by admin | Mar 12, 2015 | Uncategorized
Every election, it seems, politicians give lip service to the need for fiscal responsibility and a balanced budget. But once they are in office, they lack the courage and resolve to actually achieve one. It’s always politically more convenient to spend more than we take in, hide growing debt and liabilities through clever accounting tricks, and leave the consequences for someone else to clean up down the road.
But not this time.
In November, voters sent a clear mandate that they wanted to restore fiscal sanity to Arizona government. They demanded that our leaders take on the looming budget crisis, show some accountability and get Arizona’s fiscal house in order. Last week, Gov. Ducey and the Legislature accomplished just that.
Arizona was grappling with how to deal with a budget deficit of $520 million this fiscal year, and as much as $1 billion shortfall in 2016. No more. The recently passed budget eliminates Arizona’s structural deficit completely by 2017. There are no tax increases to slow down economic recovery, and actually increases K-12 spending while directing more funding towards the classroom – making sure our education dollars are spent where they are needed most. It’s no wonder why Arizona remains highly competitive in attracting new businesses to the state.
Just as important is how fiscal responsibility was achieved. For years, Arizona’s annual budget has been strung together by a series of stopgap measures, accounting gimmicks, and fund sweeps of questionable Constitutionality. But those gimmicks ended this year, and Arizona is now living within its means for the first time in over a decade.
Overall the Ducey budget reduced government spending by 2.3%. In addition to spending cuts, meaningful savings were achieved through common sense government reforms, such as consolidating state agencies. For example, merging the Arizona Department of Racing into the Department of Gaming has been long overdue and eliminates multiple overlapping and redundant expenses.
The budget included tax relief as well. In addition to indexing our income tax brackets to inflation, the approved package reduced taxes on small business by eliminating the job training tax. All Arizona employers are subject to the tax, which is applied to the first $7,000 in wages paid to each employee. The revenue generated by the tax goes into the “Job Training” fund, which is administered by the Commerce Authority and is primarily used by a few large companies to help subsidize their job training activities. So not only did the budget reduce the tax burden on small business, but ended a crony capitalist program in the process.
In just his third month in office, Governor Ducey was able to produce a balanced budget that protected taxpayers, put more money into the classroom and shrunk the size of government. By any measure, this was a great start to his administration and a great week for Arizona.
by admin | Mar 4, 2015 | Uncategorized
The Arizona Free Enterprise Club (Club) today strongly endorsed the budget deal reached by Governor Doug Ducey, House Speaker David Gowan and Senate President Andy Biggs as a bold step forward towards putting Arizona’s fiscal house in order.
“A lot of politicians talk about a balanced budget, but few demonstrate the leadership and courage needed to actually achieve it,” said Club President Scot Mussi. “The plan the Governor and leaders of the House and Senate introduced today not only shows that they take fiscal responsibility seriously, but that they can protect taxpayers and classroom spending while doing it.”
The budget deal, if passed, will eliminate the structural deficit by 2017, our first balanced budget in over a decade. The budget also prioritizes dollars to the classroom by increasing funding for K-12 and adding $135 million in new funding towards classrooms. The plan also provides critical tax relief to small businesses and middle class taxpayers by indexing our tax brackets to inflation and eliminating the job training tax.
“Arizona cannot truly prosper and attract new businesses and jobs until it can show that it is committed to fiscal responsibility, dollars to the classroom, and protecting the taxpayer,” said Mussi. “This budget achieves precisely that, and will make Arizona a national model for government reform and accountability.”
by admin | Feb 25, 2015 | Uncategorized
One of the most popular programs on television today is also one of the most educational regarding the risky nature of venture capital investing. The show is called Shark Tank, and involves a very simple yet ingenious format where five wealthy investors listen to business proposals by aspiring entrepreneurs and then decide whether or not to invest their own money into the venture.
Now what if I told you that Arizona had its own version of the Shark Tank, except that in our version it was bureaucrats that determined which ventures to support and then gave tax credits to “qualified” investors? We do, except ours is called the Angel Investment Tax Credit Program. Under our version, wealthy investors apply to receive tax credits for making investments into “qualified” small business, as determined by the Arizona Commerce Authority (ACA). Since the tax credits go to the investor and not to the entrepreneur, the investor benefits regardless if the business succeeds or not.
Subsidizing investor risk is a really bad deal for taxpayers, but that has not stopped advocates from introducing HB 2011, legislation that will greatly expand the size of the Angel Investment program. The main argument in favor of expansion is that good ideas have a hard time finding investors and thus need the extra incentive. Often proponents will try to point to Angel Investment “success stories” where a qualified business has flourished after receiving an influx of venture capital.
Upon closer examination none of these arguments hold merit. The reality is that if a good idea exists, it will attract venture capital regardless of any tax credits provided by taxpayers. This is nothing more than ‘found’ money for the investor.
Arizona taxpayers subsidizing the investment risk of good ideas is the best case scenario for the program. Then there is the worst case scenario—tax credits flowing to investors who put money into bad ideas that should have never made it out of the starting block. These could be proposals that initially appeared be a good investment but over time failed due to poor strategy, management or implementation. Or taxpayers could be subsidizing the worst pitches in Shark Tank history—that is up to the ACA to decide.
It is simply not true that wealthy investors need additional taxpayer assistance or that the government is better at determining “qualified” venture capital investments than the private sector. Additionally, as Shark Tank has proven, there are already private sector solutions for attracting venture capital. Arizona should get out of the venture capital business and reject HB 2011.
by admin | Feb 24, 2015 | Uncategorized
The taxpayers of the City of Phoenix – proud owners of a failing hotel, $1.5 billion in deficits over the next two years, and $3 billion in unfunded pension debt – are likely to see their sales tax nearly doubled to pay for $30 billion in transportation projects that are already losing money.
