A bulging surplus. Elimination of the structural deficit that has plagued Arizona’s bottom line since The Great Recession. Creation of a $1 billion “rainy day” fund.
By almost every measure, our state government has a healthy bottom line heading into a new decade.
Is it time for a tax cut?
Gov. Doug Ducey thinks so. So does former House Speaker, now state Sen. J.D. Mesnard. Both Republicans have announced aggressive plans to cut tax collections. Gov. Ducey presented his ideas to slash personal income taxes in his sixth “State of the State” address on Monday. Mesnard, who is expected to face a significant challenge to re-election later this year, has been grabbing headlines with a proposal to reduce taxes on businesses.
We get it. Nobody likes paying taxes and calling for cuts is especially popular in an election year that is crucial for Arizona Republicans.
Whether the strategy is responsible is a separate argument. Without a doubt, state government is financially sound. Arizona tax revenues exceeded budget projections by about $750 million in 2019 and under Gov. Ducey’s stewardship the state is prepared for future economic downturns. The only box not checked on the state’s financial statement is putting an end to the annual accounting “trick” that pushes education funds from one fiscal year into the following year. That practice began when the state faced financial ruin in 2009 and represents more than $900 million in revenue shared with Arizona schools. To be truthful on the balance sheet and fair to schools, that money should be paid out in the same year it is budgeted.
To politicians and populists, now is the perfect time to cut taxes. The state’s strong financial position means less money is needed to provide the same level of government services. The strategy usually pays off at the ballot box, as well.
What happens the next time Arizona needs a spark to ignite its economy? What about dusting off the long-promised campaign pledges to repair rural roads in Arizona? How about helping rural communities afford better broadband services?
Only 25 percent of the current state surplus is considered “recurring” revenue, meaning money that Arizona can count on collecting again in the future. That leaves about $562 million to spend on “one-time” projects, like major road repairs that rural communities have put off for years.
We’ll be watching closely to see what our lawmakers decide during the current session.
This originally appeared in the Sierra Vista Herald.