The legislative mistakes that put Arizona in budget crisis

A sign reading 'Arizona, The Grand Canyon State Welcomes You' along the state's New Mexico border on Interstate 10

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Kai Ryssdal: Even though most of the attention's focused on Wisconsin and the political fight there over collective bargaining rights and budget deficits, it's not like most other states don't have big financial problems themselves. We're long past the point of asking how all the red ink came to be. Mostly because we all think we know the answer: The housing bust and the recession. And that's true. As far as it goes, state government gets part of the blame too.

From KJZZ in Phoenix, Peter O'Dowd reports.


Peter O'Dowd: For 30 years, Alan McGuire counseled state lawmakers and governors on economic policy. Today, he stands atop the windy peak of South Mountain, 2,300 feet above the desert floor. From here, Phoenix spreads out in all directions.

Alan McGuire: I would say from here, we can probably see 50,000 rooftops.

It's Arizona epitomized. Half a decade ago, Phoenix had boomed into one of the fastest growing cities in the country. And tax revenue from all these new homes and service jobs put Arizona's budget more than a billion dollars into the black. McGuire says thinking at the state capital went like this:

McGuire: We could build houses forever and ever and ever.

So the state started spending like rich states often do. Spending on jails and health care. Spending on social services like a now-defunct program called all-day Kindergarten. It had an annual price tag of more than $200 million. McGuire says the problem was these tax riches were temporary, but penciled into the budget as permanent revenue.

McGuire: And so then, a few years later, when the housing bubble burst, and the housing construction stopped, those one-time revenues stopped but the long-term ongoing obligations remained.

Jon Shure: It's a good example of how to get into trouble, unfortunately, Arizona is not alone; a lot of states did that.

Jon Shure is with the Center on Budget and Policy Priorities in Washington D.C. He says the recession is the biggest culprit for state budget problems across the country, but legislators do shoulder some of the blame.

Shure: State policymakers sometimes forget to realize that the economy goes up and down. When you're at the bottom of a deep hole, you need a ladder to climb out.

Economists say Arizona's ladder is missing a few rungs.

Dana Naimark stands outside the gates of Xavier College Preparatory on a recent afternoon.

Dana Naimark: This setting represents one of the choices we made over the years that has dug our hole deeper.

Naimark was once a legislative budget analyst. She says in 2009, Arizona dished out about $50 million in tax credits to people who donated to tuition scholarship funds for private schools like this one. It's just one tax break on top of many others.

Naimark: Individual income tax, corporate income tax, business property taxes, tax credits: for solar energy.

A study out this shows that Arizona implemented tax cuts every year between 1993 and 2002, and started again in 2005. It's cost the state almost $3 billion.

Naimark: It's not that all the tax cuts are wrong, or bad ideas. Some of them are good ideas. The problem is, we do it repeatedly withoutthinking about the impact on the other side of the ledger.

And it's people like Hiba Tawfig who live on the other side of that ledger.

Jiba Tawfig: Where is Jano?

Today the single mother of two is helping care for a friend's sick child. Tawfig is a Sudanese refugee. She explains how difficult it's been to find childcare for her own daughters. Cuts have forced the state to drop about 20,000 children from a day care subsidy program -- a program she needed when the children's grandmother left the country.

Tawfig: I went to apply for childcare, they informed me the waiting list is two years.

With no help from her family or the state, Tawfig says she was forced to leave her 6- and 8-year-olds at home alone while she went to her job as a social worker. The worry was too much, so she quit and she now lives on $600 a month in child support from her ex-husband. She's had time to ponder the consequences of the state's budget crisis.

Tawfig: It's a big effect on people. And I believe they are not doing the right decisions.

Arizona lawmakers are weighing further cuts to social programs as they try to close a $700 million budget gap. The struggle is one of many difficult debates playing out in statehouses across the country.

In Phoenix, I'm Peter O'Dowd for Marketplace.

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