Those that have fought growth for growths sake  finally have something to celebrate. From Marshal Vest’s Census analysis. Bad economy, immigration bills and undercount are likely to blame for the dip in population.

Without successful diversification of industries beyond construction related growth it’s going to be a long and bumpy road in Arizona and especially Pima County.

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Unions ‘gaming’ the system – editorial from Arizona Republic.

Posted: Friday, February 11, 2011 2:00 pm | Updated: 12:25 pm, Thu Feb 10, 2011.

There are ways government bureaucracies can help businesses By Joe Higgins and Chris DeSimone, Inside Tucson Business Inside Tucson Business | 0 comments

If you work in a government bureaucracy then stop reading this and get back to work. Despite the economy and the major hurdles businesses have had to take to survive, government bureaucracies haven’t changed – except those that are putting up the most roadblocks have less work to do.

Like what they say about cockroaches, government bureaucracies can survive a nuclear bomb explosion.

But there are opportunties for some bold ideas to fix some basic problems in local governments.

City of Tucson

Tucson is a bureaucracy in full panic. Turnover at the top with a changing stream of city managers the past two decades has left the bureaucrats without a direction, except to survive.

The city still hasn’t come to grips with the drubbing it got at the polls in November when voters rejected a half-cent sales tax increase by a 2-to-1 margin. Supposedly, core services including police and fire protection were on the line if the tax wasn’t approved but within days of saying there were no other options, city officials magically figured out a way to survive without any layoffs at all.

In the meantime, Sun Tran still got its $35 million subsidy and Tucson Pima Arts Council got its $500,000.

And now as city officials prepare for another round of budget talks, we’re hearing more “gimme, gimme, gimme” with the same broken record of proposals: a renters tax, advertising tax and higher business fees ($5,000 to review a temporary revocable easement, really?).

Fortunately, 2011 is an election year in Tucson and this year three Democratic council members and a ribbon-cutter mayor are up for re-election.

Pima County

As bureaucracies go, Pima County is about equal in size to the City of Tucson but there’s a huge difference in how they’re run. Like him or not, County Administrator Chuck Huckelberry has created an organization that works.

We can argue over the county’s efforts to block the Rosemont Copper Mine and if you live in Marana you know your town is fighting with the county over water and wastewater issues. But you don’t hear about Pima County squandering $230 million and having nothing to show for it, as the city did with Rio Nuevo downtown redevelopment.

Instead, Pima County tells you right up front that it’s going to spend a couple hundred million dollars buying up land as open space or contract with University Physicians Healthcare to continue running Kino Hospital even if the deal isn’t necessarily a good one.

Quick, try to name a department head in Pima County government. It’s hard isn’t it? That’s because Huckelberry controls every aspect of the county’s operation.

This is an example of an entrenched bureaucratic system.

State of Arizona

With a super majority in both houses of the Legislature, this session the ball is in the Republicans’ court to balance a budget, shrink the size of government and set the playing field for business – both those that are already here and to attract new ones.

Unfortunately, lawmakers can be sidetracked. They need to let Anchor Babies go for now. Arizona had SB 1070. It’s done. There are other states wanting to go after the 14th Amendment so let them take the punch in the nose. Arizona doesn’t need anything more to hurt the economy.

But if they can get back to real issues, there are a variety of bills that are hitting their respective committees aimed at changing the business environment in Arizona.

Rep. Ted Vogt, R-Tucson, is rolling out a “loser pays” tort reform bill that will lower the cost of business for not only the medical profession, but the general business population. Lawyers don’t like it.

Sen. Frank Antenori, R-Tucson, has written a bill that will drastically reduce the mountain of red tape for business requiring all bureaucrat-created regulations to “sunset” by the end of next year. The bureaucrats have to come back to Antenori’s Government Reform committee to try to convince its members which ones need to stay. It has been reported that the bureaucrat former Gov. Janet Napolitano appointed to oversee environmental quality created more than 2,000 regulations in her tenure.

Another bill, prompted by Phoenix City Councilman Sal DiCiccio, proposes that municipalities be required to bid out all non-public safety functions to the private sector. The municipality itself could bid but the estimated economic impact for Arizona businesses is about $1.5 billion.

Contact Joe Higgins and Chris DeSimone at wakeuptucson@gmail.com. They host “Wake Up Tucson,” 6-8 a.m. weekdays on The Voice KVOI 1030-AM. Their blog is at  .www.TucsonChoices.com

Arizona has a once in a lifetime opportunity to change the way this state operates. The Republicans are firmly in control of the House and Senate with veto proof majorities. Gov. Brewer is in her last term and we’ve already run  the social conservative bills last session (guns, SB1070, fireworks).   Can the Arizona government get it right in this session?

Here are a  few game changing bills. They will certainly get stiff opposition from the League of Cities and Towns among other special interests.

SB1322 - This bill would require all cities over 500,000 population (Phoenix, Tucson, maybe Mesa) go out to bid for all City services except for police, fire and courts. The City can also bid on the service but they would have to justify what they are paying versus having the private sector perform the duties.  This is a bill coming out of Phoenix from Councilman Sal DiCiccio who’s been a strong advocate of bureaucratic reform.

SB1286 – This bill would expedite the permitting process by automatically approving permits if the municipality hadn’t acted within 60 days. My fear is there are too many loop holes to reject a permit or stall the process without going through a formal denial.

