Arizona’s population growth played a role in how the state fared in a national review of how state governments manage themselves, says Governor Napolitano.

Arizona earned a “B” from the Government Performance Project, which publishes its findings annually and bases state performance on four categories: money, people, infrastructure and information. The study is a project of the University of Richmond and funded by The Pew Charitable Trusts.

It said Arizona’s fiscal forecasting is erratic.

“I don’t know what they mean by that,” Ms. Napolitano told reporters Feb. 2. “I don’t know that forecasting has been erratic so much as the American economy has been erratic” since Sept. 11, 2001.

The report said that the state passes its budget on time, excels in completing financial reports on time, makes strong use of cost analyses for agency performance and funds its retirement system. But, it said, “Contingency funds are generally lacking.”

“When I took over as governor, the rainy day fund was depleted,” Ms. Napolitano said. “We now have put some money back in the rainy day fund. But we’re a growing state, and when you are growing at the rate we are, you need to be investing… If you’re socking all your cash away in a contingency fund, it doesn’t let you facilitate the growth that you’re having.”

State Worker Turnover Rate

The report also cited the high turnover rate among state employees.

The governor said, “That’s driven a lot by salary issues.” She also reacted to a portion of the report that stated she had “set ambitious goals for squeezing efficiency savings out of state government, but that savings achieved so far have fallen short of those goals.

In January 2003, Ms. Napolitano announced the establishment of The Governor’s Efficiency Review initiative, or “ER,” which at the end of that year reported agency savings of more than $37 million and a five-year savings goal of more than $843 million.

Ms. Napolitano said the program fell short of its first-year goal, but the report failed to recognize that ER is a five-year program.

“Even without huge efficiency savings,” the report said, “Arizona’s fiscal picture is improving faster than many predicted. Rebounding tourism dollars and healthy population increases have helped a great deal.”

But, the report and the governor said the state is facing cost increases in education and health care, even beyond what most states are experiencing.

“It’s because we’re growing faster than all but one state,” Ms. Napolitano said.

Report Says State Has No Capital Plan

The report was critical of Arizona for what it called a lack of a statewide capital plan and data on agency-by-agency performance.

No state received an “F” rating. Utah and Virginia scored highest overall, each with an A-minus, and Alabama and California scored lowest, with a “C-minus.”

Virginia’s financial management, Georgia’s treatment of employees and Utah’s work to maintain its roads, bridges and government buildings were singled out in the report as praiseworthy.

The report said economic downturns over the past few years left states with ailing tax systems and neglected infrastructure.

“Several widespread problems emerged, especially structural deficits that left many states struggling to bring in enough taxes to provide the revenue that run government,” the report stated. “The problem has been widely acknowledged by state leaders who have complained that their tax systems are geared to a 1950s manufacturing economy, not a 21st century service and technology-centered one.”

The report concluded that the healthy economy of the 1990s masked problems, and spending increases and tax cuts in those years left states less able to overcome the downturn when it came.

The silver lining was that “fiscal crisis drove many states to become more innovative and more efficient,” the report stated. —

The Associated Press contributed to this report.