Doug Ducey: Inside the Vault
Download the Q1 2013 edition of Inside the Vault.
2013 is off to a very good start!
We have a balanced budget, $2 billion in our operating account and another $450+ million in a savings account earning interest. Arizona is on firm financial footing and the Legislature is back to debating the merits of individual proposals and whether they deserve taxpayer support.
Yet, we’re still not out of the danger zone. If our revenue projections are slightly off or go on another spending spree, we could find ourselves into the same hole we’ve just crawled out of. I’m confident that the Governor and Legislature don’t want to head down that path.
I will continue to advocate for economic growth and financially responsible ideas within our state government. Two areas of particular concern for the long-term health of our finances are our public pension systems and our state debt – both of which are completely solvable situations.
In December 2012 the Defined Contribution & Retirement Study Committee completed a 2-year review of Arizona’s four retirement systems, which currently covers more than 581,000 employees, retirees, or former employees that have yet to retire.
The Pew Center for the States and the Laura and John Arnold Foundation produced a report for the Study Committee titled Arizona’s Pension Challenges in November 2012 highlighting a $13 billion shortfall between what should have been set aside to pay future pension benefits and what the state’s pension plans have on hand. In addition to a growing unfunded liability, the number of retired members in each of the four systems is growing faster than the number of new workers entering.
Much of the discussion surrounding any pension system revolves around complicated financial formulas. There is an equally important human element that must always be in the forefront; these pensions are for those who teach our children, police our streets, put out the fires, respond to medical emergencies, and keep the basic functions of government running.
We are fortunate that our pensions are in far better shape than many other states. That said, there are issues that require attention. Several reform options were explored by the Study Committee for policy makers to consider so Arizona can continue to strengthen and enhance those plans in order to protect the benefits to current retirees and employees that have earned them, as well taxpayers now and in the future.
The final report, as well as all the meeting minutes, presentations and research materials can be accessed here.
Equally as important is our state debt. In January the Joint Legislative Budget Committee (JLBC) delivered their annual report of Arizona’s State Debt and the status of other financial obligations to the Appropriation Committees in both the House and Senate. Although the Legislature has gone to great lengths to deliver balanced budgets and begin to save money in the “Rainy Day Fund” the past two years, there are several areas on the state’s balance sheet that still need to be addressed.
Arizona’s total outstanding state debt exceeds $8.71 billion; increasing significantly from $4.89 billion in FY 2007. We continue to defer $1.2 billion of payments annually and our General Fund Debt Service costs will rise from $302 million in FY 2012 to $373 million in FY 2014.
Our state debt is too high. Today it is manageable. For tomorrow, we need to address our debt and pay for the money we’ve borrowed and already spent before we continue to commit to new spending. The entire report, which includes debt retirement options and a listing of all lease-purchase/bonding issuances from FY 2003, can be accessed online here.
We need to keep up the momentum that our state government has generated in showing that we can live within our means and demonstrate financial responsibility. Together, as taxpayers and citizens, we can hold elected leaders accountable for the future costs of today’s decisions.
Thank you for your ongoing support.