SB1339 – This bill throws out ALL Arizona agency regulations that have not been voted in by the legislature.  Various agencies from ADEQ to transportation to education to permitting and IT would throw out every agency generated rule and directive. They agency would then have 18 months to present the rules they would like to have codified by the legislature. This action would remove the thousands of agency rules that should have sunset years ago.  The farmer that gets the $5000 fine for excessive dust while plowing his fields would get to go back to what his family has done for a generation.

SB1345 -and SB1347 This bill limits the hiring and rate of pay for city government employees.  Private sector employees have total compensations, including pension and healthcare, that is considerably larger than their public sector counterparts.  The City of Phoenix is experiencing tremendous financial pressures as are most municipalities. Because of political and union pressure they have trimmed their work force last year…..they’ve cut their 15,000 employees by……5.   The City of Tucson threatened a cut of 400 jobs prior to the prop 400 sales tax vote but apparently the cuts weren’t needed when push came to shove, in fact a few people in City government actually got a raise.

HB2226 – Sets performance based pay for teachers based on the results of their students and school.

HB2501 -   If a city or agency implements a rule that is vague, disputable and up to interpretation then the rule is interpreted in favor of the applicant.

HB2409 – Loser pays in Civil litigation – tort reform. If a law suit is brought currently the defendant has all the risk of financial loss. Even if they win the court case the defense has substantial legal fees. This bill would make someone think first before bringing a law suit.

HB2333 – Representative Harper wants to get rid of the 1 year cool off period before an ex legislator can go back and lobby. This one takes some guts to run, I wonder if Harper is about to term out?

HB2503 – Reduces corporate income tax rates from 6.98% to 5%. The Senate has a phase out bill. See below.

HCR2006 - Raises the personal property exemption from $50k to “the average wage of 20 employees”. This is the tax that businesses pay for their office machines, copiers and any heavy equipment they use to conduct business. It’s a tax on the items you already paid a tax on when you first bought the item.

SB1171 - Includes a provision that transfers wastewater services to a City from a County. This is a direct response to the ongoing legal battle between Marana and Pima County over control of their wastewater.

SB1030 – Raises the bar for a medical malpractice claim to the highest level which is currently applied here in Arizona at emergency rooms. This change will be huge to the medical malpractice rates of all doctors in Arizona.

SB1031 - States any tax on residential rentals established before Jan. 1, 2011 can not be raised or implemented without voter approval.  This one will stop the City of Tucson from implementing a rental tax without a vote of the people.

SB1346 – Simplified and Flat Income Tax computation for individuals. No more than two deductions.

SB1333 – This bill deals with annexation and incorporation of new cities.  Here in Southern Arizona we are at a stalemate on annexation and incorporation of new cities. The property owners surrounding the City of Tucson aren’t too crazy about joining their government and at the same time there is a 6 mile radius provision that prohibits new cities forming unless the surrounding municipalities give the OK. What’s happened in Tucson over the last 20 years is a couple attempts (Casas Adobes and Tortillita) but muscle from the City of Tucson has halted any new efforts. Pima County has 36% of it’s population unincorporated while Maricopa has 6%.  The loss in state shared revenue is substantial.  If this goes watch the incorporation and annexation activities in Southern Arizona heat up.

SB1286 - Check out how complicated the Motion Picture incentive bill is. No wonder New Mexico poached our film industry.

SB1121 – Corporate tax rate phase out. Lot’s of heavy hitting Senators are sponsoring this one.  It phases the corporate tax rate to zero by 2013. Let’s see if the Gov has the courage to sign this one.

Phil Gordon meets with Mexico’s President Felipe Calderón

Phoenix Mayor Phil Gordon met with Mexican President Felipe Calderón and Mexican Secretary of Foreign Affairs Ambassador Patricia Espinosa on Friday afternoon.

The officials discussed projects Phoenix and Mexico could collaborate on related to public safety and economic development.

The meeting with Calderon lasted about 45 minutes at Los Pinos, the president’s official residence and office.

Calling from Mexico, Gordon said he and Claderón discussed public safety and economic development. Officials talked about the possibility of partnering the Phoenix Police Department with Mexican law enforcement officials and the U.S. government to jointly go after drug and human smugglers. The collaboration could also stem the tide of illegal weapons smuggled into Mexico from the United States, Gordon said.

“It’s quite an honor for a mayor to meet personally with the president of Mexico,” Gordon said.

The mayor has been in Mexico since Wednesday on a trade mission with city and state officials. Mexico is Arizona’s No. 1 trading partner and the state’s biggest international visitors market.

Gordon said he and Calderón also discussed how to expand trade and tourism for both countries, and the potential for creating joint public works projects along the border to create jobs. Projects could focus on water reclamation or renewable energy, which would open up jobs for engineers, architects, lawyers and various other professions for Americans and Mexicans, Gordon said.

–Lynh Bui, lynh.bui@arizonarepublic.com

Higher Ed, Higher Pay: Salary Increases at ASU and UA
Go To Highest-Paid Administrators and Professors
Goldwater Institute

by Robby Stoave and Mark Flatten

When Kimberly de los Santos took on additional duties in her role as associate vice president of Arizona State University’s Office of University Initiatives, the promotion came with a hefty increase in pay. Her salary jumped from $130,000 in 2008 to $195,000 in 2009.

