In the News RSS

Florida's Personal Learning Scholarship Accounts

bwilson — Thu, 31 Jul 2014 22:29:21 +0000

In May 2014, the Florida Legislature passed SB 850, which was a comprehensive education bill. In part, the bill created the innovative Personal Learning Scholarship Account (PLSA) program. The purpose of the PLSA Program is to empower parents of special needs children to direct educational funds toward a combination of programs and approved providers in order to address the unique and individualized needs of their children as each parent sees fit. The Florida Education Association (FEA), through its member Tom Faasse, has filed suit challenging SB 850. FEA claims that SB 850 violates the Florida Constitution's "single subject" rule, which requires that every bill passed contain only one subject. However, the subject of SB 850 is clearly education.

If FEA prevails in its suit, the PLSA program will be wiped off the books and many families will lose the opportunity give their special needs children the unique and specialized education they need to thrive as adults. FEA’s attorney, Ron Meyer, has called the personalized learning accounts "a collateral casualty" in the lawsuit. The Goldwater Institute has filed to join the State of Florida in opposing the lawsuit in order to protect the right of parents to direct the education of their special needs children.

PLSA Moms

Julie Kleffel

Diagnosed with Down Syndrome, Julie's daughter Faith could be helped by Florida's recently passed Personal Learning Scholarship Account, giving her a better opportunity to succeed in the comfort of her own home.

Melissa Ward

Melissa's son Ethan has cerebral palsy, making physical things difficult to accomplish. With Florida's Personal Learning Scholarship Accounts, Ethan's family would have the resources to get him the therapy he needs, while saving money for the state.

Ashli McCall

Ashli's son Emmil has autism, making a traditional public school a difficult learning environment for him. However, this makes him eligible for Florida's new Personal Learning Scholarship Accounts, giving him the chance to receive therapies that would help his diagnosis. Yet, the FEA threatens to strike down this program, despite the large number of students it could help.

Information

-Florida Department of Education: Personal Learning Scholarship Account Program
-Step Up For Students: Special Needs Scholarship
-Goldwater Institute: Faasse v. Scott Case Page

In The News

-Examiner: Florida's PLSA has joined Arizona's ESA (6/27/2014)
-The Daily Caller: Union Sues to Block School Vouchers for Disabled (7/16/2014)
-Miami Herald: Florida Teachers Union Files Legal Challenge To Expansion Law (7/16/2014)
-Florida Times-Union: Law Expanding School Vouchers Faces Teachers' Legal Challenge (7/16/2014)
-Orlando Sentinel: Special-needs Kids Will Soar with New Scholarship Money (7/17/2014)
-WCJB Gainesville: New Scholarships Allow Children with Disabilities to Personalize Their Education (7/17/2014)
-WEAR TV Pensacola: New Scholarships Available to Special Needs (7/17/2014)
-Headlines & Global News: School Vouchers for Disabled Students Blocked by Florida's Teachers Union Challenge (7/17/2014)
-Houston Chronicle: Scholarship for Students with Special Needs Now Available Through Step Up For Students Scholarship Program (7/17/2014)
-Florida Watchdog: Teachers Union Takes on Florida School Choice Law (7/18/2014)
-Sun-Sentinel: New Scholarships Available for Special Needs Students (7/21/2014)
-Education News: Scholarship for Florida Special Needs Students Debuts, with Criticism (7/23/2014)
-Tampa Bay Times: Florida's Newest Vouchers Prove Popular (7/24/2014)
-The Gainesville Sun: Lawsuit Challenges Scholarship Program (7/24/2014)
-Goldwater Institute: Special Needs Parents To Union: Our Children Aren't "Collateral Casualty" (7/31/2014)
-Cato Institute: Florida Parents Fight for Educational Choice (7/31/2014)
-WFSU: Families with Disabled Kids Fire Back Against Teacher's Union Lawsuit Over New Program (7/31/2014)
-Miami Herald: Families Say FEA's School Choice Lawsuit Will Hurt Special Needs Kids (7/31/2014)
-NPR: Families With Disabled Kids Fire Back Against Teacher's Union Lawsuit Over New Program (7/31/2014)

For more information, please contact Charles Siler with the Goldwater Institute at (202) 487-8652 or csiler@goldwaterinstitute.org.

The Personal Learning Scholarship Account Program (PLSA) was established in 2014 to provide parents the option to better meet the individual needs of their eligible children. Personal Learning Scholarship Accounts are administered by eligible nonprofit scholarship-funding organizations (SFO). Parents of eligible children may use the accounts to purchase approved goods or services, as well as provide for prepaid college plans.Thursday, July 31, 2014 - 15:20Denying the VulnerableFlorida's largest union threatens new special needs scholarship programEducation Reform Multimedia Video In the News CaseYes 14.07.17 JK in OS PLSA.PDFfaasse, rick scott, goldwater institute, PLSA, FEA, florida, Clint Bolick, lawsuit, ESA, special needs, scholarship, school choice, education reform, SB 850, constitution, personal learning scholarship account, step up for students, TallahasseeBy Topicstrue

NPR: Families With Disabled Kids Fire Back Against Teacher's Union Lawsuit Over New Program

bwilson — Fri, 01 Aug 2014 17:34:49 +0000

Recording originally aired on NPR, July 31, 2014

Six Florida families with disabled children want to block a lawsuit challenging the state’s newest voucher program. They say a move by the state teacher’s union to invalidate a broader bill on educational choice options, is bad policy.

The Good, The Bad, and The Ugly: A Review of Arizona’s Fiscal Transparency Efforts

bwilson — Thu, 15 May 2014 17:14:39 +0000

The Arizona Open Books website proved useful in exposing some suspicious transactions, but transparency in Arizona still needs improvement. We were able to use the website to find wasteful spending on nearly $2.5 million worth of “Awards” and another $1 million on “Entertainment and Promotional” items in 2013. But the site did not provide sufficient detail to assess the legitimacy of suspicious transactions lumped into catch-all codes like “Other Professional Outside Services,” which totaled $289 million in 2013 alone.

The bottom line is that while most of the state’s individual expenditures are posted for public scrutiny, it is still possible for waste, fraud, and abuse to hide in plain sight due to vague or cryptic descriptions of individual expenditures. Curious taxpayers are treated to accounting codes and code descriptions that often bear little resemblance to the purpose for which funds are expended. In addition, payroll abuses can be hidden because payroll is kept secret under current law even though public employee salaries are subject to open records.

