Goldwater Institute: It's the Spending, Stupid

Excessive spending in recent years erases potential billion dollar surplus

By Byron Schlomach, Ph.D.

Holy misdirection, Batman! Only sitting elected officials could make a spending problem seem like an economic illness.

Arizona's state revenues are short an estimated $600 million for 2008, just three months in to the fiscal year. The culprit cited is a slowing housing market and falling home values.

However, under Governor Napolitano, every budget from 2004 to 2007 has grown faster than Arizonans' collective personal income. Nearly 7 percentage points faster in 2004, 12.3 points faster in 2005, 5.7 points faster in 2006, and 0.5 point faster in 2007.

The Joint Legislative Budget Committee's budget growth history shows appropriations rising faster than personal income in 15 of the last 28 years. Even so, there is only one other four-year period when budgets rose faster than personal income (1986-1989)--but it was by an average of 1.7 points per year. Governor Napolitano's four-year average is 6.4 points.

When spending growth outpaces the growth in earnings of the people who pay the bills, it inevitably sets the state up for hard times. Now the reality of less-than-breakneck revenue growth has hit the ninth floor like bankruptcy for a gambling addict.

The first step is to understand the problem. The problem is spending. Had it stayed in line with our population growth and inflation since 2002, instead of a $600 million shortfall, we could be looking at a (conservatively estimated, but hefty) billion dollar surplus.

Dr. Byron Schlomach is the director for the Center for Economic Prosperity at the Goldwater Institute.