The increase is in keeping with a policy—in place at both ASU and the University of Arizona since the recession began in 2008—mandating that raises only be given to employees who are promoted, take on additional duties, or are likely to accept higher-paying positions elsewhere. Yet, as de los Santos’ case shows, when an employee does meet these qualifications, the raises can be substantial. Files obtained under Arizona’s public records law revealed numerous raises of $50,000 or more over the last three years.

Among ASU employees who were already making $150,000, one in three has received a pay raise since 2007, university records show. For other employees, raises of any amount were hard to come by. When the entire workforce is considered, about one in every 14 people received a raise.

About 3 percent of ASU’s workforce makes at least $150,000 a year. At UA, it’s about 4 percent. The universities insist that the raises in this group are necessary to retain and reward the best and brightest educators. Many substantial increases, however, went to employees whose roles were predominantly administrative rather than teaching-related.

De los Santos was one such employee. Though she did not return repeated phone calls and e-mails asking for clarification of her role and salary, an ASU spokesperson explained that her raise was given because of an expanded role in overseeing university initiatives, as well as to retain her services. According to the office’s website, these initiatives include fostering “entrepreneurship, social embeddedness, university innovation and education at ASU.”

Public records showed that administrators like de los Santos were well represented among the top salary increases at ASU. At least 45 highly-paid employees were given base salary raises of 20 percent or more over the last three years. Of the employees in this group, 18 were professors and associate professors, six were exclusively administrators, and another 16 were in mixed but predominantly administrative roles, including deans of colleges. None of the administrators taught more than one regularly scheduled class, though several are listed as advisors for “independent studies,” according to ASU’s website. The remaining five were coaches of sports teams.

For Dr. Matthew Ladner, vice president of research at the Goldwater Institute, administrative bloat is a symptom of the inability of Arizona’s public universities to control their spending—and at a time when many private citizens are making do with less. He said the universities have continued to spend well beyond their means in spite of the recession, which wiped out a third of the state’s revenue, according to state fiscal data.
“The universities have largely been shielded from the effects of the downturn, and they are spending more now than they’ve ever spent,” Ladner said.

Click here to read the rest of this Watchdog Report

You have to ask yourself. After years of reading stuff like this, who is really minding the store? Rob O’Dell of the Star asks the question. Maybe you can determine an answer….

City paid $640K in unfinished condo deal

Rob O’Dell Arizona Daily Star Arizona Daily Star | Posted: Saturday, January 8, 2011 12:00 am | Comments

Developer Ross Rulney got more than $600,000 in street, sidewalk and utility improvements outside his downtown property in return for a commitment to build 53 condominiums, which have never been built.

After the city completed the first $350,000 in improvements, it agreed to go ahead with another $290,000 in work even through Rulney had not done the construction required to qualify for the second phase of assistance.

With the work nearing completion, there are questions over who should foot the bill for the former Rio Nuevo project at East Broadway and Fifth Avenue.

Rio Nuevo stopped paying the bills this past summer, so Assistant City Manager Sean McBride agreed to put up city general funds to finish the work – the same financially strapped fund used to pay for police, firefighters, parks and roads.

Rulney said he isn’t in default of his development agreement because the condominiums were contingent on financing, which he couldn’t secure in the wake of the housing bubble bursting. In addition, he said the city didn’t build the first portion of the infrastructure on time.

He said he effectively substituted retail and commercial development for the 53 condos. Rulney didn’t follow the letter of the development, but, “In the end, the spirit of the deal could not have worked more beautifully,” he said.

“The city was very happy,” Rulney said. “The city was ecstatic I was still willing to pull the trigger to pump money into this block.”

Not everyone at the city is ecstatic about the deal.

Councilman Steve Kozachik said the core of the problem is a poorly written development agreement that was redrawn midstream, combined with Rio Nuevo writing checks without adequate controls.

Some of the payments to Rulney were approved verbally by Rio Nuevo Board member Anne-Marie Russell after the Legislature stripped control of Rio Nuevo from the city in November 2009, but before March 2010, when the new board was seated.

Rio Nuevo rejected paying any more bills last summer, beyond the $450,000 it had already doled out, said Rio Nuevo lawyer Bob Gugino, because the Rio Nuevo board was not a party to the development agreement.

Kozachik said Rio Nuevo did the right thing to end the payments. But he said McBride and City Manager Mike Letcher erred in never bringing updated information about the development agreement to the City Council before tapping into general-fund money. If they had brought the issue to the council, Kozachik said, he could have supported the expenditure because Rulney is trying to make the project work.

McBride said he’s not completely happy with the deal, which he described as one of many the city has made in the past in which developments were vaguely defined and the developer and the city then sparred over the meaning of the agreement. He said that’s why the city recently adopted a new development agreement process.

“These were written in different times,” McBride said.

He said he used a special fund in the City Manager’s Office because he wanted to make sure the city met its obligations under the agreement. In addition, he said the project managers have now tried to control costs tightly.

Overall, McBride said the agreement is a good one because it is helping to spur private investment downtown.

Rulney said he has put $1 million into the project, leading to five new residential apartments and new commercial/office space that includes the exercise club O2 Modern Fitness and the headquarters of the Amity Foundation.

Because of those investments, Rulney said the deal worked as a model for a public-private partnership. “The spirit of the deal could not have worked more perfectly,” he said.