If Arizona’s state government is to be truly transparent, each transaction posted on Arizona Open Books needs an accompanying memo line to give citizens accurate descriptions of the specific purpose of each transaction. Sourcing of expenditures should be provided as well. Finally, specific details about the public payroll should be a centerpiece of Arizona Open Books.

Download the PDF version

Introduction

In 2008, the Arizona legislature passed Senate Bill 1235, which required the State of Arizona to open its accounting books to the public at large, down to the individual transaction. The result, implemented by the Department of Administration, is Arizona Open Books (openbooks.az.gov), a website launched in January of 2011. The law requires transaction information to be presented in a way that is “intuitive to members of the general public.” While this website is a good first step toward making state government more transparent and efficient, the site falls short of being easy for citizens to understand. Consequently, the state’s finances are not as transparent as they can and ought to be.

The real test of a transaction-level financial transparency system is whether individuals from the general public can tell how their hard-earned tax money is actually spent. For example, if a state agency spent money for an employee to travel to a conference, a taxpayer should be able to identify which conference. This information would enable the taxpayer to determine the utility of the conference, whether the expenditure was extravagant, and save time by avoiding unnecessary fishing expeditions when something appears suspicious only because there is too little detail available. As it is, taxpayers appear to be expected to know government accounting codes that provide little descriptive information and whose meanings appear to bear little resemblance to the purpose of actual expenditures.

This does not mean Arizona Open Books has been ineffective. For example, for two years prior to the website’s launch, $1.5 billion of state spending was categorized as “Other Miscellaneous Operating.” This vague category represented a lack of information that put taxpayers—and possibly even state managers—in the dark on a significant state line item. In the same year the site was launched, the mere appearance of impropriety from so vaguely categorizing so much spending brought about a huge reduction in this category of expenses. As of 2013, the “Other Miscellaneous Operating” category was down to $55 million, an obvious improvement.

Despite these improvements, the transparency website does not lend itself to investigation by an outside party without a good deal of agency-level knowledge. First, the number of transactions carried out by the state is vast, and a single transaction can vary from a few pennies to millions of dollars. The small transactions, though too many to individually investigate, can add up. What this means is that sheer volume makes it possible for waste, fraud, and abuse to hide in plain sight. Second, and perhaps more fundamental, there is simply not enough information on the website itself for an outsider looking in to make informed judgments about the reasonableness of most transactions.

Despite the drawbacks, it is possible to gather some important information from the state’s transparency website. Data were downloaded from the site into an Excel spreadsheet. Due to the volume of transactions, those smaller than a few thousand dollars were ignored. The transactions were then examined for anomalies. The results are reported below as the good, the bad, and the ugly in investigating expenditures from the state’s transparency database. Since the website lacks certain information, phone calls were made to agencies for clarification. When clarification was forthcoming, suspicious expenditures were often cleared up. If agencies refused to cooperate, expenditures were simply reported for what they appeared to be on the system.

The Good

Supreme Court

At the outset of this project, the Arizona Supreme Court seemed to have the greatest number of questionable expenditures. Looking through their expenses, large sums of taxpayer dollars were found to be spent on furniture, conferences, advertising, meals, and motor pool charges. As with other departments, our experience with the Supreme Court’s posted transactions provides evidence that Arizona’s open book website is not highly transparent or intuitive. Fortunately, Supreme Court administrators diligently provided information to make up for the lack of transparency.

Arizona Open Books indicates that the Supreme Court spent $320,807.75 on capital furniture expenses. Surprisingly and suspiciously, the largest expense, totaling $232,605.87, has the payee listed as “N/A.” Upon questioning the department’s chief financial officer it was discovered that the capital furniture expense was not furniture at all. It was actually purchases from Hewlett Packard, primarily for upgraded servers. It turns out the mix-up results from the Supreme Court’s code for Capital Assets being the same as the Department of Administration’s code for furniture. The lack of coding alignment between departments raises questions about how many other transactions are improperly coded throughout the state’s accounting system. A simple comment section would have cleared up any questions regarding this expense.

Shifting focus to charges under “other operating” expenditures there are a couple of expenses, totaling over $5,000 with Cleats, Inc. listed as the payee. On first glance this expenditure looks like the Supreme Court is using taxpayer dollars at a popular sporting goods store in the valley. Even the chief financial officer initially thought the expenditure looked odd. He promised to look into it right away and it turns out Cleats, Inc. is the parent company for a subsidiary called It’s Your Choice. It’s Your Choice is a promotional company and the money was used to purchase black portfolio binders with the Court Appointed Special Advocate logo affixed to be given to court appointed special advocate (CASA) volunteers. Perhaps this money could have been better spent for the purpose at hand, but even the most hard-hearted efficiency advocate will likely find it difficult to criticize giving binders to volunteers. The real problem this highlights is the difficulty involved in getting to the bottom of the reported expenditure.

On a single day the Supreme Court spent over $200,000 on “charges for conference registrations/attendance fees” at Marriott International, Inc. Arizona Open Books only provides the name of the payment recipient and the fund out of which the money was spent. There is no description of the conference’s purpose or other pertinent information such as number of attendees. As it turns out, the $200,000 expenditure was for a conference that had 569 registrants, with 23 separate educational sessions over three days. Additionally, the conference was paid for by registration fees and it was conducted to continue judicial education for judges required by the Arizona Code of Judicial Administration. None of this pertinent information came from the Arizona Open Books website.

Another Supreme Court expenditure that appeared suspicious was a $25,000 payment made to PRfect Media, Inc. The expenditure was classified under “advertising” expenses, begging the question of why the Supreme Court would need to advertise. It turned out the funds were used for the 2012 General Election Judicial Performance Review (JPR). This informational bulletin is intended to provide voters with information on judges, including how to locate JPR ratings for judges subject to a retention election.

Yet another area where a lack of transparency caused suspicion was “in-state travel” charges from the court. These categories include meals with and without an overnight stay, lodging, and motor pool charges. Without knowing most of these expenses were incurred by probation officer training, a million dollar motor pool bill would seem excessive and nearly $100,000 spent on meals should likewise raise questions. Even considering their purpose the charges seem high. However, a couple of sentences in a memo field in the Arizona Open Books database would have at least cleared up the suspicion that the Supreme Court was gallivanting about the state on the taxpayer’s dime. A more transparent website with explanations for the individual expenses could help accomplish greater efficiency and potentially reduce these expenses by inviting more critical scrutiny by taxpayers.

The Arizona Supreme Court was the most helpful of all agencies in explaining their transactions. They were able to explain each transaction of interest in a timely and efficient manner. Their short description for each transaction of interest proves that supplementary information could and should be made readily available.

