Does Arizona need a budget? Should Arizona have a budget?

Last Saturday a few University of Arizona-affiliated 'bloggers--Laura Donovan, Evan Lisull, Vishal Ganeshan, and myself--got together at a local bar to say "hello" and get updatd on an upcoming project. All three are far more capable writers than I am--working with optical tweezers and Markov chain models all day doesn't provide much practice--and are also interesting enough to be worth following, so add them to your RSS aggregator or 'blog feed. (I'd say that a broader get-together should happen, but some partisan or ideological 'bloggers haven't yet learned that the 'blogosphere is improved when it becomes a conversation--e.g. when Wilkinson and Yglesias read each other and the ideas are allowed to develop--and if you don't even link, can you socialize?)

That, eight weeks past its deadline, the legislature has yet to produce a meaningful, workable budget compromise with the Governor, came up briefly in discussion and my memory was instantly loosened up a bit as though sprayed with PB Blaster: former Congressional Joint Economic Committee senior economist (among other things) Joe Cobb, now hiding from the fuzz in Arizona, had said at one point that governments do not need budgets and that until around 1900, normally did not have budgets. I couldn't, however, remember the particulars or the arguments for it, although as Lisull noted, having to re-approve spending items each year could possibly lead to more sunsetting of (on net) worthless programs.

After leaving I gave Joe a call, trying to get him to write a guest post on the subject. No such luck. (The invitation to guest post on AZ policy still stands, and readers are welcome to send him bribes on my behalf. "Did anyone order a pizza?") But I was able to get a few minutes of his time, an explanation, and referral to an explanatory draft article on his website.

To quote:

Governments pass laws to spend money. Households and businesses don’t. Those laws make it much more difficult to change if they get things wrong.

Whereas households and businesses can predict wages and sales, governments have a difficult time predicting tax revenues when inflation and tax brackets have a large effect on actual revenues collected the following year.

The idea: have government Appropriations Committees fund projects based on tax revenue received, not tax revenue predicted. In Cobb's words, "This is...actually how households and private businesses control spending." The current system is biased heavily in favor of borrowing and increasing taxes when an economic downturn causes revenues to fall, and towards ballooning a budget unsustainably during short term "boom times" such as the construction-based expansion Arizona saw in the decade leading up to 2008. Going to the sort of "reality-based budgeting" where government spends money in hand restores the symmetry between spending cuts and tax increases.

Elimination of forward-looking budgeting would help Arizona to avoid, when the next downturn comes, the sort of scrambling legislative breakdown we're seeing now. It may also force a bit more rationality out of the voters, as rent-seeking will become (even more) transparent, and politicians would have to get more honest about their vote-buying spending programs. "You want the schools and prisons funded first, right? If you also want the UA Presents subsidy of highbrow entertainment, we will have to raise your taxes.

The main trouble in going back to the pre-budgeting way of doing things is the changeover. The old system worked, and in good years the new system works, but to go from the new system to the old system requires money in hand and for payment takers--both private and governmental--to get used to a bit of uncertainty and for institutional culture to change accordingly. Also, given that a switch will make it much harder for government to do everything we think would be nice, we can expect the Left to very strongly oppose such a switch when it does not appear necessary. At the risk of having a fictional villain named after me in the next Naomi Klein novel, I'll say that the current crisis provides the natural time to switch.

I hesitate in writing "crisis." Commenter Thane Eichenauer was right: government failure isn't going to happen. The legislature is already, out of necessity, switching to Cobb's prioritized, "reality-based budgeting" and for example those million kids I mentioned in a previous post aren't finding themselves locked out of grade school. It'd be nice for the change to become permanent. What it will take is for someone or several someones to get this idea to legislators and opinionmakers--for newspaper opinions and think-tank whitepapers promoting such a switch to start to appear.

Arizona Supreme Court: Legislators are no longer mere "alleged" pendejos.

They're convicted pendejos--and you won't find that one in your law dictionary.

From the Arizona Republic:

...The Arizona Supreme Court ordered Thursday that the Legislature immediately relinquish to the governor all bills that have received final passage, but did not specify exactly how quickly the transmittal must occur.

The ruling would appear to bar future Legislatures from refusing to send the governor bills that have passed the House and Senate, as happened this year.

In an expanded, 22-page majority opinion written by Justice Scott Bales, the high court found that lawmakers violated the state Constitution during the last regular session when they approved a budget proposal for fiscal 2010 but declined to send it to Gov. Jan Brewer for nearly a month....

