Posts Tagged ‘Budget’
As we start debating the re-authorization of our state’s 1 cent sales tax I would like to pause for a moment and take a slightly closer look at what has been, and will undoubtably be again, one of the oft heard sentiments in these discussions.
You almost certainly have heard some version of it, but Paul Krugman (writing in his recent release A Manifesto For Economic Sense) provides a good example: “There must of course be a medium-term plan for reducing the government deficit. But if this is too front-loaded it can easily be self-defeating by aborting the recovery.”
So more or less, “Yes, we absolutely, positively know we need to get back to (INSERT NORMAL HERE) but certainly not right now.”
Dr. Krugman is certainly and simply an easy target but is an excellent example of those who, over many years, have maintained an incessant drum beat for “emergency measures”. Whether it is stimulatory fiscal and monetary policy, private company bailouts, vast military spending, expanded police powers, environmental regulatory interventions, increased taxes or other“temporary”, “one-time” reactions to current difficulties, there always seems to happen to be another “emergency” on the horizon which will serve to extend the definition of “temporary” and turn “one-time” into repetitive.
My primary issue are the pundits and government officers who prefer to define us in an almost constant state of “crisis” or for whom at least the pendulum seems only to swing in one direction.
They are quick and aggressive to yell “Crisis!” and push interventionist planning and coercion on our economy and society when any dip or bump in the road occurs, but then they work tirelessly to stretch the crisis ad infinitum until, when finally their pleas for emergency efforts fall on deaf ears due to the simple overwhelming weight of contemporary evidence to the contrary… they fall silent (or at least fairly quiet). They never turn the corner, calling for the legislative counter-actions that would bring budgets or regulations or police/military powers back in line with a healthy normative standard. They let their “gains” stand and then wait at the ready for the next “crisis” which they can use to move the line of scrimmage just a bit more in their favor.
This strategic ideology is fairly well summed up by Rahm Emmanuel, Stanford economist Paul Romer and others, who have been quoted in a variety of ways but always with the same basic message, “NEVER let a good crisis go to waste.”
But for how long have we been hearing these Crisis Seekers (and I include many Arizona intellectuals and politicians in this crowd) make the argument, “Well in the long term we have to get this back to normal but in the short term we have to TAKE ACTION”?
I don’t know about anyone else, but it seems we have been living distinctly in the “short term” for at least 35 years now by my count and I’m kinda ready for the more rational, moderate, disciplined actions of the “long term” to take over.
It all reminds me of those ubiquitous bar signs, the ones you see advertising, “FREE BEER TOMORROW!” But we know when we come back the next day the sign still reads, “FREE BEER TOMORROW!”
That kind of double speak is funny at your favorite pub or restaurant but it is a bit disconcerting out of the mouths of those who purport to instruct our electorate on proper economic and government financial policies. Though it might be refreshingly honest for them to hang a “BALANCED BUDGET NEXT YEAR!” sign over the front steps of the US Capitol.
Which brings me back to our upcoming decision on the sales tax. In this article I am not arguing for or against this levy or the purposes to which the money would be directed. What I am suggesting is that, in the upcoming public debate, our politicians and public intellectuals, academics, pundits, newspaper editors, talking heads, et al, be held to account for their definitions of crisis measures and their idea of the temporary short term. When do the great results show up? How is this different from every other tax increase? When do we “get spending under control”? When does a stable, normal arrive?
I find it self evident that politicians just love their emergency powers. They generally bring with them great expansions of both authorities and revenues which many times are never given back after the “emergency” has passed. I would argue that we should be far more paranoid and skeptical in our examinations of these efforts and arguments (too often we let fear and uncertainty rule our collective wisdom), however, is it too much to ask of Arizona voters that we all at least demand to know from our policy makers, “So, specifically, when is this crisis over?”
I think holding our politicians and pundits accountable for acknowledging when we are NOT in crisis, would be a strong step away from the neverending mousewheel of short term, band-aid fixes that we seem to be ever increasingly reliant upon in today’s Arizona specifically and modern America in general.
The debate rages on about what the City of Tucson can and can not afford. The Tucson ASSOCIATION OF REALTORS® and SAHBA among other business groups have stepped up to push a mandatory police staffing initiative which will take our police officers per 1000 population from 1.9 to 2.4 (closer to a national average) and will establish minimum response times for fire and emergency services when we need them most. Those crazy business people somehow feel that safe streets, neighborhoods and businesses will actually make people want to live in our community. With an absence of leadership from our elected officials someone had to step up.