The Bad

Since it is derived from the state’s accounting system, Arizona Open Books is littered with categories so generically described that they are essentially meaningless to a person curious about government spending. Two of the categories found most often are “Miscellaneous Rent” and “Other Professional Outside Services.” The State of Arizona spent nearly $300 million in the “Other Professional and Outside Services” category in fiscal year 2013. The only information provided was the impressively vague definition for the category and the name of the payee. For charges expensed under “Miscellaneous Rent” it was decided to solely focus on the Arizona Department of Education because of the wide variety of expenses they drop into this generic category.

It should be noted that the use of private vendors is a good practice. With outside contracting, competitive bidding can keep costs lower than in-house services, and standard services are more open to innovation. However, no matter how government conducts its business, transparency is absolutely essential. In the private sector, if poor business practices occur, business owners bear the cost, and competitors can arise to give consumers better value. This is not possible where government is involved and taxpayers are on the hook. So if government enters into inappropriate contracts for some reason, the only way to discipline the system is through audit checks and transparency. Improving clarity and transparency in the system would enable more citizens to evaluate government transactions, providing a higher level of accountability.

Charges for Miscellaneous Rent

Unlike their counterparts at the Supreme Court, the Arizona Department of Education’s response to questions about specific expenses consisted of generalities that failed to make questionable expenditures any more transparent. The Arizona Department of Education (ADE) spent $1.8 million on “Charges for Miscellaneous Rent.” This category consists of charges for conference expenses, training sessions, and payments to a catering company, a storage company, a life insurance company, and a computer rental company.

A majority of the expenses in “Charges for Miscellaneous Rent” were for properties rented for conferences. This totaled a whopping $1,408,706.33. In contrast to the Supreme Court, when asked about these expenses the ADE did not mention the reason for the conferences or disclose the number of attendees. The response was that “most of these expenses are paid for with conference registration fees collected from attendees.” In other words, there is no telling how much of the expenses from venues such as Casino Arizona were paid for by taxpayers. Given that the ADE generally puts on conferences for school district personnel, it is likely that the conference expenses were entirely paid for by taxpayers except to the extent that vendors paid fees to be allowed to market their wares to the conference attendees. It would help if Arizona Open Books informed taxpayers about which costs were covered by attendance fees, reasons for conferences, and the total number of attendees and their affiliations.

Another puzzling expense was $2,009.87 paid to MassMutual Life Insurance. MassMutual Financial Group offers whole life insurance, annuities, retirement plans, disability income insurance and long-term care insurance for individuals and businesses. The ADE said the expense was coded incorrectly and was actually for non-employee travel to attend a conference. It could be reasonable in this case to assume that taxpayers funded a private company to make a sales pitch at a publicly sponsored conference, an expenditure that likely violates the state constitution’s gift clause. Were a more thorough explanation required on the website, this expenditure might never have been authorized in the first place. Without more detailed explanations on Arizona Open Books, this questionable expenditure and perhaps many like it can easily hide in plain sight.

Another questionable expense categorized as “Charges from Miscellaneous Rent” was paid to Sodexo America, LLC. Sodexo provides quality-of-life services, including sustainable energy programs, efficiently designed workspaces, and wellness and nutrition programs. The charges paid to Sodexo amount to just over $174,000. Perhaps the Arizona Department of Education used Sodexo in their food service capacity to provide catering for training and conferences, but there is no way to be sure just by visiting the website. The Department of Education never responded to an email requesting clarification.

Other Professional and Outside Services

The State of Arizona spent $288,537,361.83 in the “Other Professional and Outside Services” (emphasis added) category in fiscal year 2013. The description for this category reads “Charges for other professional and outside services such as laundry and dry cleaning, religious services, interpreters, lecture fees, security, and other services provided by external entities not accounted for elsewhere.” On its face, this is a rather outsized sum to be assigned into what appears to be a catch-all category. When comparing the dollar amount in this category to the dollar amount of the other categories within the broader “Professional and Outside Services” category it is by far the largest. The other categories within “Professional and Outside Services” include “Education and Training,” “Engineering and Design,” “Financial Services,” “Hospital and Medical Services,” “Institutional Care,” “Legal Services,” and “Temporary Agency Services.” The only category whose total comes close to “Other Professional and Outside Services” is “Hospital and Medical Services,” which falls short by over $100 million. Clearly, “Other” is less transparent than one of the more specific descriptions. Yet, perhaps there are so many different other services that it is impractical to create categories for all or any of them. This is why a memo line on the website would aid transparency.

A review of various departments’ expenditures under “Other Professional and Outside Services” showed that few transactions offered any level of detail, creating great potential for corruption and misuse of funds. Departments were contacted for clarifying information. Some departments were helpful while others denied requests and insisted on submission of Freedom of Information Act (FOIA) requests. While FOIA is useful, it is not in itself true transparency. Few understand the law and even the civic-minded will hesitate to bother with the trouble and expense. There is no reliance on FOIA requests for the findings listed below because real transparency demands that all relevant information appear online.

The Arizona Department of Transportation (ADOT) has the third largest agency budget in the state, behind only the Departments of Education and Economic Security. Given the high cost and capital-intensive nature of ADOT’s work, this intuitively makes sense. But the amount of money ADOT categorizes under “Other Professional and Outside Services” does not make sense. Over $44 million is paid to individuals and companies, with no explanation or even a hint as to what services are being provided. This is especially troubling since the “Professional Outside Services” category provides separate, relatively descriptive categories for design and engineering costs. Nevertheless, design and engineering companies are also paid under the “Other” category. For example, the Jacobs Engineering Group, which provides “technical, professional, and construction services” was paid $1,335,206 under the “Other” category in addition to $3.3 million under “Engineering and Design.”

Other examples of ADOT’s suspicious “Other Professional and Outside Services” expenses include more than $46,000 to Corporate Destination Services of Arizona for “meeting and event planning services.” Another $73,000 went to True Color International for “a model for understanding yourself and others based on your personality temperament.” ADOT offered no explanation and demanded a FOIA request, a task that often unfairly challenges the taxpayer to craft a carefully and specifically worded request in order to get the information they seek.

Like ADOT, the Arizona Department of Education (ADE) stonewalled and obfuscated. Questionable expenditures include $53,332 to the Arizona Automobile Dealers Association and $205,003 to the Arizona Interfaith Movement. After further inquiry, the department told us that the payments made to the Arizona Automobile Dealers Association were “to promote an automotive strategy for Arizona’s youth” and the payments made to the Arizona Interfaith Movement were for “payment for interfaith movement golden plate rule per 15-243- golden rule special plate fund.” A combined $2 million was paid to Arizona State University and the University of Arizona for unexplained education and training purposes. A number of individuals are listed as payees under the “Other” category. One of the largest recipients is Teresa Ann Lauffer, who received $66,165 for her services, which are not explained on the website.

