Marvins Window: How did the budget come to crisis?

I stared out my window wondering how government spending could get into such a crisis in such a short time.

The Arizona legislature is into a second special session trying to balance the fiscal 2002 budget with the same budget-balancing task ahead for fiscal 2003.

Any cut made by our legislators will have dire consequences, according to some interest group.

Babies will starve, illegal immigrants will go without heart transplants, universities will close and all state employees will go on food stamps without the promised raise is the cry head across the land!

I asked myself how the state could get in such a financial mess in just a few short months and why a solution is so difficult.

More than 30 states are doing the same thing.

The feds project a deficit for the budget beginning in October.

Mohave County appears near the edge of bankruptcy.

What happened?

The downturn in the economy and the Sept.

11 attacks get the blame, but I am not so sure that is the real answer.

Last year, economists predicted a slowing of the economy and a reduction in revenue GROWTH.

Note: The prediction was reduced growth, not a reduction in the actual dollars collected.

The state does not have fewer dollars to spend than the year before! The 6 to 8 percent annual growth common the last ten years had been predicted to stop.

It did.

While state lawmakers were ignoring the signs and continuing to write budgets based on the "growth in revenue" habit, the Kingman City Council was listening to then-Financial Services Director Roger Swenson and his predictions that the revenue would not increase very much.

Recent reports indicated the city still overestimated a bit, even after reducing the former 8 percent to 4 percent.

Growth of 1 or 2 percent resulted in a predicted $400,000 overestimation of revenue.

Tight budgeting and extra contingency funds cut the risk.

The Miner headline shouted that the city would have a $400,000 shortfall.

Had the council gone forward with the old 8 percent growth that felt so good, the shortfall would have approached $1 million!

Lawmakers argued with Gov.

Jane Hull about the estimates and found themselves making a third attempt to put state finances in balance.

How did we get into this fine mess?

I took my sharp pencil and started compounding by 8 percent, the growth rate some folks had gotten quite comfortable with.

Assume a $100 million beginning budget ten years ago.

Assume an 8 percent annual growth in revenue that is spent each year.

What would that $100 million be after ten years?

Try $215 million, more than double the original amount.

The annual 8 percent growth alone becomes a $16 million figure in the tenth year.

A prudent family could have taken that beginning $100 million and kept household spending at the same level for the ten years.

Ten years later, that family would have $115 million to add to their savings JUST THIS YEAR!

They would call that an opportunity, not a crisis.

Governments spend what they can get each year.

When tax revenue estimates decrease, governments are in trouble.

So many new programs have been funded that any cuts seem impossible.

Every program has become "essential." Our very lives depend on each program that has grown during those fat years.

We have heard great outbursts about President Bush proposing a deficit budget.

His budget is short $80 billion.

The Senate just axed his $77 billion economic stimulus package.

Some nosy newsperson asked members of Congress whether that would not now make the budget virtually balanced.

Not a one of them would admit that.

Do you suspect the folks in Washington will spend more than Bush asked for and blame the president for a deficit budget?

Small annual growth in the budget becomes a huge increase during just a few years.

That is so simple that no politician or special interest group can grasp it.

At the same time, tax collection has moved away from the local area so someone else can get the blame for taking the money.

Then, state, county and city politicians can brag about getting "grants" for local projects no one would approve if they recognized their dollars coming back home!

Gradual increases in budgets add up to real dollars.

Maybe the current financial crisis will allow governments and voters to take another look at what we really need.

It is a time to take a new look at our priorities.

Unfortunately, a crisis never seems a good time to do that.

When you are up to your hips in alligators, it is difficult to remember that the original mission was to drain the swamp.