Here is AFP Arizona’s short recipe for fixing a $3.5 billion deficit for FY10, with ideal and fallback scenarios.
1) Start by trying to do the $2.2 billion in spending cuts from the Pearce-Kavanagh Jan 15 options budget for FY2010. Fallback assumes the Legislature will only be able to cut $1 billion before losing a majority or getting vetoed.
Ideal subtotal: $2.2 billion Fallback subtotal: $1 billion
2) Sweep non-GF funds, for $200 million.
Ideal subtotal: $2.4 billion Fallback subtotal: $1.2 billion
3) Take an estimated $1.2 billion in federal stimulus funds that do not require maintenance-of-effort spending increases.
Ideal subtotal: $3.6 billion Fallback subtotal: $2.4 billion
4) Look for at least $1 billion in state assets that could be sold, or state GF functions that could be outsourced to long-term private concessions. An initial list of $1 billion in possible asset sales and concessions is pasted below. Fallback assumes that only $500 million is politically viable.
Ideal subtotal: $4.6 billion Fallback subtotal: $2.9 billion
5) Greatly expand the corporate tuition tax credits. Every child who leaves the government system via STOs saves the state/local ed system more than $5,000 (net of the lost revenue). If we move 10,000 more kids through aggressive promotion of the system in FY10, we save $50m. In FY11, we could accelerate the movement of kids out of the government system.
Ideal subtotal: $4.65 billion Fallback subtotal: $2.95 billion
6) Begin voucherizing K-12, and force districts to set up charter alternatives. If the AZ Supreme Court is not cooperative on the Blaine Amendment question, the voucher legislation could come with intent language and provisions that route around the prohibition. For example, the legislation could allow religious schools to structure their curricula and class schedules so that the vouchers pay only for nonsectarian aspects of schooling. If we save $2,000 a student (a low estimate) on 25,000 students moving to alternative schools, we save $50 million. In FY11, we could accelerate the movement of kids to independent schools.
Ideal subtotal: $4.7 billion Fallback subtotal: $3.0 billion
7) Begin voucherizing higher ed. The Goldwater Institute’s high-end estimates of savings give us $6,000 per student. We don’t think the actual savings, short term, will be that much. But if we move 2,500 students in the first year with savings of $4,000 each, the state saves $10 million. In FY11, we could accelerate the movement of students into private higher ed programs.
Ideal subtotal: $4.71 billion Fallback subtotal: $3.01 billion
8) The Goldwater Institute suggests moving state employees to HSAs with high deductibles. By doing so, we could keep the DOA health expenditures from going up $100 million a year like it did last year. (It will still go up, but we save money if the increase is less than the projections.) Assume $10 million in savings for FY10.
Ideal subtotal: $4.72 billion Fallback subtotal: $3.02 billion
9) Outsource civil law enforcement. The Goldwater Institute projects that outsourcing in this area could yield at least $20 million in savings.
Ideal subtotal: $4.74 billion Fallback subtotal: $3.04 billion
10) Collateralize future state lottery and tobacco settlement receipts. Napolitano thought she could get $1.4 billion. We’ll use a more realistic figure of $700 million.
Ideal subtotal: $5.44 billion Fallback subtotal: $3.74 billion
As for tax increases, if the Big Spenders want to put a tax increase on the ballot, we say let them find the money and collect signatures.
Again, an initial list of $1 billion in asset sales is pasted below.
Americans for Prosperity
(Arizona Federation of Taxpayers)
A Quick Look at Sales of State Assets/Functions
Rather than raise taxes by a billion dollars, Arizona should sell state government assets, and bid out long-term concessions for the private operation of state facilities and functions. To help our Governor and Legislators find $1 billion in sales for FY2010, we took a few hours to look at state assets. Using back-of-the-envelope estimates, we found what appears to be a billion dollars’ worth of asset sales and concession contracts. Imagine what executive staffers and ADOA could find, if they took a few days to open up the state’s books and look.
1) Sell the Papago Park Military Reservation.
Projected Revenue: $480 million
The state should sell the Papago Park Military Reservation for commercial or residential development, and move the National Guard facilities to state lands beyond the metropolitan area (near the southern border?). The PPMR sits on some of the best real estate in the entire Valley, right next to the scenic Papago Buttes and the Papago Municipal Golf Course, and within easy hiking range of the Phoenix Zoo and the Desert Botanical Gardens. Even in today’s market, an open, competitive bidding process could yield revenue of a million dollars an acre, or $480 million for the entire 480 acre parcel—on top of environmental remediation costs.
2) Sell the Santa Rita Experimental Range.
Projected Revenue: $250 million
The Santa Rita Experimental Range is 50,000 acres east of Green Valley that was set aside by the federal government in 1904 for the purpose of studying sustainable range practices. In the 1988 the federal government turned it over to the Arizona State Land Department. It was designated for “ecological and rangeland research purposes… until such time as the legislature determines the research can be terminated on all or parts of the lands.” Arizona could sell the land to private development. It is beautiful land, in the foothills of the Santa Rita Mountains, and close to Madera Canyon. Open, competitive bidding could yield revenue of at least $5,000 dollars an acre, or $250 million for entire parcel, even in today’s depressed market.
3) Sell an operating concession for the Grand Canyon Airport.
Projected Revenue: $150 million
The state could sell an operating concession on the Grand Canyon Airport to a private enterprise. If the private enterprise granted the long-term concession is allowed to enhance the facility by extending the runways, modernizing ATC, and building amenities adjacent to the airport, those factors could greatly increase usage of the facility, and also the state’s revenue from the initial competitive bidding process. If a potential operator believes the concession’s contribution to its future income will be to generate $10 in net income for per passenger, and if the operators believes it can increase the number of passengers to an average of 2.5 million passengers annually for 30 years, it should be willing to pay $150 million up front to obtain the concession (assuming it has an opportunity cost of 7 percent). The contract should be structured so as to protect the investments of existing FBOs.
4) Sell an operating concession for lakeside hotels and marinas on Lake Havasu.
Projected Revenue: $120 million
The state could sell operating concessions in Lake Havasu State Park to private hotel companies, allowing them to build and operate hotels for a period of time, and build and operate their own marinas. With Mexico perceived as becoming increasingly dangerous, LHC could become even more of a spring break destination for the Southwest. If the hotels believe that the concessions would contribute $20 million annually in net income from operations on 5,000-plus rooms over a 30-year period, they should be willing to pay at least $120 million up front to obtain the concession (assuming they have an opportunity cost of 7 percent).
5) Sell an operating concession for Kartchner Caverns.
Projected Revenue: $10 million
The state could sell an operating concession on Kartchner Caverns to a nonprofit. The state parks system currently earns $2,500,000 a year in revenue on the caverns. If the nonprofit granted the long-term concession is allowed to enhance the facility by building a lodge, opening environmental education/outdoor recreation schools, etc, that could greatly increase the state’s revenue from the initial competitive bidding process. If the nonprofit’s managers believe that the concession’s contribution to its future income will be to generate $1 million annually in net income from operations over a 30-year period, it should be willing to pay at least $10 million up front to obtain the concession (assuming that it just wants to break even after inflation). The contract should be designed and overseen by Arizona State Parks so as to stay committed to the original Tufts-Tenen vision of protection through development. Similar concessions could be worked out for many state parks.