Financial information from the Department of Environmental Quality suffers from similar problems. Of the department’s $100 million budget almost $38 million is classified as “Other Professional and Outside Services,” meaning that nearly 40 percent of the department’s spending lacks any real explanation.

Included in the “Other” category is a total of $22 million paid to Gordon-Darby Arizona Testing. Expenses of this magnitude require an explanation, but none is given here. There is no way of knowing without further investigation what services Gordon-Darby Arizona Testing provided. After researching the company, it was determined that the company provides services relating to vehicle emissions testing and related IT services. Yet, something that accounts for roughly 20 percent of the department’s budget should be placed in a more descriptive category or at least have some further accompanying explanation besides “Other.”

Another example of an obvious mistake that could have been easily detected and fixed with a memo field in the database comes from the Department of Public Safety. Arizona Open Books shows that the Department of Public Safety spent $571,675.11 at the Goodyear Tire and Rubber Company for “Charges for the costs associated with the purchase of supplies used in connection with the repair and maintenance of equipment and other assets that are neither buildings nor transportation equipment” (emphasis added). An expense of half of a million dollars in a category that clearly should not include anything to do with a tire company should have thrown up immediate red flags within the department. Yet, it slipped through. By the time the Department of Public Safety was contacted, its accountants were aware of the mistake. Why it was not already fixed is another issue entirely. Regardless, this points to the underlying structural problems with the website. Because the website does not allow for a descriptive memo notation, coding errors like this are bound to slip through.

The Ugly

Expenditures classified as “Miscellaneous Rent” and “Other Professional Outside Services” are often mysterious and might represent misspending, but there are plenty of examples of obvious waste. The State of Arizona spends a surprising amount on promotional items and awards, including promotional infant onesies, reusable grocery bags, and sport cups, just to name a few.

Promotional Items

In fiscal year 2013, the State of Arizona spent $939,976.25 on “Entertainment and Promotional” items. These items include reusable grocery bags from the Childhood Development Health Board, sport cups for attendees of an Arizona Department of Education conference, and $31,000 for pens and other items given away by the Department of Public Safety during anti-gang awareness events. It is hard to say with any credibility that these expenditures benefited the Arizona taxpayer in a meaningful way.

The Arizona Department of Education spent almost $22,000 on awards they described as “promotional items for educational conferences.” Those items include “lanyards, name tags, flash drives, sport cups, pens, tote bags, and so on.”

Of the nearly $1 million spent on promotional items, one company, Brown and Bigelow, Inc., took home $682,179.20. The Early Childhood and Development Health Board, by itself, spent $350,676.09 at Brown and Bigelow. After further digging, it was found that the Early Childhood and Development Health Board bought $237,737 in backpacks. The backpacks were used as packaging when passing out Parent Kits, which included six parenting DVD’s, a guide to community resources, a book to encourage reading, and a magnet with the phone number to the “Birth to 5” helpline. Nearly all of the remaining money spent at Brown and Bigelow, Inc. by the Early Childhood and Development Health Board, approximately $126,000, was for “parent awareness and community outreach efforts.”

The Early Childhood and Development Health Board exists as a result of an initiative popularly known as First Things First, which passed in 2006. The board operates without legislative supervision because it has a dedicated funding source, a tax on tobacco. That is, it essentially has no oversight except to the extent that the governor’s office chooses to exercise it through the appointments made to the board. Transparency is therefore all the more necessary. Few voters would have suspected their vote was for taxpayers’ money to be spent on promotional infant onesies or reusable grocery bags.

Awards

In fiscal year 2013 the State of Arizona shelled out $2,433,236.22 for awards. The Arizona Open Books website states that these awards are for “Employee Recognition, etc.” Given this information, no person looking at the website could possibly know that the lion’s share of these awards were for livestock contests. With a total of 49,423 full-time equivalent state employees, Arizona Open Books makes it appear that state agencies spent $50 per state employee on awards in 2013 alone. Deeper digging reveals that the transparency website’s information is once again inadequate. Buried in this section are awards totaling $1,755,611.06 handed out by the County Fairs Livestock Agriculture Promotion Fund and another $250,000 to Thoroughbred Farms and Ranches, courtesy of the Department of Racing. A mere 18 percent of what is expensed under “Employee Recognition, etc.” actually goes to “Employee Recognition.”

A further breakdown of the awards section by payee showed what appears to be a picture of misuse of taxpayer funds. The Arizona National Livestock Show, which received $533,850, is a nonprofit organization that produces the “largest livestock show in the southwest.” The Governor’s Office, through which these funds are passed, demanded a FOIA request before answering questions about why this handout was included in the awards section and exactly how these “awards” are funded.

Despite the lack of cooperation and transparency from the Governor’s Office, the source of these funds was pieced together. Following the intergovernmental transfers, it appears these funds initially came out of the portion of the general fund that is assigned for the Department of Racing. The Department of Racing then transferred $1,799,500 to the County Fairs Livestock and Agricultural Fund, which resides within the Governor’s Office. The Governor’s Office then handed out $533,850 from the County Fairs Livestock and Agricultural Fund to the Arizona National Livestock Show. Given that this money appears to have come directly from taxpayers, an explanation of the purpose of the “awards” would seem appropriate. To be sure, there are some designated fees and other non-tax funds that are deposited into the general fund (which speaks to the confusing nature of Arizona’s accounting). If this is the nature of these funds, it is not possible, or at least not easy, to figure this out from the Arizona Open Books website.

Travel in the Office of Tourism

In total, the Office of Tourism spent $103,625.51 for out-of-state travel expenses. Breaking this down further, about half of this expense was for out-of-state travel and the other half was for out-of-country travel. It’s easy to see why the Office of Tourism might spend money on out-of-state advertising and out-of-state consultants, it isn’t immediately obvious why Office of Tourism personnel should travel out of state, let alone out of the country. Of this amount, $22,897.81 was spent on out-of-country airfare; another $20,839.03 was spent on out-of-country lodging, and $5,757.73 was spent on out-of-country meals. The information on Arizona Open Books does not include who the travelers were, their destinations, or the purpose for travel.

Recommendations

Clearly, much is left to be accomplished in making state finances truly transparent. The most obvious shortcoming, however, is a lack of explanation for individual expenses. In addition, a large class of state spending—public employee salaries—is inadequately reported even under today’s system.