The ruling stems from a state spending plan that the House and Senate granted final approval on June 4.Weeks later and with the budget still not in Brewer's possession, she filed a special-action lawsuit against legislative leaders and asked the Supreme Court to force them to send her the budget.

The governor contended that legislators were attempting to press their political advantage by hanging onto the bills until the fiscal year concluded at the end of the month - forcing Brewer to sign a budget she didn't like or risk shutting down state government.

It was a claim that legislative attorneys didn't dispute. But they argued in a June court hearing that lawmakers have discretion in determining when to send passed bills to the governor, provided that the Legislature remains in session...

The lengths to which the Republicans in the Legislature have gone to discredit a Republican governor that they should be thankful to have--Napolitano's departure was a stroke of luck--are shameful. I'd recommend knocking some of these out in primary challenges, but they're more popular in the Republican Party than Brewer is, which may reflect just what is wrong with the Republican Party these days--it's turning into a group of chirping sectaries. And if they think that immigration hawks or strict social conservatives (think Len Munsil) will somehow win over independents from a strong Democratic challenger, they're even more disconnected from reality than I thought.

The full text of the ruling is now available on the Court's website. Even if you're not interested in the legal particulars, read the first few pages--especially if you're a Republican--then think again about who needs to be thrown out of office in 2010.

What isn't going to happen?

Regular commenter Thane Eichenauer asks below:

I am curious as to what _isn't_ going to happen if the legislature refuses to pass the Brewer 18% sales tax hike.

From what I've read so far all the department budgets except for government education were signed. Government education might stop but if the rest of the Arizona state government rolls along like usual there will be nothing to notice.

Aside from framing problems, he has it correct. However, if this webpage's numbers are current, there are well over a million students in Arizona's public grade schools, middle schools, and high schools. That's hardly "nothing to notice".

Eichenauer, by the way, 'blogs at This, that, and the other thing, with a rather interesting choice of URL. It took me a while to figure that out. He'll be added to the 'blogroll soon. The 'blogosphere is at its best when it is conversational. We can thank, among others, Glenn Reynolds, Matt Yglesias, and Megan McArdle for greatly improving 'blogs of nationwide focus. Arizona's 'blogosphere lags behind. It's clear that people are reading each other, but posts about and trackbacks from others' content are in order. This is one more on the "radar screen". Look forward to a unilateral increase in cross-talk in the weeks to come.

Governor Brewer's line-item vetoes and statements on the Arizona budget

The governor's office issued eight (!) releases today, seven of which pertain to the state budget:

• Governor Brewer's Statement on Budget, Call for Special Session
  
• Governor Brewer's Call for Special Session
  
• House Bill 2643
  
• Senate Bill 1188
  
• Senate Bill 1188 - Part A
  
• Senate Bill 1188 - Part B
  
• Vetoed Bills - For Special Session
  

One would think that in 2009 and in the era of LaTeX, PostScript, and word processors the governor's staff could do better than crooked scans of paper documents.

But back on topic: When Brewer took office there was quite a bit of worry that she'd be a weak governor who would rubber-stamp everything that came from the sometimes wacky legislature. If it wasn't already clear, it should be clear today that this is not the case. This morning, she called their bluff, quite effectively. There'll be no state shutdown, and they will have to more meaningfully compromise.

That having been said, some of (vetoed) the lump sum reductions of allocations to the universities were probably in order. Tuition fees are still too low, and the universities are still lobbying against the rights of their employees and spending taxpayer money on molycoddling--with a special office apiece!--organized ethnic groups. On the other hand, Brewer's statements say that these vetoes come because the legislature went beyond the compromise levels agreed to by her office, so perhaps the reductions were indeed not in order.

Also vetoed are cuts to K-12 education. Like the rest of the country, Arizona could benefit from real education reform--universal parent choice and gradual withdrawal of government from the education services "market". "Starving the beast", so to speak, isn't a means to effect that, but it can certainly deprive students who are already short-changed by being in public schools to begin with. That isn't to say that there isn't room for savings. There is, but the chances the public schools will achieve these savings in a manner that leaves kids still in the public schools at worst no worse off are slim. The incentives aren't there.

SB 1188 is 131 pages long, far too long for me to give it a thorough reading. The amount of Federal money the legislature on pp. 127-129 is counting on to balance the budget amounts to nearly a hundred dollars per Arizonan. If you spot anything interesting, bring it up on the comment thread or e-mail me backchannell.