E-mails obtained through an Arizona Daily Star public-records request tell a different story, as Rulney repeatedly questioned the city’s response to his development agreement and hinted about a lawsuit.

Rulney said the deal ultimately worked beautifully, and added those e-mails were just part of the frustration that comes with working on large projects with the city. He said the e-mails were extremely justified at the time.

“It was a long road to get here,” Rulney said. “It was a frustrating process.”

Rio Nuevo Project Coordinator Jessie Sanders said both the original and second versions of the development agreement were vague about monetary commitments, which caused much of the problem. Sanders said he tried to hold Rulney to his commitments to work on the condominiums before the city did the second $290,000 in improvements.

But Sanders said he was then taken off the project, which was reassigned to former Tucson Downtown Partnership head Glenn Lyons, who worked on development agreements for the city at that time.

On StarNet: Go to azstarnet.com/news/local/ govt-and-politics to read more about local and state government and political news.

Contact reporter Rob O’Dell at 573-4346 or rodell@azstarnet.com

Copyright 2011 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

For the future of G.O.P. governance, look to Arizona

By Ken Silverstein

In 1897, when the Territory of Arizona was seeking to demonstrate its fitness for statehood, the legislature solicited bids to design a new capitol building and grounds in Phoenix. The winning entry was that of James Riely Gordon, the architect behind a number of well-regarded public buildings in Texas and Maryland. He drew up ambitious plans: an expansive dome, a grand rotunda, stately wings for each house. But funding fell short, and so the legislative wings were scrapped, and a diminutive lead-alloy top was chosen in lieu of Gordon’s more elaborate dome. Worse, in the building’s interior, a mosaic of the state seal was bungled by the contractor, who forgot to include the images of cattle and citrus, two of Arizona’s “five C’s” (the others being climate, copper, and cotton).

Despite much talk over the years of an upgrade—including a proposal from none other than Frank Lloyd Wright, who envisioned the addition of fountains, gardens, and reflecting pools—all plans were rejected as too expensive. In the 1960s, two new buildings were finally erected on either side of the capitol, one for the house and one for the senate; but these structures, which resemble Soviet apartment blocks, only made matters worse. Nowadays, the capitol’s dingy, unshaded plaza is bare save for a few small rosebushes and some patches of dry grass. The buildings themselves have been plagued by plumbing problems and leaks, making the complex “wholly inadequate” to Arizona’s future needs, according to a task force charged with studying the matter.

The general unsightliness of the capitol makes it a fitting home for today’s Arizona legislature, which is composed almost entirely of dimwits, racists, and cranks. Collectively they have bankrupted the state through a combination of ideological fanaticism on the Republican right and acquiescence and timidity on the part of G.O.P. moderates and Democrats. Although dozens of states are facing budget crises, the situation in Arizona is arguably the nation’s worst, graver even than in California. A horrific budget deficit has been papered over with massive borrowing and accounting gimmickry, and the state may yet have to issue IOUs to employees and vendors. All-day kindergarten has been eliminated statewide, and some districts have adopted a four-day school week. Arizona’s state parks, despite bringing in 2 million visitors and $266 million annually, have lost 80 percent of their budget, with up to two thirds of the parks now in danger of closure. The legislature slashed the budget for the Department of Revenue, which required the agency to fire hundreds of state auditors and tax collectors; lawmakers boasted that these measures saved $25 million, but a top official in the department estimated that the state would miss out on $174 million in tax collections as a result.

Any way out of Arizona’s crisis will require raising taxes, a move that is tantamount to heresy for most lawmakers. For nearly a year, the legislature refused to approve the emergency sales-tax increase (of just one cent per dollar) proposed by Governor Jan Brewer, a Republican who had been elected as secretary of state but assumed the top job in 2009 when Janet Napolitano joined the Obama Administration. Eventually, lawmakers passed the buck to voters by authorizing a May 18 statewide ballot on the sales tax—which passed, after a $2.2 million marketing effort by education and business groups—but before doing so they enacted tax cuts that over four years will deprive the state of more money than the sales-tax increase is estimated to bring in.

Instead, to raise cash, the legislature has pursued a series of wild sell-offs and budget cuts. It privatized the capitol building and leased it back from its new owner, an arrangement that brought in substantial revenue but over time will cost Arizona far more. The legislature has sold off numerous other state properties at bargain prices, and has put up future lottery revenues as collateral on a $450 million loan. Meanwhile, Arizona removed more than 300,000 adults from state health coverage and terminated one health-care program for 47,000 poor children. Funding was slashed at the agency that deals with reports of child abuse and neglect, and also at Children’s Rehabilitative Services, so that parents of children with cystic fibrosis, cerebral palsy, and a number of other conditions are now required to pay 100 percent of treatment costs.

All totaled, the cuts amounted to roughly $1 billion, which came on top of a similar amount that had been slashed the previous year. These cuts, in combination with the sale of state assets (which raised more than $700 million) and the securitization of the lottery, plugged a massive hole in next year’s budget. But the deficit for 2011 is already projected to be at least $1 billion and possibly double that, on a total budget of only $9 billion. The situation will only worsen from there, as federal stimulus money dries up and the state runs out of short-term sources of cash. “Could we cut our way out of it mathematically?” Dennis Hoffman, an economist who has forecast revenue for Arizona governors since 1983, mused when I asked him about the crisis. “Anything is possible on paper, but for practical purposes it can’t be done, unless you want to start releasing prisoners, shutting down universities, and eliminating extracurricular activities in the schools. We’ve already had a $2 billion haircut over the past two years. Try another $2 billion and see what the state looks like.”

