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AZ Week Notebook entry


Gov. Jan Brewer's proposals to balance this fiscal year's budget and set a budget for next fiscal year include a series of onerous cuts to education and health care. Public safety, in the form of money for state prisons, would increase under Brewer's proposal.

The Legislature will begin vetting it this week, and on Arizona Week, we will talk with key legislators getting involved in the process.

Republicans are blaming Democratic former Gov. Janet Napolitano for huge increases in state spending in her six years in office, 2003-2008, or the mess Arizona is in. Certainly, spending rose sharply in those years, with three consecutive years of 15-percent plus increases in 2005, 2006 and 2007.

All this occurred on the cusp of the great recession, making the effects even more pronounced as the state went into an unprecedented cyclical revenue reduction that saw 30 percent of state revenues go away.

But before that, the stage was set by Republicans in a series of tax cuts over 15 years -- back to 1995, that effectively cut state revenues as a share of personal income nearly in half.

Economist Matthew Murray of the University of Tennessee studied Arizona's situation at the behest of the Morrison Institute for Public Policy at Arizona State University. Murray found that in 1995, state tax revenue per $1,000 of personal income was about $50. In 2010, after steady declines and a series of major income tax cuts and one significant property tax cut, that fell to about $27 per $1,000 of personal income.

Another way to look at it is that residents were paying about 5 percent of their personal income to the state in taxes in 1995, and by 2010, they were paying about 2.7 percent.

In Murray's words, via e-mail: "Personal income measures the size of the economy, but since it is 'resident based' income, i.e. income earned by residents, it also reflects your ability to pay taxes and thus fund government services. In short, you are spending less and less of your income in support of government. This is a rather dramatic reduction especially in such a short period of time."

Combine that factor with the steady and sometimes dramatic increases in state spending, and we have the current situation -- a structural deficit in the order of $2 billion or more, with no rebounding economic cycle. And even if there were a rebound, it wouldn't help without long-term adjustments in both revenue and spending.

Hence, when it comes to finger pointing, everyone should get a share of the blame.

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About AZ Week Notebook

News and commentary from Arizona Week producer/host Michael Chihak and interns Melanie Huonker and Lucy Valencia.

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Economist Matthew Murray Governor Janet Napolitano University of Tennessee