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Governor’s budget plan could put state in precarious position

Like the rest of the nation, the people of Arizona are trying to come to terms with the fact that recent years of economic expansion are being challenged by a downturn in the housing and financial markets. How long that downturn will last and the impact it will have on Arizona households and various business sectors is the topic of current debate among economists.
We were glad to see Gov. Janet Napolitano acknowledge that current economic conditions are creating a projected budget shortfall of at least $600 million. We were also glad to see her put forward a proposal and begin a dialogue with the Legislature on how best to address this problem.
How the state responds to this shortfall is crucial. If our response to this budget shortfall creates a fiscally unsustainable budget, taxpayers will be in jeopardy. We want to be perfectly clear that, whatever we do, we cannot increase the burdens on taxpayers who are already struggling to keep up with their mortgage payments and other household expenses.
Being a good steward of the state's fiscal system means recognizing problems associated with overburdening the revenue producers as well as the needs of government. We will only worsen the economic situation by increasing taxes.
Recognizing the impact of skyrocketing property values and local government property tax increases, the Legislature enacted a $235 million property tax reduction that expires, by the governor’s insistence, in tax year 2009. The Democrats have opposed efforts to make that rate reduction permanent, meaning it will reappear on your property tax bills.
We are concerned that Governor Napolitano’s proposed response to the budget shortfall could put the state’s finances in a precarious and unsustainable position. Most worrisome is her continued advocacy for the state budget to become addicted to a series of long-term, interest-bearing, debt obligations to finance costs we will face each and every year for decades into the future. At some point, the debt service payments for that accumulated debt will exceed the annual amount of cash needed. This is like taking out multiple mortgages to pay for utilities.
The governor also proposes using the state’s “rainy day fund” — a one-time cash source — to keep ongoing programs afloat. She apparently is counting on some yet-to-be determined revenue increase to occur at some yet-to-be determined time in the future. This is like taking out a payday loan to cover spending based on the hope that your boss will suddenly decide to double your salary.
These responses to a financial problem do not, in our view, represent wise fiscal management. We suspect that most families and businesses understand the dangers of going into debt for ongoing spending demands. That is why we were glad to see the governor include, at least conceptually, recognition that some degree of belt-tightening should be part of the solution.
The current revenue situation requires decisive action to examine the state’s financial management and look for areas where we might be able to improve. Much of our budgeted expenditures are driven by statutory formulas that basically run on automatic.
Budget shortfalls provide a good opportunity to retain, eliminate, or modify government programs and the formulas that drive their funding.
The executive and legislative branches and the people of Arizona are all in this together. We have a better chance of responding appropriately if we work cooperatively, as we have in the past.
Thayer Verschoor is the Arizona Senate majority leader from District 22 in Gilbert. Bob Burns is the chairman of the Senate Appropriations Committee and represents District 7 in Peoria.

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