Arizona lawmakers have shown little enthusiasm for dealing seriously with the state’s insolvency. They have instead preferred to focus on matters that have little to do with the crisis. Lawmakers have turned racial profiling into official policy, through a new law that requires police to stop suspected illegal immigrants and demand to see their papers; anyone not carrying acceptable proof of citizenship can be arrested for trespassing and thrown in jail for up to six months. But this is just one bill in what has been a season of provocative legislating. Another new law bans the funding of any ethnic-studies programs in the public schools, while a third prohibits “intentionally or knowingly creating a human-animal hybrid.” Lawmakers declared February 8 the “Boy Scout Holiday,” took time out to discount fishing-license fees for Eagle Scouts, and approved a constitutional right to hunt.

In January, Senator Jack Harper, an immaculately combed zealot who speaks in the patter of an infomercial voiceover, submitted a bill that would allow faculty members to carry guns on university campuses, saying it was “one very small step in trying to eliminate gun-free zones, where there’s absolutely no one who could defend themselves if a terrorist incident happened.” The house passed a measure that would force President Barack Obama to show his birth certificate to state officials if he runs for re-election, as well as a bill that bars Arizona from entering into any program to regulate greenhouse gases without approval from the legislature. “There are only two ways to vote on this,” said Representative Ray Barnes of the latter initiative. “Yes, or face the east in the morning and worship the EPA because they own you.”

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As the national midterm elections approach in November, the Tea Party movement is supplying the Republican Party with most of its momentum. But this movement, and the strain of aggrieved libertarianism it espouses, cannot claim much representation in elected office. This disparity has led many on the left to dismiss Tea Partiers as a media phenomenon, and to speculate that their ideas could not possibly “stand up to the test” of real governance. But there is, in fact, one place where the results of Tea Party governance has already been tested: Arizona, where the Tea Party is arguably the ruling party. Less driven by issues of national security, on the one hand, or moral values on the other, Arizonan conservatives are largely obsessed with taxes and immigration—also the twin fixations of Tea Partiers, who, like Arizonans, are disproportionately white and older. So it comes as little surprise that top Republican elected officials in Arizona eagerly seek the Tea Party’s support and make time to speak at the group’s rallies. Should the Republicans succeed in retaking power nationwide over the next four years, the country might start to resemble the right-wing desert that Arizona has become.

Arizonans are generally moderate. In-migration has brought a flood of independents and Democrats, who in 2008 won five of the state’s eight U.S. House seats. Although registered Republicans outnumber Democrats by 36 percent to 33 percent, independents now stand at 30 percent and are rapidly gaining ground at the expense of both parties. And yet Arizona politics are disproportionately controlled by ultraconservatives. Only a handful of the state’s house districts are genuinely competitive between Democrats and Republicans, with the latter holding thirty-five of the sixty seats. Being a member of the legislature is not considered a prestige job—the office pays only $24,000 annually—and many lawmakers are small businessmen. The Republican primaries are dominated by hard-core conservatives who spurn moderates and back ideologues.

Anti-government sentiment here is longstanding, and can be traced in part to the influence of the Church of Jesus Christ of Latter-day Saints. Mormons make up only around 6 percent of the state population, but they are enormously influential in Republican politics—and they don’t approve of borrowing money, whether it’s an individual or a state that’s doing the borrowing. Mormons tend to believe that the role of government is to let people fend for themselves. After the church created a nationwide Welfare Services Department, back in 1936, its Arizona branch displaced the government among church members as the provider of many social services, offering everything from job training to family counseling to educational programs.

Since the days of Barry Goldwater, an axiom of Arizona politics, particularly among Republicans, has been that tax cuts generate economic growth in all circumstances. Hence total state taxation has declined during fifteen of the past seventeen years; the individual income tax has taken the biggest hit, but sales, property, and corporate-income taxes have also come down substantially. The legislature has created tax exemptions for everything from country-club memberships to pedicures to food purchases by airlines (the latter at the behest of local airline lobbyists). None of this has produced the hoped-for effect. Although tax cuts “have lowered government revenues,” they “have not had any perceptible effect on the state’s economic growth,” concluded an Arizona State University business-school study, published last November, that examined the past three decades of fiscal policy.

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Yet even as the state has teetered toward bankruptcy, political leaders have remained unwilling to acknowledge that taxes in Arizona are too low. Indeed, thirty-eight of Arizona’s ninety lawmakers, together with Governor Brewer, have signed the “Taxpayer Protection Pledge” of Grover Norquist’s group Americans for Tax Reform, a pledge that they will never vote for a tax increase. Democrats have played the game as well: in 2007, then-Governor Napolitano approved a 10 percent reduction in the income tax, which cost the state about $500 million. The combination of historic tax cuts with the recession has reduced government revenues from $9.5 billion in 2007 to $6.4 billion this year. That latter figure is roughly equal to the amount of money the state took in six years ago, even as the population—and the need for government spending on health care, education, and prisons, for example—has continued its rapid growth.

