With the state facing a significant budget deficit, Arizona is at a crossroads. The decisions our elected officials make to get us out of this fiscal crisis will determine whether Arizona improves its competitive position in the global economy by encouraging enterprise and a healthy business environment. The alternative is stifled economic development and perpetuated financial strain.
As a percentage of the overall budget, Arizona’s 2009 deficit is projected to be the largest in the U.S., according to a new study from the Center on Budget and Policy Priorities. To break it down, Arizona’s current year deficit is $1.2 billion, with 2009 estimated to come in around $1.9 billion. Unfortunately, growth in state revenues is expected to remain slow through 2010.
Arizona’s action plan must not only close the deficit today, but ensure prosperity for tomorrow. To that end, the Arizona Chamber of Commerce and Industry offers a series of recommendations we believe will be useful to legislators and the executive when crafting solutions to Arizona’s fiscal crisis. The document, “Weathering the Downturn and Preparing for a Brighter Future,” also provides ideas for preventing a return to a similar budget situation.
A few short-term tools, used wisely, can help lawmakers close the gap between revenues and expenditures. The size of the deficit requires multiple solutions but prudent measures include cutting unnecessary spending, deferring non-critical capital expenses, and using the Rainy Day Fund, the state’s savings account, throughout the course of the downturn.
It’s clear that financing for school construction is also part of the equation, as opposed to the traditional cash payment system. However, certain restrictions must be put in place to minimize interest payments, expedite repayment, and otherwise keep debt under control to keep Arizona from going the way of other states who are struggling to afford their debt. Defining strict borrowing terms now will preserve economic stability later.
For the longer term, the state should also consider a smarter spending policy that would tie money going out to money coming in. Every Arizonan understands that when you have money you can spend it, and when you don’t, you can’t. The state should adopt a system of similar triggers so agencies can automatically adjust to changing economic conditions. And when times call for above-normal spending, lawmakers should alert the public before voting to do so.
Arizona’s elected officials are responsible for being good fiscal stewards of the public purse. Accordingly, they should consider each policy decision in the context of how it could advance or hinder our state economy. Despite some advances, Arizona recently passed a number of measures that send a collective, negative message to potential new investment in our state. The employer sanctions law, an increase in workers’ compensation costs, the raised minimum wage, and a host of new regulations aren’t exactly the welcome basket businesses hope for when relocating.
If we’re not careful, this year after the ribbon cuttings we’ll welcome companies to Arizona with an increased property tax bill as well. With this picture in mind, it should be clear why maintaining a competitive tax and regulatory climate should be paramount in the budget considerations.
Many state economies are struggling. By putting in place fiscal and regulatory policies that stimulate private investment and job creation, Arizona can emerge from the current downturn as a choice location for new and existing businesses in diverse industry sectors.
Arizona’s business community calls on our elected officials to approach the current budget situation as an opportunity to make our state economy more stable, competitive and diverse. We look forward to working side-by-side with them to make Arizona a stronger state, ready for business well into the future.
Glenn Hamer is president and CEO of the Arizona Chamber of Commerce & Industry. Eileen Klein is vice president of Government Relations for United Healthcare and vice chairwoman of Public Affairs for the Arizona Chamber of Commerce & Industry.