Recommendation 1: Provide a memo line in the state’s spending database so that accountants can input more detailed explanations of expenditures

The state’s checkbook, really a series of checkbooks from various departments, is a behemoth. In fiscal year 2013 there were over 4 million expense-related transactions. This report consists of several weeks of research into state budget expenses line-by-line as laid out in the Arizona Open Books website, but the sheer number of transactions makes a truly comprehensive report on state spending nearly impossible, in no small part because the lack of detail in the database requires so much additional research. There is little doubt there are many examples of waste and abuse buried in plain sight in the sheer volume of transactions reported on the Arizona Open Books website.

The only way to get a true measure of what taxpayer dollars are going towards would be to require a free form memo section on line items, entered with little extra time when the transactions are logged into an agency’s electronic books. This would provide much needed information in order to determine if the expenses are legitimate or not. This would enable the website to actually be “intuitive to members of the general public”. This simple step of providing useful information, as demonstrated by the Supreme Court example, would result in more transparent spending.

State agencies should be required to describe transactions in a way that is meaningful to the average citizen. These descriptions should be inputted under oath.

Recommendation 2: Post salary information.

State workers’ salaries understandably consume a large portion of state spending. State worker salaries are subject to Freedom of Information Act requests. In fact, state employee salaries are regularly posted on the Arizona Republic’s website, azcentral.com. Unfortunately, when the state’s transparency law was passed, lawmakers explicitly exempted salary data from the requirements. It is understandable to exempt personal addresses from being posted but names and positions, as well as expected hours per week to be worked, should be included in the database. The difference between the spending database and the salaries posted by the newspaper is that actual pay would be posted on the database, which can be different from the base salaries the newspaper posts.

Recommendation 3: Remove the comprehensive financial transparency loophole.

Currently law states that if the state or any local government is awarded a Certificate of Achievement for Excellence in Financial Reporting by the Governmental Finance Officers Association, the posting of that certificate can satisfy the requirement to post individual transactions. Clearly, this provision is a result of an effort to reduce opposition to the original transparency law.

This loophole to transparency is ludicrous. First, the law exempts government from transparency due to an award by an extra-governmental organization. Second, that organization bases its award purely on a government’s Comprehensive Annual Financial Report (CAFR), which is a summary of finances and does not reflect individual transactions in any way. Indeed, it is entirely possible that a CAFR could be largely fraudulent but its mere form would earn a government the certificate. Such a certificate is, in no way, a substitute for full and complete transaction-level transparency.

Full transparency has proven itself to be low-cost in its implementation and easy to maintain. Not only does the state maintain such a system, but the City of Phoenix has gotten onboard as well, despite the fact that both have earned the Certificate of Achievement for Excellence in Financial Reporting. Even small towns are reporting individual transactions through the state’s website. There is no excuse for Mesa and Tucson, among others to hide behind their certificates.

Conclusion

Government’s most defining characteristic compared to private enterprise is its legitimate ability to compel even otherwise free people to contribute to its funding. Combine that with a lack of discipline through competition, and the temptation to, fall down in diligence to spend wisely is profound. Comprehensive transparency is the best way, perhaps the only way, to counteract otherwise nearly unchecked avenues to waste and abuse taxpayer money.

The purpose of transparency is to create a more direct avenue of accountability to taxpayers. This will make government more efficient and effective. While Arizona Open Books marks a significant step forward, there is still much work to do to achieve true transparency. By making sure adequate information is available to evaluate spending, taxpayers can better determine if their money is well spent. Since salary information is technically public knowledge, there is no reason to leave taxpayers in the dark about it. Taxpayers are, after all, paying the salaries. Finally, no government should be able to avoid transparency merely because they pass a desk audit and keep their books in an orderly manner.

Download the PDF version

References

Arizona government entered modern financial transparency in 2008 when the legislature approved the launch of the Arizona Open Books website. When the website came online in 2011, the state essentially opened its checkbook by posting individual transactions to the web. This report assesses the usefulness of Arizona’s Open Books website and reveals questionable financial transactions. The Arizona Open Books website proved useful in exposing some suspicious transactions, but transparency in Arizona still needs improvement. We were able to use the website to find wasteful spending on nearly $2.5 million worth of “Awards” and another $1 million on “Entertainment and Promotional” items in 2013. But the site did not provide sufficient detail to assess the legitimacy of suspicious transactions lumped into catch-all codes like “Other Professional Outside Services,” which totaled $289 million in 2013 alone. The bottom line is that while most of the state’s individual expenditures are posted for public scrutiny, it is still possible for waste, fraud, and abuse to hide in plain sight due to vague or cryptic descriptions of individual expenditures. Curious taxpayers are treated to accounting codes and code descriptions that often bear little resemblance to the purpose for which funds are expended. In addition, payroll abuses can be hidden because payroll is kept secret under current law even though public employee salaries are subject to open records. If Arizona’s state government is to be truly transparent, each transaction posted on Arizona Open Books needs an accompanying memo line to give citizens accurate descriptions of the specific purpose of each transaction. Sourcing of expenditures should be provided as well. Finally, specific details about the public payroll should be a centerpiece of Arizona Open Books. Tuesday, July 15, 2014 - 09:45A Closed BookA lack of fiscal tranparency hides a lot from taxpayers State Powers Government Accountability In the News ReportYes GoodBadUgly.pdf 2013 EXPENSES.pdf Enivronmental quality.pdf references.pdfBy TopicsByron Schlomachtrue

MEDIA ADVISORY: HOBBY LOBBY DECISION IS A SMALL VICTORY, BUT IT DOESN’T STRIKE THE HEART OF OBAMACARE

bwilson — Mon, 30 Jun 2014 16:00:37 +0000

Contact: Charles Siler

(602) 633-8980

MEDIA ADVISORY: HOBBY LOBBY DECISION IS A SMALL VICTORY, BUT IT DOESN’T STRIKE THE HEART OF OBAMACARE

Christina Sandefur, Goldwater Institute Senior Attorney, praised the high court's decision in Sebelius v. Hobby Lobby Monday, but warned that the decision does not get at the heart of defeating Obamacare. The Goldwater Institute's own legal challenge against the federal health care law, Coons v. Lew, could eviscerate the Obamacare law completely by invalidating the Independent Payment Advisory Board, the cost-rationing board that is the lynchpin of the federal law. That case is currently pending before the Ninth Circuit but is expected to be taken up by the Supreme Court in coming months. Sandefur stated:

Today's U.S. Supreme Court ruling dealt a much-deserved blow to Obamacare's mandate on businesses to provide contraceptive coverage that conflicts with a business owner's religious objections. However, the contraception mandate is just the tip of the iceberg of the threat Obamacare poses to the American people. Far more threatening is the key provision of Obamacare that remains on the books: The Independent Payment Advisory Board. Created to control Medicare prices, this powerful health care rationing agency can regulate and tax both public and private health care, and its actions automatically become law without Congress’s vote, the president’s signature, the public’s input or even the courts’ review. Wielding the powers of every branch of government but accountable to none, IPAB is the most extreme consolidation of government power in American history. If the Constitution’s separation-of-powers principles are not respected, Americans can expect many more controversial and burdensome Obamacare regulations to come.

