
So, while Schlomach is correct to argue that cuts to K-12 (and the other exempt agency: health and welfare) need to occur if Props 301 and 302 fail, there is another option that lawmakers and interest groups will look at: an income tax increase.
Since the collapse of state revenues, liberal policymakers have had their eye on raising income taxes 10 percent on all brackets. This essentially reverses the 2006 10 percent income tax cut spearheaded by the Free Enterprise Club. Never mind that raising taxes in a recession is a bad idea (Gov. Brewer did it twice in the last year with property and sales tax hikes), and never mind that even left-leaning economists in Washington, DC are arguing to extend the Bush tax cuts, lest a double-dip recession becomes more likely. While intuitively counter-productive to sound politics, tax increases in Arizona seem to be an easier path for many lawmakers than taking on the K-12 lobby.
The AZ Corporation Commission is meddling in the marketplace again and the Arizona Republic gives them a pat on the back.
In a recent editorial, “High Standards Will Save Us Millions,” the Republic argues that if consumers demand less energy, then our energy bills will be lower. In other words, if you spend less, you won’t spend as much. Thanks.
In support of the Arizona Corporation Commission’s recent 5-0 vote to require power companies to “achieve energy savings of 22 percent by 2020,” the editorial states:
Customers will save hundreds of millions of dollars as power companies avoid enormous capital expenses. Lower demand will reduce, and even eliminate, the need for new generating plants and transmission lines.
The piece argues that if customers take advantage of federal cash incentives (is this free money from the National Grants Conferences?) to purchase appliances or insulation, then they’ll save money on their electric bills. And looking down the road, the paper writes, “Future homes and businesses will likely be built to minimize power consumption.” And we thought low-flow toilets were bad; can’t wait to see “minimal power homes.”
I’m sure those homes will be cheap, too, like today’s energy efficient cars. The federal government has to bribe consumers $7,500 each to buy a Chevy Volt (60% of which is owned by the government), and even then, it will take more than 10 years of gas savings to recoup the premium on the four-seat hatchback.
But the kicker in the Republic’s editorial is here:
The one challenge is creating the right rate structure so power companies don’t take a financial hit for getting their customers to use less electricity. . .
. . . The Corporation Commission has been working on the issue and can certainly come up with a fair solution.
But I thought “customers will save hundreds of millions of dollars.” Where will those millions come from if they don’t come from the very companies from which we buy electricity?
You can be sure that to maintain the “right rate structure” any savings consumers would realize from a decrease in demand from electricity would be eaten up by being forced to further subsidize renewable energy. So while we might save millions in electricity consumption, we’ll spend on other sources of energy.
Why else would the newspaper be concerned about power companies taking a “financial hit” if people use less electricity? Because there would be less capital available to subsidize expensive alternative energy sources. If the true goal was a reduction in the demand for electricity, the paper wouldn’t worry about the financial hit to APS or TEP. They’d simply adjust. After all, the Republic has over the years argued for higher taxes on tobacco without worrying about the financial hit befalling tobacco companies. Are RJ Reynolds shareholders less important than Pinnacle West shareholders?
The “fair solution” being considered by the Corporation Commission should frighten anyone paying attention to the commission. The Corporation Commission has already instituted a rate hike to pay for the commission’s mandate that power companies obtain more renewable energy. The Republic also endorsed an increase in the statewide property tax, which nailed the state’s largest property taxpayer Pinnacle West (a direct financial hit to their bottom line).
This is the problem with government do-gooders. Not only is it ripe with hypocrisy, but there’s seldom regard for the eventual unintended (and often expensive) consequences. So what if the Chevy Volt has to be subsidized by a federal government with a $1.5 trillion budget deficit. Who cares if property taxes go up or if Arizona ratepayers have to pay more for solar? As long as solar panels and batteries displace nuclear and gasoline, what’s the big deal?
Clean Elections Commission Executive Director Todd Lang said that the SCOTUS ruling that blocks the issuance of matching funds for this election cycle hurts both participating candidates (those taking the public money) and voters because now we won’t be able to hear “both sides of the story.” The result, he said, is a “real harm to our democracy.”
Lang is wrong about this. Does it harm democracy if you choose to run “Clean” but fail to qualify for the government cash? Is democracy threatened because Dean Martin hasn’t qualified for his $707,000? Or is democracy going to be okay because we all assume Martin will qualify eventually?
Lang might argue that there has to be some kind of threshold to qualify for public money, otherwise the state would have to fund everyone running for office. That’s right. The threshold is called the private marketplace. Do you have a message that people want to voluntarily support? If so, you might raise a few bucks. You might not. Either way, this is life. Just like no one is entitled to a high paying job, no candidate for office is entitled to a professional staff, survey research, a good press shop, or a single yard sign. Likewise, no one is entitled to one dollar to pay for these things.
You want a high paying job? Don’t go looking to the state to help you out. Same thing applies if you want to run for office.
From Greg Patterson at Espresso Pundit. He’s right about this.
