Friday, June 19, 2009

Goldwater Institute: Stop the Special District Shell Game

In 2005, Maricopa County spun-off its hospital system to a newly-created special health care district. With the stroke of an accountant's pen, the county shifted what was then $400 million in annual spending off its books and onto those of the new special district. Maricopa County quickly took advantage of that new-found money with hundreds of millions in fresh spending. Meanwhile, the County's newborn special district toddled along, levying more than $40 million in new property taxes and spending more than $400 million in its first fiscal year.

shell gameSince then, Maricopa County and this district have saddled county taxpayers with more than $150 million in new spending and taxes that would have otherwise been blocked by the state constitution's spending and property tax caps. It is doubtful that voters had any idea this would result when they approved the creation of the "Maricopa County Special Health Care District".

Special districts are the municipal equivalent of Enron partnerships. They have benign sounding names like "health care district," "water district," and "stadium district," all of which disarm voters when they appear on the ballot. But once formed, numerous special districts can overlap, making them exceedingly difficult for ordinary citizens to track, much less to hold politically accountable. Special districts operate below the political radar, while wielding broad taxing and spending authority.

It is no accident that the number of special districts in Arizona has tripled from around 100 in 1980 to more than 300 today. When tax and spending caps were imposed in the early 1980s, those caps excluded most special districts. As a result, cities and counties remained free to avoid hard budgetary choices by spinning-off expensive programs into special districts.

Fiscal responsibility will return to local government only when this shell game is stopped. The best solution is to eliminate the incentive to indulge unsustainable spending through the device of special districts. This requires closing the special district loophole in the state constitution's spending and taxing caps.
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.

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