Monday October 22, 2001

Low state funding of education during buoyant years hurt universities, officials say

After a long economic boom in the 1990s, Arizona is now faced with an economic shortfall of more than $650 million in this fiscal year- an amount that is expected to grow to nearly $1 billion next year.

As a result, state agencies - including Arizona's three state universities - are being asked to slice 4 percent from their budgets for this year to hand back to the state.

Many, however, are now critical of how Arizona's revenue was invested in the mid-90s when lawmakers pushed for large tax cuts rather than funding for education.

UA President Peter Likins said university budgets are typically cut in hard economic times, yet they are not rewarded when the pendulum swings toward a booming economy.

"Sadly, in the state of Arizona, there was a period of 10 very buoyant years in the economy - years in which the state government was focused on cutting the taxes instead of investing in universities or other public services and so we are not prepared," he said.

Arizona State University economist Tom Rex agreed and said Arizona universities faced the same kind of cuts in the late 1980s that they are confronting now.

Rex said Arizona's economy was slow in the late 80s, so taxes were increased. Then, in 1994, the state's economy rebounded with a budget surplus of more than $318 million.

More than $120 million of that surplus was used for a tax cut, which, when added to a $33.8 million cut that then-governor Fife Symington enacted in 1993, equaled $153.8 million in tax cuts.

Symington told the Legislature in 1994 that he believed the government should "retrench in lean times," or cut back. He also said he changed his mind about saving money for when Arizona's revenue failed to keep pace with the state's needs.

Those actions have now resurfaced for criticism as the state's economy continues to diminish.

Rex said lawmakers cut income and property taxes in the 90s, but at the same time raised the sales tax.

He said sales tax does not bring money in during a recession because sales are down. Also, Rex said the rise of Internet purchasing has created a tax-free method of shopping.

Kay McKay, president of the Arizona Board of Regents, said lawmakers in Arizona have failed to look at education as an investment.

"It's about planning," she said. "Many people do not seem to comprehend that when you start cutting, it is ultimately going to impact our state."

Rex said that cutting the budgets of government agencies now will only hurt the economy further.

"In a recession, the need for government increases," he said. "More people are going to school because they can't find jobs."

He said lawmakers need to be willing to invest for the future, look ahead to the long term and consider changing some of Arizona's tax codes.

At a special Legislative session in Phoenix, which will begin on Nov. 13, lawmakers will assess just how large the cuts will be. The UA is already preparing for a $43.8 million cut, but the number could be higher.

"Typically what happens in the cycles of the economy is that when there is a recession, universities get hurt and when there's prosperity, universities receive the benefit of investments," Likins said.