No sooner than the initiative hit the streets did the spin machine from city council and the county go into effect scaring the community by bemoaning the high cost to increase the police force and process the criminals. What’s the cost of not doing it gang?
City Council members and city staffers have declared the initiative would cost the city $50 million more per year to pay for the 350 additional police officers and firefighters required, and have questioned where the money will come from. County Administrator Chuck Huckelberry has also indicated the additional officers will result in higher court and jail costs for the county.
* Does the City of Tucson have the money to pay for:
* Public Safety First Initiative;
* Convention Center Hotel;
* Balance the budget
(the rating agencies recently lowered Tucson’s credit rating and cited a “structural budget deficit”)
My contention is that there is plenty of money to pay for things; it is just a matter of priority and political will. These are difficult times but we expect our political leaders to make those difficult decisions. The 2008 Comprehensive Annual Financial Report (CAFR) for the City of Tucson reveals several funds that are running large deficits. Reducing or correcting these deficits frees up vital funds to help with other priorities. (This information is a year old but many funds are operating about the same or worse. 2009 CAFR will be available in a few months; should be an interesting read.)
The Mayor &Council authorized an increase in fares recently. It was decided to use the funds to enhance transit services rather than reduce the subsidy.
Remember the ‘trash fee’. This basic support function simply needs to charge properly so they break even. Is this function ripe for outsourcing to local trash companies?
I believe basic utilities such as this need to break even each year.
Let’s just say that as a stand-alone entity, the TCC loses plenty of money. Does this facility provide sufficient ancillary benefits from events held there?
Capital Improvements Fund: $38.5 million negative cash flow (page 83)
This fund had a nice fund balance at beginning of year ($86 million) but $38 million was taken from it. Could be that the City built stuff they did not have the money to pay for? It is also possible some of these funds were shifted to help balance the budget (dip into reserves to balance the budget – the rating agencies notice this stuff).
H.U.R.F. Fund: $8.6 million transferred to “Other Funds” (page 83)
HURF Fund ran a $1.6 million deficit and then transferred $8.6 million to “Other Funds”. Just wondering out loud where the money went?
Development Fee Fund: $5.5 million PROFIT (page 83)
We found a profit center! This money comes from ‘Developer Fees’.
Should greens fees be raised? City golf is one of the best deals in town. Golfers could probably kick in a little more to help clear this deficit.
Public Housing (AMP) Funds: $3.8 million deficit (page 91)
What is the City’s role in public housing? If the City simply matched -dollar-for-dollar what the Feds kick in, the deficit is cleared. But we kick in much more.
Fleet Services: $6.1 million deficit (page 94)
This basic support function simply needs to break even. The motor pool charges various units for operating their vehicles. They just have to charge properly for their services. Perhaps this function is ripe for outsourcing to local automotive shops?
Self Insurance Fund: $5.7 million operating deficit -and- $17.6 negative fund balance (pg 93/94)
This issue came to light earlier in the year when the City considered dipping into this fund to help cure the budget deficit (just about the worst idea I have heard all year). There is the potential that the City will get whacked with a large legal verdict and have to take money from the general fund to pay the settlement. The rating agencies have this on their radar screen and this hurts the City’s credit rating. The City needs to charge each department properly according the risk. This function is screaming to be outsourced to private companies – the City should not be in the insurance business; they are not good at it. Political temptation is simply too great: politicians tend to under-charge for risk and like to dip into this piggy bank.
● Cut City Departments 7.1% (held Public Safety cuts to 2.5%);
● Eliminated more than 400 city staff positions;
● Transferred $28 million in one-time revenues to cover core public services;
● Required five unpaid furlough days for city employees that will reduce average salaries 1.9% (public safety employees excluded);
● Required city staff to contribute more to their pension andbenefits;
● Cut City Council’s budget by 50 percent (eliminated federalgrants, community support funds and youth employment funds along with7.1% cut in office budget);
● Reduced Parks and Recreation Center hours and staff.
Our City is facing complex challenges that are not easily addressed by
simple solutions. Mayor and Council must make difficult decisions to
balance the budget. We have to cut departmental budgets, reduce
services, and we also have to increase fees and new revenue.
SALC (Southern Arizona Leadership Council) is a group of CEO’s that came together 20+ years ago. Members pay upwards of $6000+ per year to be a part of an elite club. They get together to lament on the great work they are doing in the community and support the work of local government. Judge for yourself the results.
