Our panelists tell three stories about someone ignoring all the warning signs while reaching for the stars, one of which is true.
AZ: In the Money?
Arizona is bringing in more money than expected. August revenues were around eight and a half percent higher than the same month last year. And, so far this fiscal year, the state has collected one and a half billion dollars more than it did last year. So…the obvious question is…what should the state do with that cash?
First of all, let’s get the terminology down. Yes, Arizona has brought in close to $80 million more than expected so far this fiscal year. But House Speaker Andy Tobin says, don’t use the “S” word.
(While it says surplus, you can’t have borrowed on your buildings and say now we have a surplus…we have a debt crisis here as well.)
Tobin says it’s too soon to tell what lawmakers and the governor will do with the extra cash. He says the state is still involved in several lawsuits resulting from past budget decisions…and points out that the voter-approved temporary sales tax will end in two years. But, he says, that doesn’t mean lawmakers aren’t willing to spend some of the money.
(We’re not opposed to looking at those things, and saying, ‘oh, ok, these are some good investments, that if we make them now, we’re actually gonna save money going forward…so, we’re actively trying to be efficient, and look and listen, to the experts in the field.)
(If you’re standing in a 10 foot hole, you feel pretty bad…but if you used to be standing in a 20 foot hole, you actually feel better…)
Alan Maguire is the president and principal economist of the Maguire Company….and has advised lawmakers on crafting state budgets in the past. He says they have to resist the feeding frenzy that’s likely at the state capitol.
(…but remember, you’re still in a 10 foot hole…and we’re in a 10 foot hole still…we’ve got a long way to go…and we shouldn’t spend our way back into a 20 foot hole.)
Maguire says the state has to wait and see what the new normal will be in terms of revenue….and advises not to spend what could be one-time money on ongoing expenses. He also thinks the state should pay back some of the dedicated funds it’s swept over the past few budget cycles.
(So, if you broke into your neighbor’s house, and stole their jewelry because you were broke last month, and now you got some money, well, what you ought to do is go back to the pawn shop, get that jewelry back, and put it back in your neighbor’s house, so that when you need to steal it again in a couple of months when you’re broke, you’ll have it there to use.)
Maguire also says the state should start paying off its debt. House Speaker Andy Tobin has appointed a sub-committee to come up with a plan on how to do that…and says majority Republicans are interested in starting to reduce Arizona’s debt load.
(We hate paying interest…we don’t want our taxpayers working really hard to give us money, so we can pay a bill that we incurred two years ago, so there is an emphasis to try to have at least a debt plan.)
But another veteran of state budgets says Arizona’s annual debt service isn’t high enough to warrant setting aside too much money for that cause just yet. George Cunningham does say, though, that paying off some of its debt could show national markets that the state is financially responsible. The former lawmaker, and deputy chief of staff for budget and finance under Governor Janet Napolitano says lawmakers shouldn’t make snap decisions with the unexpected dollars.
(The state needs to proceed somewhat cautiously at this point, and not rely upon 1 year of surplus, by which to make long term commitments or decisions.)
Cunningham says lawmakers should put some of the extra money towards long term planning….to help figure out what state programs will look like down the road. But both he and Alan Maguire say the state should also sock some of the money away…in preparation for the next rainy day.