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At the beginning of the decade, Arizona, like many states, faced a series of fiscal shortfalls. Starting in 2001, Arizona ran deficits for three consecutive years, with the largest being a $1.2 billion shortfall in fiscal year 2003. Often blamed on a tax system that provides insufficient revenue, an inspection of Arizona’s budgetary history indicates the stateÃ‚’s persistent budgetary shortfalls are actually due to high rates of expenditure growth.
Indeed, for the past twenty years per capita expenditure growth in Arizona has consistently exceeded the inflation rate. The situation was particularly bad during the 1980s as real per capita expenditures increased by 43 percent. Expenditure growth slowed down during the 1990s, but real per capita state expenditures still increased by over 22 percent between 1991 and 2000, with general fund spending doubling over the course of the decade.
How can this spending growth be controlled? In the past 25 years, Arizona voters have passed a number of fiscal limitations, including a tax and expenditure limitation (TEL), a property tax limit, and a supermajority requirement for tax increases. However, none of these measures has been able to limit spending. One possible solution might be enacting a more stringent TEL modeled after Colorado’s Taxpayer Bill of Rights (TABOR). Enacted in 1992, TABOR has demonstrated considerable success at both limiting spending and providing tax relief for Colorado residents.
A look at Arizona’s recent fiscal history explains why its fiscal limitations have been unable to restrain government growth, in contrast to TELs such as Colorado’s TABOR, which has enjoyed much success. A similar TEL in Arizona
could provide tax relief and prevent future fiscal crises.