Wednesday, March 26, 2008

Goldwater Institute: Governor's refusal to freeze state spending has ominous consequences

Waiting Game

By Tom Patterson

Governor Janet Napolitano recently vetoed bills to freeze state hiring and spending, in spite of a state budget deficit of more than $1 billion.

It has been clear since last July that the revenues for fiscal year 2008, which ends June 30, would not be nearly sufficient to support the gigantic spending increases in the last four state budgets. During the Governor's first term, real general fund expenditures increased 54 percent, 29 percentage points more than population and inflation, combined.

The governor could have called for a special session of the Legislature to adjust budgets midyear, as has been required in the past. But she refused to do that or to reduce agency spending through executive action. Instead, she has delayed correcting this year's budget until most of the money has been spent and meaningful reductions are literally impossible.

So what's the end game? Once the one-time fixes are used up, only two options remain to support spending that exceeds revenue: taxes and debt, which is taxation of future taxpayers. The governor prefers debt for the very reasons that make it such a poor option. Debt substitutes for fiscal restraint. It temporarily, but only temporarily, obviates the need for politically unpopular taxes. It burdens future generations, who have no vote in the matter.

The real threat is that high-spending, high-taxing states face disastrous economic consequences. In case after case, states that lack budgetary discipline fall into a vicious cycle -- higher taxes, slowed economic growth, and reduced government revenue, culminating in still higher taxes.

The ill-advised delay game over the budget will conclude sometime. But how it gets resolved will have enormous consequences for the future of our state.

Tom Patterson is chairman of the Goldwater Institute, a former state legislator and emergency room physician. A longer version of this article originally appeared in the East Valley Tribune.

No comments: