Tuesday, November 18, 2008

Goldwater Institute: Impose fiscal discipline with independent budget analysis

By Byron Schlomach, Ph.D.

With election fever behind us, the cold light of reality has dawned and the state's fiscal outlook is being realistically assessed. Governor Napolitano has acknowledged that this year's budget shortfall is at least $1.2 billion.

Just a month ago, Governor Napolitano stated that a shortfall of $800 million for the 2009 budget was a "pessimistic" scenario, despite a legislative briefing at the time showing the shortfall could be $1 billion or more.

Remember that within a month of the legislature enacting the budget in 2007, everyone in state government leadership knew there was a shortfall. As evidence mounted that the problem was serious and getting worse, no special session was called and a revised budget for FY 2008 was not passed until late in the 2008 session, only a few months before that fiscal year ended.

The revised budget for 2008 maintained the governor's rosy picture. Ultimately, the Joint Legislative Budget Committee's $100 million larger shortfall estimate was confirmed when the state had to withdraw an additional $99 million from the rainy day fund to balance the books.

The last two years have made it abundantly clear that the budget process needs reform. The legislature should consider adopting a law requiring an independent revenue estimate from the State Treasurer or another independent agency, like the auditor general, that the governor and legislature must use for their budgeting purposes.

Byron Schlomach, Ph.D, is director of economic policy at the Goldwater Institute.

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