Asked for a plan to balance Arizona's books, the state's public universities recently advocated constitutional brinkmanship. Their "Fiscal Alternatives Choices Team," or "FACT," report suggests delaying payment on obligations incurred in one fiscal year until the next fiscal year. It promotes disguised debt financing through selling state assets to investors and leasing them back to the state. And it urges the Legislature to raise taxes without the required supermajority approval by passing a law that combines a temporary tax increase with a future tax decrease.
But the FACT report disregards the facts. The Arizona Constitution prohibits the state from freely taxing and borrowing its way out of a fiscal crisis. A two-thirds majority of the legislature must approve any bill that imposes "any new tax" or "[a]n increase in a tax rate." This constitutional requirement cannot be bypassed by a bill that offers a tax reduction tomorrow for a tax increase today. Such a tactic could be employed endlessly, which would render the supermajority requirement meaningless.
Moreover, the Arizona Constitution's debt clause was meant to keep state government operating on a virtual pay-as-you-go cash basis. When the state government continuously finances its operations by delaying payment obligations into the next fiscal year or mortgaging state assets for cash injections, the debt clause becomes a dead letter.
No one should expect the judiciary to elevate form over substance mindlessly if called upon to review the sham sale-leaseback schemes, payment rollovers, or tax gimmickry advocated in the FACT report. Instead of yielding to ivory tower financial shenanigans, the Legislature should maintain its focus on reducing state spending to sustainable levels.
Nick Dranias holds the Goldwater Institute Clarence J. and Katherine P. Duncan chair for constitutional government and is the director of the Institute's Dorothy D. and Joseph A. Moller Center for Constitutional Government.