Where’s the Money?
With all this talk of (desperately needed) teacher pay raises that will cost the state $700 million a year, and budget season inching ever closer on the horizon, we have to ask the obvious question: where is the money?
The brutal truth: Our state has no money.
Why? Decades of tax cuts and eight years of former Gov. Ducey’s failed policies have pushed our state to financial starvation. Per capita, Arizona has less than half of Florida’s budget and less than one-third of Tennessee’s.
The Ducey Flat Tax is Bankrupting Arizona
This week the Finance Advisory Committee, an independent panel of economists, released its April report. The massive tax cuts former Gov. Ducey and our Republican-led legislature passed in 2021 are beginning to phase in, meaning our state is both collecting less income tax revenue and giving more revenue away. By 2024, revenue will match expenses. By 2025, our multi-billion dollar surplus will be completely exhausted.
As Save Our Schools Arizona warned when the flat tax was being debated, “This dangerous and permanent tax cut will impact our state for many years to come” — making it all but impossible to fund our state’s many priorities, including public education. And now, here we are. Income tax refunds are off the charts, up 54% from last year and almost triple the forecast. And this is just the beginning: As the legislature’s nonpartisan budget analysts alerted lawmakers in January, “With tax cuts, net growth is negative.
Reckless Spending Abounds
To make matters worse, our lawmakers are spending extravagantly on private school vouchers, compounding the coming crisis. According to a March report by the Arizona Department of Revenue, STO tax credit vouchers cost our state over $250 million a year in 2022. Add in universal ESA vouchers, which are spiraling out of control at $300 million more than expected per year (and growing!), a legislature that’s putting voucher dogma above fiscal responsibility and the needs of our students, and the expected recession to come — and we’ve got a recipe for disaster for our schools and our state. At the current rate, the total cost of STO and ESA vouchers will reach $950 million per year by next year. This is money that Arizona simply does not have. Horrifyingly, Republicans are even talking about dipping into the state’s rainy day fund — meant to keep the lights on in an emergency — to pay for their irresponsible and ideologically driven projects.
Rather than tackling this issue head-on and looking for additional sources of revenue, Republican lawmakers are sticking their heads in the sand with even more ruinous revenue cuts like SCR1035, which would mandate permanent and ongoing yearly cuts of $250 million and up.
As we cautioned in a late March op-ed: “Tax cuts subtracting from the general fund keep a competitively funded public education system forever out of reach.” It has become abundantly clear that undoing the damage former Gov. Ducey has inflicted on our state will take years, even decades of work, from a new majority — and from lawmakers who can muster enough boldness to tackle this crisis head-on.
Arizona Is Headed Towards a Massive Fiscal Cliff
It’s hard to overstate the catastrophe Arizona will face if we don’t alter course. The state’s general fund covers all of Arizona’s responsibilities: not just public education, but also public safety, roads, public health, economic security, child safety, and more. Our leaders refuse to learn from history, repeating failed experiments from Kansas, Colorado, and elsewhere to create a state that will wither under the oppressive weight of its own failures.
It doesn’t have to be like this. As Rep. Athena Salman pointed out when asked how Arizona can afford teacher salaries: “If we repeal the universal expansion of school vouchers and repeal inequitable funding programs such as results-based funding, then we can afford enough ongoing revenue to implement [raises].” Our lawmakers must correct course immediately, lest our state be forever mired at the bottom without the revenue necessary to fund the most basic services. Our future depends on it.