As of late SALC has taken on the Tucson Town Hall forum, which brought together various community and political leaders together to talk about our regions problems. They are running a pretty cool ‘Tucson Values Teachers – a support teachers campaign’ and working hard on literacy issues in our community. SALC and Tucson Town Hall sponsored an Urban Land Institute series on the coming Megalopolis. There was a time when SALC was a little more willing to push an agenda – HERE. See SALC members list HERE
SALC just put out a position paper asking the state legislators to tax our business properties to balance the state budget. Not your typical position for a group of business leaders.
Hey guys, Arizona’s budget took 100 years to get to $6 billion (2001) and five to grow another $4 billion. Between 2001 and 2006, our state budget had ballooned to $10.3 billion. Budget growth far outpaced population increases at every level of government. What caused the huge increase in dollars to the state coffers you ask? Only one of the biggest housing booms in the United States history.
What does each level of Arizona government depend on as their economic piggy bank? Construction! Huge amounts of sales taxes, income taxes and assorted fees rolled into City, State and County government and they spent spent spent.
Time to pay the piper. Private businesses are laying off and cutting to the bone to survive. Entire industries are virtually shutting down. Why shouldn’t government be doing the same? You spent too much in the good times and now it’s time to trim back in the bad. My home values are back to 2004 levels, how about yours?
Don’t gimmick, shift between funds, bond, sell our lottery revenues, put up speed cameras all over the place, borrow or use accounting tricks. Cut back like we’ve had to do.
Certain areas are going to be hurt. Unfortunately things like university education, 21st Century Fund, Rio Nuevo, k-12, healthcare among others are going to suffer a little pain. It’s not going to be a fun time. We will emerge through this tough spot in a better position. It’s the cycle of life. Booms and busts have come and gone for generations.
The states, cities and counties that address the issues head on will emerge stronger and attract better and stronger industries. Better and stronger industries mean more money for government……you get the point. The first sentence of the SALC position statement should say it all……
While agreeing that Arizona’s tax policies deter business and the creation of jobs, the SALC Board of Directors believes that it is imprudent during the state’s financial crisis to permanently repeal the state equalization property tax. It is critically important to preserve the state’s infrastructure for the future, and SALC believes repealing the tax right now would do more harm than good. SALC believes that preserving the tax is only one part of a larger set of actions needed to ensure the state is prepared to be competitive in the future.
Hrm. They also call for the tax to be suspended later, which I don’t agree with, but, unlike our legislators, they seem to understand that cutting revenue when you are running out of money makes no sense. That’s what a business background will do: twist your brain around with practicalities.
Later in the release, they outline what they think state budget priorities should be:
1. Continue to the extent possible to provide basic services to ensure the health and well being of the most vulnerable among us.
2. Consider a combination of spending reductions, deferrals, debt financing, revenue enhancement and other short-term strategies to solve the budget shortfall.
3. Maintain to the extent possible investment spending in areas like education and economic development.
4. Investigate and pursue all non-state sources of assistance, such as federal stimulus spending and federal grants.
5. Base spending cuts on specific programmatic considerations.
Health? Education? Economic development? What sort of anti-American Socialism is this? Hank Amos, Jim Click, Bruce Ash, Steve Lynn, Don Pitt, Katie Dusenberry…trotskyites all!
Here’s my prediction – Rental tax -YES, the council will think they are taxing big bad landlords but in reality it’s renters that will pay. Trash Increase – NO Uhlich and Trasoff ran on eliminating the trash fee so don’t expect this political football to go anywhere in an election year. Bed Tax – YES, easy target because it only hits out of towners. It is kind of biting the hand that feeds you. The MTCV is collecting $9m as it is. Any discussion on how they are spending their funds? Bus Fare – YES, it needs to happen. We are way out of line with other communities. We don’t have the political leadership or will to make this tough decision so the RTA will take over Sun Tran and promptly raise fares. Utility Tax – who knows – No telling how this council will go on this one. It hits everyone so the impact on low to middle class families will be noticeable. The memo forgot to mention an Ad Tax – look for that one coming soon. Low Income Housing Trust Fund – watch this one closely. It’s a classic take from the rich and give to the poor. All it will do is increase the prices of housing and drive investors out of city limits. We’ll probably see increases in sign permit renewals, building permits etc. Development Services will need to recoup as much as they can. Water Fees - YES – we went up 8.9% last year, expect another 10% or so this year. Sewer Fees - YES. Anyone notice your TEP bills have a new tiered pricing structure. Higher users pay more – keep an eye on that on because it can be a big escalator. Wonder who this will hit the hardest? What you are witnessing is nickle and diming an entire class of people and business right out of a community.