To read more about that case, visit: http://goldwaterinstitute.org/article/coons-v-lew-federal-health-care-lawsuit

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To schedule an interview with Goldwater Institute, please contact Charles Siler with the Goldwater Institute at (602) 633-8960 or csiler@goldwaterinstitute.org. The Goldwater Institute has an in-house VideoLink studio for rapid cable hook-up if needed.

Christina Sandefur, Goldwater Institute Senior Attorney, praised the high court's decision in Sebelius v. Hobby Lobby Monday, but warned that the decision does not get at the heart of defeating Obamacare. The Goldwater Institute's own legal challenge against the federal health care law, Coons v. Lew, could eviscerate the Obamacare law completely by invalidating the Independent Payment Advisory Board, the cost-rationing board that is the lynchpin of the federal law. That case is currently pending before the Ninth Circuit but is expected to be taken up by the Supreme Court in coming months. Sandefur stated:Monday, June 30, 2014 - 08:59Healthcare Freedom Press Release In the NewsYesBy Topicsfalse

FOR IMMEDIATE RELEASE: AMIDST PRESSURE OF LAWSUIT, CITY ENDS GROSS 'PENSION-SPIKING' ABUSES

bwilson — Fri, 27 Jun 2014 16:36:00 +0000

Contact: Charles Siler

(602) 633-8960

FOR IMMEDIATE RELEASE: AMIDST PRESSURE OF LAWSUIT, CITY ENDS GROSS 'PENSION-SPIKING' ABUSES

End to Corrupt Practice Will Save Taxpayers Millions

More than a quarter century of an abusive union practice known as "pension spiking" has ended, thanks to the resolution of a Phoenix lawsuit Friday. Officials for the City of Phoenix agreed to cease the practice in new contracts imposed on public safety unions as the result of a lawsuit filed by the Goldwater Institute last year.

The Goldwater Institute's lawsuit argued that pension spiking in Phoenix violates state law explicitly banning the practice.

Pension spiking occurs when a retiring employee cashes in their benefits such as sick leave, unused vacation time, bonuses, uniform allowances, vehicle allowances and more in order to inflate their salary for pension calculations. While the practice is illegal in many states, it still occurs frequently, often resulting in massive lump sum payouts and six-figure retirements.

Once actively encouraged by city officials, pension spiking had caused Phoenix’s public-safety retirement costs to explode, rocketing from $7.2 million in 2003 to nearly $130 million in 2014--more than a 1700 percent increase. In spite of the lawsuit from the Goldwater Institute, the Phoenix Police Sergeants and Lieutenants Association, who were also defendants, fought to keep the spiking calculations. But this spring, Phoenix's city manager took note of the lawsuit, imposing a new contract that prohibited the unlawful payments to be used in calculations for pension purposes.

“This win does more than just put the pension system back onto a path towards solvency, it also starts to repair the trust between the taxpayers and their civil servants, especially those in the public safety sector,” said Goldwater Institute attorney Jonathan Riches, who led the lawsuit against pension spiking in Phoenix. “We will continue to work with taxpayers throughout the country to put an end to these abusive practices wherever they are occurring."

As a result of new contracts that eliminate pension spiking among public safety employees (and pension changes in contracts with other municipal workers) taxpayers will save an estimated $233 million over 25 years – a savings of nearly $10 million a year.

The Goldwater Institute’s pension spiking case has already driven changes in other parts of Arizona, with the City of Tucson specifically citing the pension spiking litigation for their decision to voluntarily end similar pension spiking among its public safety employees. Tucson’s chief financial officer reported that ending pension spiking in Tucson will save Tucson taxpayers an estimated $1.2 million per year.

Should Phoenix decide to revert back to paying illegally inflate pensions, taxpayers may return to court to enforce the clear language of state law and prevent pension spiking in the future.

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To schedule an interview with Jon Riches, please contact Charles Siler with the Goldwater Institute at (602) 633-8960 or csiler@goldwaterinstitute.org. The Goldwater Institute has an in-house VideoLink studio for rapid cable hook-up if needed.

FOR IMMEDIATE RELEASE: SCOTUS decision in NLRB v CANNING only first step to curb executive overreach

bwilson — Thu, 26 Jun 2014 19:16:26 +0000

Goldwater Institute Vice President for Litigation Clint Bolick praised this morning’s U.S. Supreme Court ruling in NLRB v. Canning, calling it an “important first step” in curbing federal abuse. The Goldwater Institute has separately taken on the NLRB, recently winning a federal lawsuit against the agency. In that case, the NLRB attempted to invalidate secret ballot protections for workers passed in nearly ten states (drafted by the Goldwater Institute and known as the Save Our Secret Ballot amendment) because the agency wanted to reserve the right to implement federal “card check” on American workers and businesses. Stated Bolick this morning:

Today’s unanimous decision by the nine justices is an important first step in curbing abuses by the country’s executive now and in the future, whether Republicans or Democrats are in power. The NLRB appointments at issue in this case were made by the President during congressional recesses to deliberately avoid the vetting process for political appointees that is central for our nation’s checks and balances to succeed. Fortunately, thanks to this decision, we can rein in that abusive process. But we must be steadfast in our fight against practices of this kind, and today’s victory is only one piece in the solution to curbing federal overreach. The NLRB, in particular, led by unvetted political appointees, has shown itself as an agency willing to make an end-run around the legislative process to seek major changes to the American landscape, most notably through efforts to implement card check nationwide through obscure agency rulemaking without the attention of the American public. That’s why we must continue to counterbalance federal overreach through reforms like Save Our Secret Ballot to protect American workers and the American economy no matter who is holding these agency seats and no matter how they come to hold office.”

In addition to serving as Vice President for Litigation at the Goldwater Institute, Bolick is a research fellow at the Hoover Institute and the co-author of Immigration Wars with former Florida Governor Jeb Bush. He previously worked in the Justice Department during the Reagan Administration and co-founded the Institute for Justice.

