After fighting for years, small-government advocates thought they had a victory as the Legislature passed HB2707, the so-called Taxpayer Bill of Rights measure that would place strict limits on how quickly government spending could increase.
But their celebration was short-lived, as Gov. Jan Brewer vetoed the bill on April 28, despite the fact that it found broad GOP support in both the House of Representatives and the Senate.
Though there is an agreement that a limit should be set, not everyone was on the same page on how to do that. Fiscal hawks want to limit government spending to the growth of inflation plus population growth, which is what HB2707 proposed, while the governor would prefer to use a rolling average of past budgets.
In 1992, Colorado became the first state to put the population-growth-plus-inflation limit on spending. Since then, the system, known as TABOR, has been a goal of Arizona fiscal conservatives.
Since the governor ultimately has the final say, sponsors of the bill and other groups who were pushing for it hope to come to some sort of a compromise. But that compromise, they say, may not amount to much, especially if it’s based on the past budgets method of limiting spending.
“We would simply be saying, ‘Henceforth, we will be spending, on average, what we have been spending on average,’” said Tom Jenney, director of the Arizona chapter of Americans for Prosperity. “It doesn’t look like much of a spending limit.”
The problem with the rolling average, he said, is that it sets the baseline at what state government is already spending, a level small-government advocates already think is too high. The population-plus-inflation formula, on the other hand, limits the growth of government to how quickly the state is actually growing, he said.
The bill’s sponsor, Rep. Debbie Lesko, R-Glendale, is frustrated with the process, but said she thinks all parties can come to a compromise.
“The thing that disappointed me the most is that I had worked with the Governor’s Office for six months,” she said, “and at very close to the last minute, the governor’s folks came up with a brand new idea for a spending limit, and there was no way, at the last minute, that we were going to be able to pass that version in the House and Senate.”
Lesko said that, after speaking with Sen. Andy Biggs, R-Gilbert, one of the bill’s co-sponsors, they decided to run the bill that they already had and hoped the governor would change her mind and sign it.
Instead, they got the veto message.
“I’m disappointed, but I’m not very surprised,” Lesko said of the veto.
But Matthew Benson, Brewer’s spokesman, said that the governor had outlined her plans for a spending limit back in January when she released her budget proposal.
The executive budget summary for the fiscal 2012 budget called for a spending limit based on a rolling average of revenue growth during the past 10 years. The governor’s goal, Benson said, was to keep brief spikes in economic activity, and therefore state revenue collections, from artificially inflating the budget. A rolling average, he said, would accomplish that goal.
Lesko said she was hopeful the governor would support the stricter formula that was in her bill, but Brewer thinks it is too rigid.
“I support a state spending limitation wholeheartedly,” Brewer said. “I just believe that TABOR is unrealistic.”
For many conservatives, TABOR is the Holy Grail, since it strictly limits the size of government. But calculating the success of the measure beyond that goal gets tricky.
Daphne Greenwood, an economist and the director of the Colorado Center for Policy Studies at the University of Colorado at Colorado Springs, agrees with Brewer’s assessment of TABOR. The population-growth-plus-inflation method isn’t flexible enough to allow for things like an increased number of participants in entitlement programs, or an increased number of students enrolling in public schools.
Changes have been made to Colorado’s version of TABOR, which dictates the use of the population growth plus inflation method, but they haven’t come easy. In 2000, voters passed Amendment 23, which would required that funding for
K-12 education increase by at least the rate of inflation plus 1 percent for 10 years, and at the rate of inflation from then on. But the amendment also meant that deep cuts had to be made in other places in order to preserve the education spending mandate, Greenwood said.
It’s not necessarily the concept of a revenue limit that’s flawed. In addition to the difficulties posed by the population growth plus inflation method, Greenwood said, Colorado’s TABOR was approved by voters as a constitutional amendment, which makes it much more difficult to change.
HB2707 was different from Colorado’s TABOR in that would have been a law rather than a constitutional amendment, and therefore could be changed by a simple majority vote of the Legislature — a deliberate change that Lesko said was meant to give the law more flexibility.
Greenwood agrees that such a change would be an improvement.
“If it’s a law rather than a constitutional amendment, you don’t have to launch a huge PR and marketing campaign to get everyone in the state to become an expert on TABOR and what the new amendment would do,” she said.
But Lesko’s bill would have set the budget baseline based on the past two fiscal years’ budgets, opening the possibility that in Arizona, as in Colorado, an economic recession like the current one could lock the state into a low-revenue collecting and spending limit, also known as a ratchet-down.
“I think that was the most dramatic part that people saw,” Greenwood said. “When you had a ratchet-down, even when you had a recovery, you couldn’t go back up.”
Benson said the ratchet-down provision in HB2707 was one of the issues that concerned Brewer. In her veto message, Brewer cited Colorado’s TABOR.
“We should learn from the state of Colorado that experimented with a similar measure, an experiment that failed,” she wrote.
TABOR advocates like Americans for Prosperity and the Free Enterprise Club are disappointed by the bill’s veto, but plan to keep pushing for the system, or at least something resembling it.
Steve Voeller, president of the Arizona Free Enterprise Club, said he would be open to some compromise when it came to the mechanism used to set the spending limit.
“I think that population plus inflation is the best way, but it’s not the only way,” he said. “We’re not going to draw a line and say it’s this way or no way.”
But Voeller acknowledges that HB2707 was already compromised: it would be statutory, rather than a constitutional amendment, which would mean that a simple majority of the Legislature could approve a spending increase — less than comforting for groups that are trying to limit the size and scope of government.
Voeller’s hope, he said, was that a law would at least require legislators to vote on the record to increase the spending limit.
“When they see that limit and want to spend more, and cast a vote to exceed it, that makes them think twice,” he said.
Jenney, meanwhile, is less optimistic. Though he said his group was happy with Lesko’s bill, he said that it was already pretty heavily watered-down. With the governor’s veto, he said he has his doubts as to whether the Legislature can get the Ninth Floor’s support on any spending limit.
“They are still going with a rolling average of past budgets,” he said. “That’s an indication to us that they are not serious about imposing real spending restraints.”
Lesko said that she intends to keep working on a new bill over the summer, communicating both with the Governor’s Office and with outside groups, to try and find some middle ground.
Though the veto was a blow to one of her significant legislative wins this session, she said she won’t be backing down.
“This issue has been raised for I don’t know how many years,” she said, “and it’s certainly going to continue to be an issue to be pursued.”