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| B- | Arizona |
• Population (rank): 6,166,318 (16)
• Average per capita income (rank): $24,110 (24)
• Total state spending (rank): $25,731,467,000 (19)
• Spending per capita (rank): $4,173 (45)
• Governor: Janet Napolitano (D)
• First elected: 11/2002
• Senate: 30 members: 13 D, 17 R
• Term limits: 8 years (consecutive)
• House: 60 members: 27 D, 33 R
• Term limits: 8 years (consecutive)
There's no question that the past few years were good ones for Arizona's economy. Thanks in part to the real estate boom, revenue grew by more than 16 percent in both 2005 and 2006. The problem is that state leaders seemed convinced the good times would roll on forever, and they began spending that way. General fund expenditures grew faster than revenue and faster than any formula based on population and inflation would justify.
Last year, when revenue growth returned to its historic average of around 8 percent, some of the more mature citizens of Arizona might have recalled song lyrics from "The Party's Over": "It's time to wind up the masqueradeÉ The piper must be paid."
The debt to the piper in this case came in the form of a $1 billion shortfall in the state's $10.6 billion budget for 2007. To some extent, this was the side effect of an income tax cut passed by ebullient lawmakers in 2006. The tax structure is now dangerously dependent on sales taxes.
Although the Arizona agencies facing steep cuts have strategic plans and performance measures to guide their reductions, this information doesn't always drive managerial decisions. Part of the problem is old technology that sometimes inhibits managers from using cost and performance data to best advantage. The state's aging financial information system is all but obsolete, making good reports hard to access and putting decision makers at a disadvantage.
Arizona is working to rectify that situation. The Government Information Technology Agency provides good IT planning and wields strong authority in coordinating IT funding at the agency level — especially in an ongoing overhaul of the state's telecommunications systems. And the current budget problems may actually help the modernization process along. For instance, the Department of Administration argues that a new statewide purchasing system would reap big savings — possibly as much as $60 million a year — and improve a procurement process that one manager describes as "challenging." Should such new projects get approval, GITA's new Project Management Certification courses ought to hone system implementation.
There's good news to report from the Department of Transportation. It has succeeded in using performance measures to persuade the legislature to provide sufficient funding for highway repairs. This is especially important since Arizona's rapid population growth has strained road capacity. A Statewide Transportation Acceleration Needs Account was created in 2006, as well, in order to address the fastest-growing areas.
What doesn't look so good is building maintenance. Between the fiscal years of 2005 and 2007, despite a flush treasury, only 20 percent of the needed money was appropriated to take care of the 2,650 state buildings that depend on general revenues. Deferred maintenance for those buildings now totals nearly $250 million — almost $100,000 per building.
Although lots of people want to live and work in Arizona, fewer of them seem to want to work for Arizona state government: It receives insufficient applications per job and its 16 percent voluntary turnover rate — including more than one-third of employees with less than one year of service — is one of the highest in the country. Facing those scary figures, Arizona wisely develops the employees it does have. More than half of Arizona Government University's quality training programs are available online. And in November 2007, the state opened its Career Center's occupation-planning and job-hunting services to all state employees, in addition to displaced workers, in an attempt to retain employees by providing them a career path within state government.
Overall, money management remains Arizona's foremost challenge. In October 2007, for the first time, the state treasury hired an internal auditor to keep an eye on the $56 billion worth of financial transactions that occur between annual financial reviews. Good thing, too. In each of the past three years, Arizona's financial reviews have been late — nearly a year after fiscal close for FY 2006.
For additional data and analysis, go to pewcenteronthestates.org/gpp.