We are starting to hear of lay offs finally today, with over 5600 employees at the City cutting 12 here or 30 there is a drop in the bucket. – fromt the Star – HERE.
City ponders new taxes, boost in fees to balance budget
February 23, 2009, 6:26 p.m.
Higher parks and recreation fees, higher bus fares, taxes on rental properties and gem show vendors buying temporary licenses are among the “revenue enhancements” Tucson officials have proposed in a report sent to the city manager Feb. 4.
The report, obtained by the Tucson Citizen through a public records request, examined ways the city can increase its tax and fee collections to cover its costs. It suggested that most fees be hitched to an index or cost-recovery formula to avoid financial handwringing whenever there is an economic downturn.
“Without intermittent fee increases, or a mechanism for incremental increases, the city will continue to find itself in situations during economic downturns when it is forced to cut entire services and programs,” the report states.
The report was written by the city’s Revenue Enhancement Team, which consists of staffers from the finance, transportation, legal and internal auditing departments.
The panel suggests returning to the city’s 1996 user-fee policy, which sets a percentage of the cost of a service that must be paid by the fee.
Seemingly small changes could mean significant revenue for the city, which is looking to save another $30 million next fiscal year (which starts July 1) to match expected revenues. Any new or reinstated taxes would likely take effect in July.
The City Council is scheduled to discuss City Manager Mike Hein’s proposals for closing the $30 million gap at its meeting Tuesday. They include $5 million in unspecified revenue enhancements.
The options on the table and the amounts they are expected to raise annually are:
•A 2 percent tax on residential rental real estate – $12 million.
• Raising residential trash and recycling fees by 4 percent – $986,000.
• A 25 percent increase in most bus fares – $1.8 million, with economy and express fares exempted. The basic fare would go from $1 to $1.25.
• Doubling the bed tax levied on hotels to $2 a night – $1.8 million.
• Utility tax increases on water, power and cable – $5 million
Officials also recommended that advertising, health spa memberships and tanning salons be taxed, that residential rental property owners be licensed and that builders be prevented from taking a cost-of-land deduction on their taxes.
City golf courses may also raise fees due to a $1.1 million bill they left the city’s general operating budget for the 2008 fiscal year, which ended June 30.
Twice in the past dozen years the City Council considered a proposal put together by a “revenue enhancement team.” Of the 10 suggestions made in 1997 and 2000, one was implemented: the much debated trash collection fee.
I’ve had a few requests of late to share the comparison chart that I used during my campaign. What I I put together was a snap shot comparison of our Pima County to other western US counties over the 1 million population. I compared population, tax rates, unincorporated population and employees per 10k residents (county wide). I took quite a bit of heat from the media about the chart.
You can argue it from any way you want. The biggest push back I received from using it was that comparing Pima County to the other counties was not accurate. The arguments centered on the fact that other counties have different taxing methods (a few had property taxes and a sales tax), some argued that Pima County was in the hospital business or the wastewater business and that was unfair to compare to counties that didn’t have those burdens. True but let’s look at why and how much it costs us to be in the wastewater and hospital business.
The hard and fast facts that jumped out at me was the large portion of unincorporated population and the employees to population figures.
For those of you that are interested, here’s the chart (click to make it larger).
From Expresso Pundit.com.
The public, the media and most legislators have no clue how bad the the budget is. We are like someone who has been unemployed for a few years, actually increased our lifestyle by spending down our 401k and refinancing our house. Now we still have an extravagant lifestyle and all the reserves are gone. Napolitano’s level of fiscal mismanagement amounts to malfeasance.
We are going to do the unthinkable. We will be releasing thousands of non-violent prisioners who have less than a year left on their prison terms. School funding will be cut, AHCCCS reimbursements will be cut, the tax equalization rate will be allowed to rise. Double counting out-of-state college students will stop. All day Kindergarten is gone. The Science foundation is gone. The Commerce and Tourism departments? Gone. We are going to sweep the remaining funds, refuse to fund the state’s pension system, reduce the state contribution to employee health care benefits and then we are going to see large layoffs and a even then we will run out of cash and struggle to make payroll.
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