Napolitano should clean up her mess before she goes

From the Arizona Federation of Taxpayers

When I was little and my room was a mess, my mom would make me clean up before I could go outside and play with the other kids.

Right now, there is a lot of talk about Governor Janet Napolitano leaving Arizona to go play with the big kids in Washington, DC. She is on the short list to be Barack Obama’s vice presidential running mate, and many think she could become the next US Attorney General.

But before she leaves, Gov. Napolitano should clean up the mess that she—more than anyone else—has made of Arizona’s state budget.

Since taking office in 2003, Napolitano has prodded the Arizona Legislature to grow state budgets at an average rate of 12 percent annually, much faster than the rate of growth of the state’s private economy, which grows at 7 or 8 percent annually during economic boom times. State government spending now takes up 7.01 percent of the state’s economy—the biggest portion since 1980.

With spending growing so fast, and reaching unsustainable levels, it was inevitable that tax revenues would fall short and that a gigantic deficit would emerge. That gap is now up to $2.2 billion—proportionally, the biggest state deficit in the country.

Napolitano was the prime mover in creating the deficit, so she should have taken the lead in trying to fix it. But she failed to call the Legislature into special session last fall to correct this year’s budget, and she failed to use her executive power to reduce agency spending.

For next year’s deficit, Napolitano has proposed fund shifts and accounting gimmicks, but very little in the way of net spending reductions. The combined impact of her measures would be to temporarily reduce the deficit by roughly $1.2 billion—a billion dollars short of actually balancing the budget.

Napolitano has left open the possibility of increasing state property taxes by $250 million, but tax increases are politically unpopular (and bad for a struggling economy). So it appears that her real plan—if she has one—is to balance the budget by increasing state debt. At this point, it is likely that the liberal majority in the Arizona Legislature will support her in resorting to debt.
Of course, taking on debt will not be the end of the story. If Napolitano moves to DC in 2009, she will be gone when the state begins paying $200 million annually in interest on that debt. Between the interest payments and voter-approved automatic spending increases, the budget deficit for the following year (FY 2010) will probably still be over a billion dollars.

To avoid ongoing deficits in 2010, 2011, and 2012, Arizona would have to see spectacular economic growth, with annual growth in tax revenues of about 15 percent. If that kind of growth does not materialize—and it probably won’t—Napolitano’s replacement will be forced to choose between deep spending cuts and huge tax increases.

Instead of leaving a gigantic fiscal mess for someone else to clean up, Napolitano should work with legislative leaders to make significant spending reductions now.

The Legislature’s appropriations chairmen, Sen. Bob Burns and Rep. Russell Pearce, have found $1.5 billion in spending reductions that would allow the state to balance next year’s budget without taking on debt or raising taxes. Napolitano should be able to support those reductions, which would shave the overall state budget down to the size it was two years ago, in FY 2007.
And if she is still in Arizona this fall, Napolitano should be ready to call the Legislature into special session to make further spending reductions, if revenues fail to meet current expectations.

For better or worse, Napolitano does not have a political “mom” who will make her stay in Arizona until she cleans up her mess. But she is a big girl now, so maybe she can learn how to clean up after herself.

--Tom Jenney is the Arizona director of Americans for Prosperity (www.aztaxpayers.org).