The anti-government attitude in Arizona is now reflexive, especially because of its entanglement with the issue of immigration. As one local resident, who didn’t want to be identified because she has a government job, told me: “People who have swimming pools don’t need state parks. If you buy your books at Borders you don’t need libraries. If your kids are in private school, you don’t need K-12. The people here, or at least those who vote, don’t see the need for government. Since a lot of the population are not citizens, the message is that government exists to help the undeserving, so we shouldn’t have it at all. People think it’s OK to cut spending, because ESL is about people who refuse to assimilate and health care pays for illegals.”

This confluence of nativism and anti-government sentiment makes Arizona fertile ground for an especially showy brand of symbolic politics. One day in February I sat in the audience during a session of the Senate Appropriations Committee, which meets in a wood-paneled room with a stained carpet, on the ground floor of the senate building. During the meeting, committee chairman Senator Russell Pearce—sponsor of the anti-immigrant bill and one of the most powerful politicians in the state—called on the federal government to put the National Guard on the border and “have rifles with bullets in ‘em.” Apropos of nothing, the balding, red-faced Senator Al Melvin brought up his pet topic of inmate labor, which he views as a solution to the state’s budget crisis. Jailbirds, burbled Melvin, should fill potholes, keep golf courses open, and refurbish public buildings.

Soon the committee began to debate whether to post the Ten Commandments at the entrance to the old state capitol. A six-foot granite version located a few hundred feet away did not, it seemed, sufficiently convey the state’s piety. “George Washington, our first recognized president of this republic, said you cannot properly govern without the Bible and God, and I couldn’t agree more. And John Adams once made the statement that this republic is designed wholly for a moral and religious people and will survive under none other,” Pearce, the measure’s sponsor, told his colleagues. After a few minutes’ more debate, the measure passed, and the committee, having done the people’s business, adjourned for the day.

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Besides its aging mining industry and its few remaining aerospace plants, Arizona doesn’t manufacture or even sell much of anything. Phoenix is a branch-office town, not a headquarters town, and much of the population works low-paying jobs at call centers and assembly plants. Yet over the past half-century, the population of Arizona has grown faster than that of any other state besides Nevada. Between 1950 and 2009, Phoenix swelled from 105,000 people to 1.5 million, making it the fifth largest city in the United States. The climate—one of those “five C’s”—has been a major attraction, especially for senior citizens. So have low taxes, weak business regulation, and (for a long time) cheap housing, especially when compared with neighboring California. The engine of economic growth in Arizona was growth itself—real estate in particular, but also a host of related industries: construction, hauling, landscaping, roofing, painting, remodeling, swimming-pool maintenance, architecture, plumbing, and on and on.

Real estate prices rose wildly in Arizona during the past decade, pushed, as elsewhere in the country, by low interest rates, ARMs, and the reckless practices of such companies as Countrywide Financial and Goldman Sachs. When the market went bust, Arizona—along with Florida, Nevada, and California—crashed particularly hard. Last spring, Phoenix became the first major American city where home prices had fallen by half from their mid-decade market peak. Recent figures show that 61.5 percent of Phoenix mortgages are “underwater,” with commercial real estate in even worse shape. It is unlikely that a major office building will be erected in Phoenix in the next five years. Since its peak in 2006,  the state’s construction industry has lost roughly 113,000 jobs, a drop of almost 50 percent. The official unemployment rate is above 9 percent, but that figure nearly doubles when people who can’t find full-time work and people who have given up are factored in. The Arizona Department of Health Services estimates that as many as 260,000 Hispanics have left the state since late 2007, partly because of anti-immigrant laws and sentiment and partly because jobs dried up.

“Texas has oil and gas, and Nevada has gambling, so they generate money even during a recession—but Arizona needs growth to grow,” Grady Gammage Jr., a lawyer and real estate developer, told me at his office in Tempe, thirteen miles from downtown Phoenix. “We’re also not a low-problem state like Vermont. We’re a big border state with only a few private institutions to take care of social problems. We need government.”

Gammage walked me out to a balcony that faces Arizona State University’s Sun Devil Stadium. He pointed off to the left, toward two unfinished towers, barely visible in the distance. They had been started with financing from a company headed by Scott Coles, a leading local businessman; as the project was unraveling last year, Coles’s wife left him and he committed suicide. “Investors put $130 million into it,” Gammage said. “The penthouses had private pools and they were talking about selling them for between $5 million and $10 million apiece. Now they’ll be lucky to get $30 million for both buildings, and it would cost another $20 million to finish them. But the market’s gone and no one knows what to do. There’s talk of turning it into a hotel or student dormitories.”

Drive around Greater Phoenix, and one sees a procession of commercial real estate projects in bankruptcy and for-rent signs plastered across strip mall windows. But to take in the full scale of the damage—and to understand why the state government is bankrupt—requires heading out to communities at the edge of recent development, communities that were growing at a breakneck pace up until the crash.

Few spots are worse off than Maricopa, forty-five minutes southwest of Phoenix by car, a town that sprang from desert scrub in 2003 and within five years had a population of 45,000. On a sunny Sunday morning, John Guthrie, a thirty-five-year-old real estate agent, met me at the Carl’s Jr. in the town’s main shopping mall, off the John Wayne Parkway. He moved here from Orange County, California, in 2004, just as the real estate boom was gathering force, before there was a mall or nearly anything else in Maricopa. But by the end of that year, the real estate market in Maricopa was in a frenzy. Lotteries became normal in the most popular new developments; would-be buyers had to put up a deposit of $20,000 or more just for the right to bid. “Developers said we’d be getting a Home Depot and movie theaters and restaurants,” the soft-spoken Guthrie recalled. “Over twenty-five years they were saying there would be amusement parks and resorts.”