‘God, I thank you that I am not like other men—robbers, evildoers, adulterers—or even like this tax collector.
from Arizona’s Own Espresso Pundit by Greg PattersonYou don’t have to read Luke 18:11 to know that the most despised person in Biblical times was the Tax Collector, yet few people understand why. We tend to think of Tax Collectors as IRS agents and since no one likes the IRS, we tend to equate that with the Biblical version.
However, first century tax collectors were vastly different from modern IRS agents. Ancient tax collectors were ordinary citizens who contracted with the Roman government. They assessed taxes and kept a percentage–and if you refused to pay…well, let’s just say that Rome had ways of making you pay.
Tax collectors were despised because the people understood that the system was fundamentally unfair. After all, there was always some room for interpretation so merchants had to decide if it was worth fighting over an assessment that was too high. And since the Tax Collector collected a percentage of the overage, the assessment was always too high.
In modern times, we measure the amount of corruption in government by the degree that the functionaries’ benefit from the regulations they enforce. And we long ago learned that we don’t sell tax collection franchises to private individuals and let them assess the tax and keep a cut. Well, at least we used to know that.
The Arizona League of Cities and Towns has entered into a partnership with a private company with the Orwellian name of “Revenue Discovery Services.” Under this arrangement*, RDS would have access to the private salses tax records of individual businesses and conduct private “audits” in order to assess these small businesses additional tax liability. The businesses would then be forced to either hire a lawyer in order to appeal the assessment, or write a check to RDS. RDS then takes its cut and forwards the rest to the city. Frankly, I can’t think of a more destructive tax system. Nothing drives away business faster than a third world tax structure.
The scheme is obviously illegal to implement, after all, A.R.S. 42-2003 prohibits a city from distributing confidential tax information to a private party–and the arrangement won’t work if the city isn’t allowed to transfer the information.
Here’s where the story gets interesting. Rather than go straight to court, those who opposed the scheme sponsored a bill that would make the partnership illegal on its face. That seems like a no brainer. It’s a feel good bill that protects taxpayer’s personal information and prevents a private party from shaking them down for profit. The bill, HB 2512, failed in the House–twice.
Supporters then tried to pass the bill in the Senate and the amendment that added the language failed on 4-4 tie with Repubicans Ron Gould and Barbara Leff voting with the Democrats to kill the provision. Frankly, if anyone understands the abuse of power that the government can wield through tax code enforcement it should be Gould.
And Leff? Frankly, I’m baffled. After a career of advocating for economic development how could she vote to kill a bill that would have prevented such an anti-business scheme? Leff is running for State Treasurer and after fumbling such a basic issue many will question her fitness for the office. In fact, someone with a decent budget could define her entire career by that one vote.
Is there a solution? Well, the obvious answer is for business advocates to seek an injunction in order to prevent confidential information from being turned over to a private company.
How about a legislative solution? Since the bill failed three times–twice in the House and once in the Senate–it seems unlikely that the Legislature is willing to step up and address this issue. Ironically, one of the priorities for the House is HB 2550, which is an economic development package dubbed the “Jobs Bill.” Well, there’s nothing that will kill jobs faster than a banana republic taxation scheme. Come to think of it, the Anti-tax collector bill is germane to the Jobs Bill… Hmm, Maybe the legislative Republicans will get a fourth chance to do the right thing. After all, the Bible says that everyone has a chance at redemption–even tax collectors and Legislators.
*footnote: Don’t be fooled by claims that RDS is merely a private collection agency. Advocates for RDS admitted in Committee that RDS conducts private audits and rejected a proposal to limit its activities to collections.
April 9, 2010
Leaving Arizona . . . Poorer
Relative to the size of its budget, the red ink in Phoenix is even higher than in Sacramento or Albany. Arizona has one of the largest deficits of any state. Its mortgage foreclosure rate is also one of the highest. No wonder pro-spending groups and labor unions have been consistently pushing for higher taxes. Last year Arizona raised property taxes by more than $200 million.
Governor Jan Brewer, a Republican, is eyeing a sales-tax hike next. Legislators agreed to put a one-point hike before voters in a referendum scheduled for May. They also passed a “contingency” budget — conservatives mockingly call it the “doomsday budget” — that would take effect if the sales tax hike is voted down. Liberal interests want to persuade voters that failing to accept higher taxes will mean draconian cuts in schools, health-care services and road maintenance.
But Arizonans appear not in the mood for higher taxes this year. Last week the powerful Arizona Hospital and Healthcare Association backed away from an initiative it was supporting to boost the state income tax on “the rich” to 5.45% from 4.45%. Leading anti-tax groups, including the Arizona Free Enterprise Club, blasted the proposal, complaining that the health care lobby is in favor of every new tax that comes down the pike, including higher taxes on tobacco, snack foods and liquor.
Also speaking out was former Gov. Fife Symington, who says higher taxes would “make Arizona poorer, when we need more jobs and higher incomes to pay the bills.”
Steve Voeller, head of the Free Enterprise Club, says the hospital group finally “backed down because there was no political support in this state for the tax hike.” The anti-tax groups now are turning their attention to defeating the proposed sales tax increase. Tweaking the hospitals, Mr. Voeller says: “The best way to “keep people off Medicaid is by getting them a job.”
— Stephen Moore
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