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To schedule an interview with the Goldwater Institute, please contact Blake Wilson (bwilson@goldwaterinstitute.org or 602-633-8961). For television producers: The Institute has an in-house VideoLink studio for rapid cable hook-up to networks.

The Right To Try

bwilson — Fri, 16 May 2014 23:24:06 +0000

Everyone Deserves the Right to Try

Patient Stories

Lorraine's Story

Lorraine Heidke-McCartin loves to run. She is currently training to run a 5K with her daughters this spring. A 5K isn't much for most runners, but for her it's the finishing stretch on a marathon that began in 2006. That was the year she was first diagnosed as a Stage IV (the most lethal and final stage) of an aggressive strain of breast cancer, HER 2. She immediately began a regimen of treatment with her doctor, undergoing rounds of chemo that sapped her energy, took her hair and gave her a great deal of pain. As her treatments progressed, so did her disease, until she had finally exhausted all of her available treatment options. She and her husband, Philip, began looking for another way to save Lorraine's life.

In 2009, their doctor returned from a conference where she had heard about an experimental treatment that could be a life saver for Lorraine, T-DM1. They reached out to the drug company conducting the trials for T-DM1 and found the closest trial to their home in Boston was in Fairfax, Va. Lorraine and Phil jumped on the opportunity and got to Virginia as soon as possible. Lorraine would end up making over 16 trips back and forth in the course of her treatment before finally being allowed by the FDA to take the drug in Boston, thanks in large part to her incredible recovery. She has been cancer free since December 2011, thanks to an experimental drug and her ability to make the regular trips to a distant trial site.

Tracy's Story

Tracy Canter lost her mother to breast cancer two years ago. Once diagnosed with the deadly disease, her mother was required to drive 8 hours to Redlands, California every couple of weeks to receive the best available medicine as opposed to getting it in her home of Tucson. With little money left to travel and the disease quickly weakening her, her mother could no longer make the trips. Right To Try would have allowed Tracy's mom to get the medicine without the hurdles to jump through.

Mikaela's Story On Good Morning America (3/27/2014)

Mikaela Knapp and her husband Keith fought hard for her life. In order to get the drugs she thought might save her life, they needed to run a national social media campaign just to raise awareness and win support for her plight. Sadly, Mikaela died without getting the chance to try to save her own life. Right To Try would have allowed her that opportunity.

Nick's Story on Colorado Daybreak (5/16/2014)

On the eve of the first Right To Try bill signed in the country, Colorado Daybreak takes a look at the life of a father who should have had the Right To Try before it was too late.

Right To Try: Kathy's Story

Kathleen Thompson's son Josh was diagnosed with ALS in 2007. After many promises from the FDA and much time spent working to get the necessary treatments, Josh was denied access to possibly life saving medicine, crippling this young man's ability to live.

National Coverage

Right To Try on The Kelly File (5/5/2014)

If you have a terminal illness, should you have the right to try treatments that might save your life, but are not yet officially approved by the Feds? That debate is now playing out across this country as lawmakers get behind the Right To Try act.

Goldwater Institute CEO Darcy Olsen

Discusses Right To Try with Stossel (3/27/2014)

During John Stossel's "Government Bullies" show last Thursday on Fox Business, Goldwater Institute CEO Darcy Olsen came on to discuss Right to Try, and initiative that gives terminally ill patients access to possibly life-saving medicine.

CNBC's Street Signs talks Right To Try (5/6/2014)

The hosts of Street Signs grill University of Miami's Kenneth Goodman on the intricacies of Right To Try.

Sign Brigg's Legacy Petition for Access

Briggs Sanderson was diagnosed with Stage IV cancer in 2007, and for 15 months she and her husband Paul battled her cancer. While this deadly disease took Briggs too soon, her legacy is inspiring others to call for earlier access to innovative cancer treatments and therapies.

Paul has found the support of a number of celebrities and professional athletes in his drive to highlight the desperate need for viable treatment options for terminally ill patients.

To learn more and to view Paul’s petition, visit http://www.change.org/petitions/petition-for-briggs-for-cancer-immunotherapy-for-all

Clippings

Daily Beast: The 'Dallas Buyers Club' Bill by Eleanor Clift (3/4/2014)
Denver Post: "Right to Try" aims to limit bureaucracy for Colorado's terminally ill by Kurtis Lee
Townhall Magazine: Every Patient Deserves the Right To Try (4/10/2014)
The Coloradoan: Right to try bill called both last chance, false hope by Pat Ferrier and Sarah Jane Kyle (4/22/2014)
Fox News Online: Lawmakers fight to cut red tape for terminally ill patients seeking experimental drugs by Jennifer Gordon (5/6/2014)
The Atlanta-Journal Constitution: Afflicted have the right to try by Ted Harada (5/9/2014)
Arizona Republic: Arizonans will vote on right-to-try drugs measure by Ken Alltucker (5/12/2014)
National Review: The Right To Try by Amity Shlaes

Resources

Policy Report
Read Full PDF Report
The Cost of FDA Approval
Model Legislation

If you're interested in reviewing model legislation or sponsoring Right To Try in your state, please contact Craig Handzlik at the Goldwater Institute at (602) 633-8994 or chandzlik@goldwaterinstitute.org.

To schedule an interview with the Goldwater Institute, please contact Michael Kelley at the Goldwater Institute at (602) 633-8965 or mkelley@goldwaterinstitute.org. If you are affiliated with a national network, the Goldwater Institute has an in-house VideoLink studio for rapid cable hook-up at no cost.

States should enact “Right to Try” measures to protect the fundamental right of people to try to save their own lives. Designed by the Goldwater Institute, this initiative would allow terminal patients access to investigational drugs that have completed basic safety testing, thereby dramatically reducing paperwork, wait times and bureaucracy, and, most importantly, potentially saving lives.Sunday, May 18, 2014 - 16:23Everyone Deserves the Right to TryEmpowering Patients to Save Their Own LivesEveryone Deserves the Right to Try: Empowering the Terminally Ill to Take Control of their Treatment Healthcare Freedom Multimedia In the NewsYes Cost of FDA Approvalwith logo.pdf RIGHT TO TRY MODEL LEGISLATION (2).pdfBy Topicstrue

