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Real Reform of Arizona’s Fiscal System Won’t Happen Until. . .

I'm going to write about taxes again.  I have to admit, it's been occupying my mind a lot lately.  I hope it's been occupying the minds of other Arizonans, too - at least enough to vote for the Proposition 100 sales tax increase on May 18.

But what's really been gnawing at me is this: why have we been mired in a budget crisis for years now?  Even with the sales tax increase, the state still faces a more than $1.6 billion budget chasm next year.  Is it that we simply don't know how to fix the system to avoid this kind of calamity?  Has the recession been so deep and the housing crash so catastrophic that there was simply nothing we could have done?  I hate to be dramatic, but is there no hope for the future?

The answers, in order: No - we have a lot of good, workable ways to fix the system; we've had them for years.  Not really - certainly even the best-prepared states with stable, balanced revenue systems are hurting right now, but had Arizona had a more stable, balanced system we wouldn't be mired in quite the fiscal mess we are now.  And, yes, there is hope for the future - but it's going to be a tough slog.

Creating a fiscal system in Arizona that is stable and balanced over the long term will be a tough job precisely because the issues preventing that kind of reform are so deeply seeded.  What I mean is:

In the past two decades there have been a number of committees and reports that recommended really smart fixes for the state's revenue system.  The most recent was the Citizens Finance Review Commission (CFRC) in 2003.  The non-partisan group of industry leaders and experts came up with a number of recommendations of changes the state could make to rectify the structural imbalances that have plagued us. 

Yet the CFRC's published report has largely done a wonderful job gathering dust.  (To be fair, some of the smaller changes the report recommended have been enacted, but clearly no sweeping reform.)

That begs the question: why?  Why have these reports died a quiet death?

I was talking to a friend the other day who answered just that question.  She told me that the most recent Arizona Town Hall, which addressed the topic of government revenue in Arizona, focused in part on the institutional and structural barriers that have prevented comprehensive reform.  The Town Hall's report of recommendations included:

Eliminate the supermajority requirement.  In 1992, Arizona voters passed a ballot proposition requiring a 2/3 vote in both the House and the Senate to pass any net increase in revenue.  Since then, not a single revenue increase has been passed by the Legislature. 

That's a problem for a number of reasons.  One is that the ballot initiative process is not cohesive, there's no guiding body to ensure that new laws make sense within the existing system.  It's also a problem because Arizona voters, by and large, are not fiscal policy experts, nor do they have access to those experts like the state's legislators do.  Yet they're asked to make fiscal policy.

Remove term limits and/or lengthen legislative terms.  Certainly not everyone agrees, but some people suggest (and I think there's merit in the suggestion) that term limits, while well-intentioned, have had a couple of negative consequences:

  1. First, they create a rush to leadership that robs legislators of years of seasoning before they assume leadership roles in the House and the Senate. 
  2. Second, they limit institutional memory among legislators, which puts that memory (and at least some policymaking power) in the hands of long-term lobbyists and legislative staffers.

Repeal or amend Arizona's public campaign finance (Clean Elections) law.  Like term limits, public campaign financing was passed with the best of intentions.  The goal is noble - to create an environment in which people's political aspirations aren't beholden to their bank accounts.  But one of the unintended consequences has been to create a system within which candidates who are not representative of a broad swath of constituents are nevertheless elected into office.

Before public campaign financing was enacted in 1998, a candidate had to appeal to "moneyed interests" - business leaders, unions - in order to attract the kind of financing that was necessary to run a successful campaign.  Now, as I heard someone describe it "All the prospective candidate has to do is stand outside Safeway and get 220 signatures and $5 contributions and he has access to public funds to run his campaign."

Create more competitive legislative districts. 26 of the state's 30 legislative districts are not competitive.  In other words, they've been drawn in a way that ensures a Republican or Democrat victory.  That means the election is decided in the primary.  That wouldn't be a problem except that only a small percentage of voters (just 10% by some estimates) vote in primary elections, and those who do are typically the most ideologically extreme.  So the legislators elected to represent their constituents actually represent only the most ideologically extreme - those who voted in the primary.

Once those ideologically extreme candidates get to the Legislature, they have historically proven far less willing to compromise across the aisle - especially on such ideology-centered policies as governmental revenue and expenditure.  One need not look farther than the day's current headlines to see evidence of that - as one policy analyst put it "It was like pulling alligator teeth in the Legislature just to get the 50%+1 vote needed to refer the sales tax increase to the ballot."  And that's in the middle of a crippling fiscal crisis, with even the most conservative of groups calling for a temporary increase in the sales tax.

I wish the answers to the question Why haven't the good ideas for reforming Arizona's fiscal system succeeded? were easy - they're certainly not.  Many of the barriers to the kind of change we so desperately need (change that would create a stable, balanced fiscal system) are deeply institutionalized (many in the state's constitution).  But overcoming those barriers is critical to ensuring that we don't find ourselves in yet another mess next time the economy cycles down.

You'll notice below that you no longer have to register to write a comment.  Please share your thoughts - it's really important to me that this be a dialogue, not a monologue.

Written on Wednesday, 21 April 2010 04:01 by Gary Yaquinto

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