Your Questions Answered: Is AZ a Big Spender? 12/09/09
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The latest edition of Your Questions Answered!
In this update we cover two recent questions from AEN subscribers regarding Arizona spending statistics…
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Q: I get a lot of mail from a special interest group saying that our state spending is wildly out of control. Are our expenditures really out of line?
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While the answer to this question is subjective, we took a look at all of the states that have a similar population size to see how their spending compares. What we discovered is that Arizona is already operating with fewer general fund dollars than any of the states with populations between 6-7 million people[i].
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| State | Population Rank 2008 | Total Population 2008 | 2008 General Fund Expenditures (in millions) | Size of Projected Budget Gap as % of 2010 budget | Education Spending per student 2006-2007 | 2008 state GDP (in millions) | 2008 GDP Rank |
| TN | 17th | 6,214,888 | $11,361 | 0.7% | $6,930 (46th) | $210,216 | 33rd |
| IN | 16th | 6,376,792 | $12,730 | 2.2% | $8,874 (25th) | $209,903 | 42nd |
| MA | 15th | 6,497,967 | $27,227 | 2.1% | $12,627 (7th) | $312,476 | 13th |
| AZ | 14th | 6,500,180 | $10,037 | 20.5% | $6,248 (50th) | $210,235 | 43rd |
| WA | 13th | 6,549,224 | $14,616 | 4.8%
(2 year budget) |
$7,959 (38th) | $264.633 | 10th |
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Our state general fund spending also hasn’t varied much when it is compared to the total personal income of Arizona citizens each year. The highest income to state spending ratio in the last 16 years was 5.2% in 1995 – it was 4.7% in 2008.
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What has changed dramatically is our tax structure. Corporate income tax rates have declined from 9.3% in 1990 to 6.98% in 2008. The JLBC reports that our yearly corporate tax revenue was actually lower between 1998-2004 than it was in FY 1997.
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Personal income taxes have dropped from a range of 3.80-7.00% in 1990 to 2.59-4.54% in 2008, and the number of tax credits and loopholes introduced during that time means that many individuals and businesses pay less than their actual published tax rate.
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Q: My legislator told me that education spending has been consuming more & more of our state budget every year. I also hear that we are the lowest in education spending in the US – how can this be if we are spending so much more each year?
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There are three main ways that education spending is typically measured on a state level: by total dollars spent, the percentage of spending in relation to the overall state budget and the per-pupil spending (total spending divided by actual number of students served).
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Unfortunately, your legislator is misinformed. In 1979 Arizona was investing about 69% of the total general fund budget on K-12 schools, community colleges and universities. Today about 57% of our state budget is devoted to our schools.
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While Arizona’s overall spending on education has increased during that same time period, it has not kept up with the growth in our population. The American Legislative Exchange Council (ALEC) reported recently that Arizona actually spent more per K-12 student in 1986 than we did in 2006. This bears repeating: we actually spent $61 less per student than we did 20 years prior…and those latest figures were released before the most recent spending cuts. The ALEC report also concurs with all of the other national education surveys that Arizona is ranked at the very bottom for educational investment among US states.
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References
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US Population Statistics: U.S. Census Bureau, Cumulative Estimates of Population Change for the United States, Regions, States, and Puerto Rico and Region and State Rankings: April 1, 2000 to July 1, 2008 http://www.census.gov/popest/states/NST-pop-chg.html,
State General Fund Expenditures: The Fiscal Survey of States, National Governor’s Association, June 2009, http://www.nasbo.org/Publications/PDFs/FSSpring2009.pdf
Projected State Budget Deficits: Recession Continues to Batter State Budgets; State Responses Could Slow Recovery, Center on Budget Policy & Priorities, Table I, http://www.cbpp.org/cms/?fa=view&id=711
Education Expenditures and State Rankings: American Legislative Council, The Report Card on American Education: A State-by-State Analysis, 2008 http://www.alec.org/am/pdf/ReportCard08.pdf
GDP by State: Bureau of Economic Analysis, Economic Slowdown Widespread Among States in 2008, Table 1 Real GDP by State 2005-2008, http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htmysi
General Fund Spending as a Percent of Personal Income, Joint Legislative Budget Committee, 2009, http://www.azleg.gov/jlbc/gf%25azpi%2010-08.pdf
Arizona corporate and individual tax statistics: Joint Legislative Budget Committee, 2008 http://www.azleg.gov/jlbc/08taxbook/08taxbk.pdf
Frank Antenori’s Quote: KGUN News, Channel 9 Tucson, November 18, 2009 http://www.kgun9.com/Global/story.asp?S=11533711
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Find Out More
Joint Legislative Budget Committee, November 2009 Monthly Fiscal Highlights