Guthrie crumpled up his sandwich wrapper, grabbed his soda, and ushered me to his car in the parking lot. In 2007, the market stalled out, and by early the following year it collapsed, he explained as we pulled out onto the road. “You could see it hit street by street,” he said. “One house would go into foreclosure and then it would just move down the street, and then hit the next block and then the next. There were a bunch of families who came out here who didn’t have assets, and when they started going upside-down by $150,000 there wasn’t much to do but walk away.”

Guthrie handed me several documents as he drove. One showed that in Maricopa the “Distress Index”—the percentage of sales in which the property is bank-owned or in pre-foreclosure—was 76.8 percent. Guthrie looked increasingly shell-shocked as he laid all this out, and soon I found out why: he was upside-down on a home of his own by about $100,000.

In a neighborhood called Maricopa Meadows, we drove past numerous empty lots—builders as well as homeowners had gone under during the crash—and many “short sale” signs in front of houses. Soon we rolled past a block of McMansions, all but a handful of which had gone into foreclosure. “These houses have about 4,000 square feet and swimming pools,” he said. “They topped out at $600,000. Now you can get one for about $250,000. You’ve got people doubling up in houses so they can split utilities. During the summer the air conditioning bill can be $500 a month. The story is the same from here to Queen Creek to Buckeye, in all these places that people scattered out to before the crash.”

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Politically, there was almost no fallout from the economic crisis. In the G.O.P. primary of 2008, when the impending disaster was already apparent, a number of Republican state legislators who opposed further tax cuts lost to fire-breathers on their right, all but eliminating the party’s “moderate” wing. In the state senate, Russell Pearce—who as a house member had already sponsored a number of anti-immigrant bills, including an employer-sanctions law—trounced his Republican opponent, an attorney who had handled immigration cases and who was backed by the Chamber of Commerce (which is highly conservative on most issues but splits on immigration because its members like cheap immigrant labor). Steve Pierce, a right-wing rancher, ousted Senator Tom O’Halleran, a pro-environment moderate who had helped broker a budget deal with Governor Napolitano. Al Melvin, who had never before held public office, won his primary race against Pete Hershberger, whom he tarred as not sufficiently “loyal” to the G.O.P. on issues of taxes, gun rights, and gay marriage.

Then there was Sylvia Allen, a real estate broker from the town of Snowflake, who, in 2008, was appointed by the local Republican Party to finish the term of a respected conservative who had died in office. Allen, who retained her seat in an election that fall, has since gained minor notoriety after calling for more uranium mining, saying in a speech that “this earth has been here 6,000 years, long before anybody had environmental laws, and somehow it hasn’t been done away with.” She also has complained that trees are “stealing Arizona’s water supply” and sponsored a new law that allows carriers of concealed weapons to forego safety training and the indignity of background checks.

A similar crew was elected to the house, including Frank Antenori. “I despise expansion of government into people’s lives,” he said on the campaign trail. “K–12 is meant to prepare kids to enter the world. . . . We need to spend less time teaching how to put condoms on cucumbers and more time on balancing a checkbook.”

In 2010, the same paradoxical process seems to be at work: despite the disastrous policies of the right in Arizona, the state’s Republicans are threatening to move rightward still. This slide was clearly visible at the February campaign kickoff for J. D. Hayworth, who is hoping to beat Senator John McCain in the August G.O.P. primary. A former sports anchor and radio talk- show host, Hayworth served in Congress from 1995 to 2007, where he was best known for his cornball jokes—from the House floor he cracked that Democrats should “hire Freddy Krueger as the new liberal Democratic spokesman” and “set up a new political-action committee, the ‘Whine Producers.’ ” He also was embroiled in the scandal around the lobbyist Jack Abramoff: in 1997, Hayworth helped stop a proposal to tax Indian casinos and five years later helped prevent a change in the law that would have capped campaign contributions by Indian tribes. Between 1998 and 2005, Hayworth received $150,000 from Indian tribes and other groups connected to Abramoff.

Conservatives have always been suspicious of McCain’s support for campaign-finance reform and his opposition (before he flip-flopped on the presidential campaign trail) to torture and to George W. Bush’s tax cuts. But what truly sank McCain’s standing in Arizona was his long-standing support for comprehensive immigration reform, a position he has now desperately abandoned as well—he came out in support of the state immigration bill during an interview with Bill O’Reilly, saying that “illegals . . . are intentionally causing accidents on the freeway”—though this switch has been of no avail in placating the Arizona right.

