Friday, November 13, 2009

Why Arizona, California budget woes have similar causes

As I'm sure virtually everyone in Arizona has heard by now, a report out this week states flatly that Arizona is in the second worst financial shape after California.

In fact, I wonder if that's even true, for one thing California actually did overcome partisan differences and get a budget together while our Governor and legislature, led by the same party, were still bickering and not getting anything done. In fact they never did agree on a budget this year, with the Governor 'creating' a pseudo-budget by vetoing some of the legislative cuts and forcing a third special session which may or may not begin next week to address some of the unresolved budget issues.

However, for some clues to why things are so bad, it might be useful to compare the two states and see what is common between them that may have led to this situation.

Party control is not one of those factors. California, once the home of Nixon and Reagan Republicanism, has become a reliably Democratic state, and despite having a Republican Governor has had a Democratic legislature for a long time. Arizona on the other hand has had Republicans running the legislature since 1964 (when Barry Goldwater's coattails in his home state swept the GOP to power in a body they have controlled for decades since then.)

There are however three factors that all appear to have sprung from populist impulses.

The first is that Californians, who were anti-tax during the 1970's and 1980's passed the same kind of law as Arizona passed in 1992. It requires a 2/3 vote of both houses of the legislature plus a Governor's signature to raise taxes. This effectively prevents raising taxes even in an emergency like the present since it is virtually certain that you can muster 1/3 of one house or the other to always vote against a tax increase. Let's be honest here-- if the same provision applied to spending cuts, the state would be just as constricted since you could always find 1/3 of at least one house who would vote against any spending cut. What this does is effectively disables the legislature's ability to deal with problems as they emerge and in a disaster like we have now this restriction is crippling. And it is also true that preventing the legislature from raising taxes is in effect saying that you don't trust the voters to vote out any legislator who voted for an unpopular tax.

In Arizona the supermajority provision was complicated during the 1990's when the state cut taxes very deeply so that we now are faced with a situation where we already are one of the lowest tax states in the nation and still can't raise them back again.

The second is the citizen ballot initiative provision that has essentially pre-written large chunks of the state budget in both states. While I fully supported and voted for dedicated spending on programs like children's health care that I did not believe the legislature could be trusted to fund adequately (and I will oppose any effort to repeal this dedicated spending, at the ballot box or elsewhere because I know that Kirk Adams and Bob Burns would use the money to pay for tax cuts, not to reduce spending cuts) it is true that when there is a big budget deficit, the fact that certain budget items by law can't be touched forces the cuts to be deeper everywhere else. Sort of like building a wall around a town to keep out a flood. It may succeed but it will push more water downstream and flood the next town worse.

As one California observer noted, Californians are schizophrenic-- they don't want to pay taxes but they want the Government to provide a lot of stuff. So they have voted that combination, and the same is true of Arizonans. That's not a partisan observation, it's an observation of the way things are.

The third similarity is legislative term limits. Most people don't like professional legislators, but in Sacramento and Phoenix that problem has been solved by another populist measure that creates a whole new set of problems-- term limits. The biggest problem with this is that there are always at least 1/4 of the members with no experience, another 1/4 of the members who are on their way out and therefore have no reason to try and reflect what anyone in their district thinks (1/4 + 1/4 = 1/2) and the other half of the legislature in between these two extremes (i.e. with little experience and not really needing to satisfy their district beyond the next election or two.) Further, there is a lack of institutional memory. Programs that may have been begun at an earlier time (such as investments in biotechnology) may be discontinued, defunded or severely cut when a new group of legislators comes in with a different idea about where things should be headed and has no idea of what the original justification or purpose for the programs was.

Term limits may be nice in theory but in practice it means we force people to retire once they actually learn what is going on and how to get things done within the system.

These three populist ideals-- supermajority to raise taxes, budget-by-ballot-initiative and term limits, while appealing in some degree to people on both the left and the right, have essentially crippled the governments in both Arizona and California to the extent that neither may be able to deal with the tidal wave of red ink now rolling towards them at high speed.


Anonymous said...

Eli - I totally agree with your analysis of the situation, and I sincerely wish that you had national prominence so that the newswires would pick up this comment.

Thank you.


sandyh said...

It's called shooting yourself in the foot and being too stubborn or ashamed to go to the doctor to fix it.

Great post, Eli. It's time for those who are wrong to admit it and get busy fixing what they broke.