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Alberta H. Charney, PhD
Arizona state policy makers have been reducing state government, cutting education funding and shrinking university funding, as shares of the state economyi.
Although volatile, the General Fund of the State of Arizona has been shrinking, per $1,000 of state personal income, since the early 1990s (Figure 1). The General Fund declined steadily through fiscal year (FY) 2003, largely due to numerous tax cuts in the 1990s and a weak economy in the early 2000s. The General Fund then climbed steeply between 2005 and 2007 but dropped again due to tax cuts and a weak economy.
General Fund Spending per $1000 of Arizona Personal Income
Figure 2 shows several of the major expenditure categories, per $1,000 of Arizona personal income. Protection and Safety has grown throughout the period shown on the graph (1979 – 2008). Health and Welfare expenditures, after a severe increase during the early 1990s recession, followed by a decline, has been growing strongly since 2002. The recent growth in Health and Welfare expenditures has been due, in part, to a referendum passed by the voters in 2000 that increased eligibility for state-provided healthcare and, in part, to the recession that officially began in December of 2007. Much of the cost of the increased healthcare eligibility was paid for through 2003 by Tobacco Settlement money, but in recent years the added costs have increasingly been born by the General Fund.
Both Education and General Government have shown a general downward trend. The “bump” in education, starting in FY1999 and continuing through 2002, is due to School Facilities Board (SFB) expenditures. SFB expenditures dropped to very low levels in 2003, when the state had shortfalls, then resumed in 2005 through 2008. These large, irregular expenditures started in 1999 when the state took on the responsibility of K-12 school construction due to a court decision. The state took on this responsibility without increasing revenues necessary to fund them.
Selected General Fund Categories per $1000 of
Arizona Personal Income
The effect of School Facilities Board spending on total education spending is better seen in Figure 3, which disaggregates education expenditures. School Facilities Board expenditures are shown at the bottom of the graph. When separated from total education expenditures, there is a slight downward trend in K-12 expenditures and a stronger downward trend in University and Regents expenditures, when graphed per $1,000 of Arizona personal income.
Education Expenditures by Type per $1000 of
Arizona Personal Income
It should be noted that not all state money for education is in the General Fund. In 2001, voters passed Prop. 301, which increased the state sales tax rate from 5 to 5.6 percent, with the proceeds going toward education. Figure 4 depicts education funding from the General Fund (less the School Facilities Board expenditures) with and without Prop. 301 money added. Education funding from the General Fund (without Prop. 301 money) continued to drift downward after the passage of Prop. 301, suggesting there was some substitution of Prop. 301 money for General Fund spending. It is clear that without the Prop. 301 money, state expenditures on education would have fallen well below the level of spending during the 1990s, as a share of Arizona personal income.
General Fund Education,
less School Facilities Board,
per $1000 Arizona Personal Income
With and Without Prop. 301 Money
Not only do General Fund education expenditures decline relative to Arizona personal income, education expenditures (excluding School Facilities Board expenditures) declines as a share of the General Fund (Figure 5). In the late 1970s, education comprised almost 70 percent of the General Fund of the State of Arizona. In recent years, education was slightly over half of the General Fund.
Education (excl. School Facilities Board)
Share of General Fund (%)
Universities fared much worse than education as a whole. University expenditures fell from 19 percent of the General Fund to approximately 10 percent in recent periods (Figure 6). Despite representing only 10 percent of the General Fund, some proposals to solve the current fiscal crises would have universities absorbing approximately 25 percent of the budget cuts.
Universities as
Share of General Fund (%)
University expenditures have also declined as a share of general fund expenditures on education (Figure 7). Of total General Fund education expenditures, universities received almost 29 percent in the early 1990s. Since then, the share of education expenditures received by universities declined precipitously, to 17 percent in 2006 and 2007. Although the share grew slightly in 2008, the proposed cuts will substantially decrease the share of education expenditures going to universities.
Universities as
Share of Education (%)
Figure 8 shows General Fund expenditures on universities and on protection and safety. In the late 1970s, universities received $9 for each $1000 of Arizona personal income and protection and safety got $3. Over time, universities received less and expenditures on protection and safety grew. With the proposed budget cuts, universities will fall substantially below protection and safety, of which 80 – 86 percent represents the Department of Corrections.
Selected General Fund Expenditures
Per $1000 Arizona State Personal Income
One has to ask whether these budget priorities are what are required for Arizona and its citizens to compete in the 21st century global economy. 
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