At Hayworth’s campaign kickoff, held in front of his new campaign headquarters in a Phoenix strip mall, a series of local conservatives stood beneath a banner proclaiming Hayworth the “Consistent Conservative,” thrilling the crowd with stories of Hayworth’s devotion to conservative causes and McCain’s betrayal of same. One of the most warmly received speakers was right-wing Senator Ron Gould. A big guy with a flattop haircut and a shit-kicker’s mustache, Gould prefaced his endorsement of Hayworth by calling himself “probably the most conservative legislator in the state,” and he closed with the words, “God bless America and may America bless God.” The crowd, mostly white retirees, picked up doughnut holes and coffee from a table draped with a yellow banner that featured a coiled rattlesnake and the words don’t tread on me. (That design dates to the Continental Congress in 1775 and has been widely adapted by Tea Party activists.) Vendors sold green buttons supporting the Tea Party; red buttons bearing the slogan proud member of the angry mob; and pink buttons that said, simply, sarahcuda. From speakers blared a soundtrack that included “Hound Dog,” “Wake Up Little Susie,” and the theme from Hawaii Five-O.

“Sheriff Joe is here!” a woman next to me exclaimed. She was referring to longtime Maricopa County Sheriff Joe Arpaio, known for housing prisoners in tents and making them wear pink underwear, and for having his officers raid Latino neighborhoods to round up suspected illegal immigrants. Wearing a dark jacket, maroon shirt, and a tie pin shaped like a gold pistol, Arpaio took the stage to declare that McCain had been in Washington too long. “We have to give McCain a map to help him find his way back to Arizona,” he said to a big cheer.

“Give him a map to Mexico,” someone shouted from the audience.

Now Hayworth took the microphone, and scanned the crowd. He was taller and tanner than anyone else on stage. “Like Ronald Reagan, I believe that government is not the solution to our problems, but too often it is part of the problem,” he said.

“If they do anything more for the poor I’m gonna be one of them,” yelled a well-dressed man from the audience.

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Backed into an ideological corner on taxes, Arizona continues to cut indiscriminately. The three state universities have scrapped whole degree programs and may soon have to shutter entire campuses. Funding for GED programs and adult-education courses has been reduced to zero. Arizona has furloughed more than 15,000 state employees and has closed thirteen of eighteen highway rest stops. (This latter move provoked an outcry, especially among truckers; state authorities responded by asking roadside businesses to allow motorists to use bathrooms free of charge.) The budget for the Department of Water Resources—an important agency in the desert—has been cut from $23 million to $7 million during the past two years. “Demand for water exceeds supply, and we share what there is with six states,” Herb Guenther, the agency’s director, told me. “We have to protect what we have collectively while looking for new supplies, but everyone is fighting for resources. There’s a cliff coming, and we haven’t figured out how to fly. ‘No government’ is not the answer when it comes to water.”

Lawmakers have siphoned off state funds allocated for specific purposes, pouring the money into the state’s general fund. The legislature seized $160,000 in voluntary contributions and mandatory fees from the agriculture industry that were supposed to be used for research and marketing. It swiped another $7 million from the Arizona Early Childhood Development and Health Board, whose revenue comes from a voter-approved tobacco tax. (Arizona’s supreme court ruled that the legislature had acted illegally and forced the return of the tobacco money; the state may eventually be ordered to give back tens of millions of dollars more from other “sweeps.”)

In addition to selling the state capitol, the legislature has examined auctioning off dozens of other properties—among them the house and senate buildings, the offices of the secretary of state and the treasurer, and most of the state’s prisons, including maximum-security units and death row. One of the major proponents of privatization is Representative John Kavanagh, an amiable oddball originally from Queens and a former Port Authority Police Department detective. “We haven’t cut taxes that much,” he told me during an interview at his legislative office, which is decorated with a variety of G.O.P.-related knickknacks, including a large pink plush elephant on a bookshelf. “Here’s the problem: we grew government during good times far beyond responsible levels, and instead of cutting, we’ve been relying on tricks and massive borrowing to sustain it. Now we’ve reached the end of the line. It’s going to require major cuts; you’re talking about government super-light.”

Kavanagh blithely opined that the benefits of all-day kindergarten “dissipate by third grade for all but poverty level” and that the state should offer Medicaid only to people at one-third of poverty-level income—which works out to less than $7,500 for a family of four—as opposed to the current practice of offering it to everyone at poverty level and below. “We can’t afford to be that generous anymore,” he said.

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Despite passage of the sales tax in May, no one believes that Arizona’s financial crisis is over. But the state’s electoral system, which rewards extreme right-wing rhetoric, has allowed the political class to be as irresponsible and reckless as it likes. State residents seem content to cheer on the legislature for lowering their taxes—even as massive budget cuts pack their children into classrooms with more and more students, or force them to stand in line for a day to renew driver’s licenses at the gutted Department of Motor Vehicles. Arizonans will complain about their legislature—one recent poll showed that just 15 percent thought state lawmakers’ performance was “good”—but keep sending ever more radical Republicans to office. It is much like the Tea Party nationwide, which will, quite sensibly, demand political reform and protest the bank bailout, even as it backs hacks like Hayworth who represent the most corrupt wing of the G.O.P.

Russell Pearce, basking in the triumph of his immigration-law victory, is hoping to become senate leader, and he likely will win that post. Representative Antenori—who distinguished himself in the house by opposing federal light-bulb efficiency standards (which he dismissed as “touchy-feely legislation”) and by proposing that welfare recipients be required to sign an affidavit swearing they do not smoke, drink, use drugs, or have more than basic cable—was recently appointed to a vacant senate seat. And as for Senator Sylvia Allen, the senator who once complained that trees were “stealing Arizona’s water supply,” she stands for reelection this year and, by all accounts, is almost certain to prevail.