1. Nevada Taxpayers Association Annual Meeting Nevada Taxpayers Association Annual Meeting Kevin McCarthy ATRA

2. Source: The Brookings Institution- Governmental Research Association Annual Conference.

3. Arizona Conditions ► The impact of the recession on Arizona public finances has eclipsed that of most states. ► Actual On-going General Fund Revenues (In Millions) :  FY 2007: $9,850  FY 2008: $8,765  FY 2009: $6,967  FY 2010: $6,410 Difference FY 2007-FY 2010 = ($3,410) or 35%

4. ($1,345) ($429) Adopted June ‘06 Adopted June ‘07 Adopted June ‘08 Beg. Balance (in millions) 1.047 529 1 (478) (478) (478) Arizona Tax Research Association FY ’07 Actual Revenues $9,850 ($313 million over budgeted revenues) FY ’08 Actual Revenues $8,765 - $1,321 less than Budgeted Revenues $77 million (budgeted surplus) ($2,789) Adopted Sept. ‘09 *FY 2008 on-going spending of $10,515 includes $370 million in SFB cash financing, as well as $250 million in K-12 school aid not included in the FY 2010 on-going spending of $9,881. Updated Oct. 22, ‘09 ($3,481)($3,181) Updated Nov. 23, ‘09

5. Budget Solutions to Date? ► Gimmickry abounds:  Debt financings (sold the Capitol to ourselves)  “Rollovers” – shift school state aid payments into future years  Raiding non-general fund revenues ► Some budget cuts to state agencies. Education and health care largely spared ► Statewide property tax increase this year ► Temporary 1-cent sales tax increase on the ballot in May

6. Major Impediments to Deficit Reduction ► Voter-approved spending partially limits policymakers options ► Supermajority required for a general fund tax increase ► Federal stimulus money comes with strings attached - “maintenance of effort”

7. Major Impediment - Politics ► Political courage necessary to directly solve the problem ► Most policymakers opt to blame someone else for the crisis  Democrats spent too much money  Republicans cut too many taxes ► 2010 General Election – many players seeking to gain advantage from the crisis

8. Are there any solutions? ► In Arizona, state and local government budgets are dominated by the salaries and benefits of public employees. The deficit can’t be solved while insolating those employees from the recession. ► “Current Services” budgeting guarantees deficits when the economy slows. The deficit can’t be closed w/o reversing the formulas and budget assumptions that drive spending. ► Nothing meritorious about debt financing spending that lawmakers are unwilling to cut. Cut Spending or Raise Taxes