You read that right.
Phoenix’s current transportation tax – Transit 2000 – will expire in five years, and the Phoenix City Council is preparing to nearly double it – from .4% to .75% – to raise $30 billion for a hodgepodge of projects that the city neither needs nor can afford in the first place. What’s more, the Council is being asked to do away with any pretense of making the new taxes temporary or subject to review. They will simply make them permanent.
Keep in mind that Arizona still has one of the highest sales tax burdens in the nation, even after letting the 2010 sales tax hike expire.
However, the bulk of the new taxes would be spent on the further expansion and maintenance of light rail. In fact Phoenix mayor Greg Stanton has plans to triple the size of the system. As we approach the ten-year anniversary of breaking ground for light rail, it’s worth noting that it has never, ever operated in the black. Instead it’s operating losses amount to tens of millions each year, which the City of Phoenix has to absorb. For example, Phoenix spent roughly $22 million to operate light rail last year, but only recovered $8 million.
So – drowning in debt, facing over $1 billion in new deficits, and faced with the reality that taxpayers spent $1.4 billion to build a slow moving trolley that loses $14 million a year – the Phoenix City Council is poised to double your sales taxes to triple it. All while police and fire continue to be dangerously underfunded.
Don’t let them get away with it. We encourage all Phoenix residents to call their councilmember, write letters to the editor, and show up to the City Council for the debate over this irresponsible tax hike – and let your voice be heard.
by admin | Feb 5, 2015 | Uncategorized
Arizona is in a difficult budget situation. The projected deficit is close to a billion dollars, and revenue and growth projections remain anemic. In response to these financial difficulties, Governor Ducey has proposed a responsible, sound fiscal plan to balance our budget. There is still work to be done, but Ducey’s budget blueprint has given lawmakers a good place to start.
Then along comes a bill that is completely oblivious to all of this, proposing to spend billions of dollars the state doesn’t have. It’s OK, the legislator argues, it’s not really spending – it’s an “investment” that will create jobs and generate revenue for the state.
That bill is House Bill 2033, sponsored by Rep. Bob Robson. HB 2033 proposes to spend over $2 billion on public university research facilities over the next 30 years–$68 million in FY 2017-18 and $72.8 million per year for through FY 2047-48. Of course successful private universities like Grand Canyon University, which actually pay state income and property taxes while still keeping tuition low, won’t see a dime of it. So not only do we spend billions, but we pick winners and losers in the process.
Some lawmakers will never realize that you can’t spend your way out of fiscal crisis. More deficit spending only creates more debt, and the rate of return on all these investments the state couldn’t afford in the first place turn out to be far less than promised. It has happened over and over again, and is a big reason why Arizona is now on its second major budget crisis in less than five years.
Nevertheless, for those familiar with the failure of President Obama’s 2009 stimulus package, HB 2033 should feel like déjà vu. After all, “this is a jobs bill,” Robson claimed. No word on whether those jobs are “shovel-ready.”
If there is truly a need for capital improvements in higher education, they should have no trouble raising the funds from the private sector and alumni to pay for it. But to propose spending $2 billion of taxpayers’ money, right in the middle of a budget crisis, is simply unwise. Lawmakers need to reject this proposed “investment” and focus on the real issue, getting our fiscal house in order.
by admin | Feb 2, 2015 | Uncategorized
In Arizona, thanks to a slew of solar incentives and special tax breaks, the solar industry is bigger than ever. More astonishingly, the rooftop solar industry doesn’t even try to hide the fact that their entire business model is dependent on the staggering number of taxpayer handouts and loans being provided. SolarCity’s own annual report filed with the SEC bluntly stated: “Our business currently depends on the availability of (government) rebates, tax credits and other financial incentives.” In other words, the viability of their entire business model hinges on these massive taxpayer handouts.
As if the subsidies weren’t bad enough, several companies have figured out how to securitize these taxpayer giveaways by leasing the solar panels over a 20 or 30 year period (not unlike a mortgage) rather than selling them. Under this lease financing scheme, solar firms promise homeowners “free solar” and lower electric bills, seemingly guaranteeing a no risk investment. If this seems too good to be true, it means it probably is.
So what are solar companies not telling us about these lease agreements? Things like if the homeowner decides to move in the next 30 years, they may have trouble selling their home, since the solar lease can potentially cloud the title (in some instances the rooftop solar company has to approve the buyer). Additionally, solar firms have been known to omit hidden fees embedded in the lease, exaggerate the long term cost and energy savings and fail to disclose that homeowners are likely responsible for any reductions in the subsidies being provided.
With millions in corporate welfare at stake, these lease agreements deserve additional transparency and disclosure. Unfortunately, solar firms have little incentive to provide more information, and there is almost no regulatory oversight for these long term leases. Unlike utilities, rooftop solar is exempt from review by the Arizona Corporation Commission. They face little real scrutiny over their dubious marketing practices or what they are telling – and selling – unsuspecting homeowners.
It’s long past time that policymakers take a closer look at these heavily subsidized programs, which is why the Free Enterprise Club supports Sen. Debbie Lesko’s efforts to shine light on the rooftop solar leasing scheme. Sen. Lesko is proposing legislation that would implement minimum disclosure requirements for solar companies prior to leasing to prospective customers. In particular, they will be required to let homeowners know the amount of subsidies, credits, utility costs and projected savings that can be reasonably expected throughout the life of the lease. They will also have to disclose that any savings being promised is subject to change depending on future legislative or regulatory action.
Additional transparency of solar lease agreements will be good for consumers, taxpayers and ratepayers. If rooftop solar wants access to the subsidies that fuel their bottom line, then they should have no problem with minimum disclosure requirements to better inform prospective customers.
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