How Cities Can Drive Economic Growth in Five Easy Steps

bwilson — Thu, 20 Mar 2014 17:00:11 +0000

Introduction

Nine cities have seen job losses near 10 percent and may never fully recover, including two, in the arid, oil-depleted part of Texas as well as two Nevada cities, and one each in California, Illinois, Connecticut, Georgia, and Michigan.⁴During the recession, the Phoenix-Mesa-Glendale metro lost more than 13 percent of its private employment and private employment is still more than 5 percent below its pre-recession peak.⁵ Phoenix’s finances suffered so badly, they found it necessary to impose a sales tax on food that persists to this day. Both Mesa, Arizona and Phoenix continue to suffer tepid growth in revenues with Mesa City Hall continuing a four-day, 10-hour per day public employee workweek to save on building maintenance and Phoenix having to adjust to yet another disappointing revenue picture.⁶

As a consequence of the recession and slow recovery, municipal governments are considering ways to strengthen their economies and become more business friendly in an effort to set their fiscal houses in order. A key ingredient is making city administration more efficient and less burdensome for businesses. Many theories about what government can and should do to make a city attractive to investment and job creation distract from focusing on what must be done. One theory promotes the clustering of certain similar businesses, such as biotech.⁷ Another related theory involves the clustering of certain classes of workers, particularly “young creatives.”⁸ Still others focus on sports amenities and tourism venues. Time and again, though, research shows that when seeds of development fall on fertile soil, they grow, naturally and organically, the fertile soil being favorable institutions.⁹ These include privatization, procurement reform, transparency, deregulation, and personnel reform. By keeping taxes low and making cities flexible enough to quickly adapt to economic fortunes as they are influenced by the entire globe, these measures lead to wealth creation and healthy economic development.

Read the PDF version here

For example, the city of Phoenix recently enacted reforms that have made the city friendlier to new business. These reforms included some zoning simplification, but the real accomplishment has been in streamlining construction permitting, especially when remodeling existing business space. Effectively, the city has privatized construction permitting for certain projects by certifying architects to act as surrogates for city plan reviewers. The city calls this the Self-Certification Program. Architects can self-certify certain construction, landscape, grading and drainage/storm water, and parking lot plans.¹⁰ The results have been satisfying. There are 203 professionals allowed to self-certify projects. Since its inception, the program has seen 450 projects and 550 permits issued under the self-certification program with a project value of $450 million.¹¹ The self-certification program could have easily saved a month in bringing these projects to fruition, translating into savings of $3 million.¹² Even marginal reductions in cost of investing in a city can make it significantly more attractive for investment.

Cities have other opportunities for reform that can drive economic development and create jobs. These reforms include privatizing municipal services such as garbage collection and park maintenance. Cities should move to an at-will system of employment and do some modest reform of procurement policies. They can also move to a defined-contribution retirement benefit for new city employees who would fall under the city’s independent pension system. Reducing onerous small business licensing requirements, streamlining requirements for minor construction and remodeling permitting, and eliminating plant salvage requirements for new development would also do much to help businesses thrive. Finally, cities should carefully review and narrow their functions to core competencies.

1. Privatizing Services

Privatization does not mean the elimination of publicly-provided services. In fact, privatization can sometimes preserve the public provision of services by making them more affordable. Many city services can be contracted out to private companies who meet specific cost and performance requirements. Privatizing services can improve overall financial performance and improve government finances.¹³ Privatization is a superior driver of efficiency and cost savings through incentives that lead to better management techniques, more productive equipment, innovation, incentive pay structures, and efficient deployment of workers.¹⁴ This is because city administrators and taxpayers hold contractors responsible for performance without being concerned about union work rules and employees’ political connections when coupled with transparency policies. The benefits of contracting can be greatest when contracts are based on desired performance specifications (performance contracting) rather than contracting to have a job done a certain way, which is likely to be the way it’s always been done and which might be less efficient than how a contractor would choose to do it.

Privatize Trash Collection

Privatizing trash collection, in most cities, can save citizens 20 percent of their current trash collection costs.¹⁵ Detroit has turned to possible privatization of trash collection and has 10 bidders vying for the contract with the initial expectation that the city could save $15 million of its annual $50 million trash collection budget.¹⁶ Academic research has supported the notion that privatized trash collection is more efficient than traditional government-run trash collection.¹⁷

Privatize Park Maintenance

New York’s Central Park is privatized, supported by revenues from concessions and private contributions as are several other parks in the city.¹⁸ Complete privatization of parks that do not restrict admittance can be difficult, however. The unique parks of New York City rely on high-income contributors to non-profit administrators. That arrangement may be difficult to replicate. Minimally, though, landscaping duties such as mowing and basic grounds upkeep at other cities’ parks could be contracted to private providers. This would likely require bundling various parks in a rational way and contracting for upkeep of these bundled sites. Sports parks could be similarly contracted for trash cleanup and basic monitoring for upkeep.

Recently, Carlsbad, California, explored parks privatization opportunities and found that the city could save up to $4.7 million per year. Moreover, reducing responsibility for parks relieves the city of equipment ownership and upkeep. Personnel needs are reduced along with associated costs such as pension contributions and various insurances. Properly structured contracts with closely monitored performance criteria that focus on park appearance and functionality can produce the sort of efficiencies that lead to significant savings, just as privatized trash collection tends to do.

Privatize Golf Courses

Many cities own and operate golf courses, but only about 10 percent of the U.S. population plays golf and the sport’s popularity is waning.¹⁹ It is unclear why the other 90 percent should subsidize any city’s municipally-owned golf courses. The City of Phoenix has long owned and operated golf courses but in 2011-12 alone Phoenix city golf courses ran a $2.4 million deficit and have run an annual deficit since 1998-99 except for a single modest surplus year. Phoenix’s golf enterprise fund has accumulated a total deficit of $17 million.²⁰ City courses compete with private enterprise and generate no property tax revenues.

Golf course privatization alternatives include: 1) selling the courses with a proviso that they remain golf courses, 2) inviting proposals from private parties for lease/management contracts to run the courses, and 3) outsourcing golf course maintenance, as Phoenix is currently doing with five of the courses. The City of Tucson has seen the desirability of comprehensively privatizing municipal golf courses through lease/management contracts after seen million dollar deficits running the courses themselves.^21/22 In the case any city losing money on an amenity that is provided by private enterprise, if the three privatization alternatives fail to completely halt the financial bleeding, the courses should be sold.

Some might object that golf courses and other amenities are economically beneficial and that closing golf courses, even if they are subsidized, would be an unwise thing to do purely from an economically pragmatic point of view. However, economic studies purporting to show benefits from parks and golf courses show only that values of homes abutting and near parks and golf courses are more valuable than those further distant.²³This is hardly a justification for taxing everyone else to support a minority’s pastime.

Privatize Road Maintenance

Road maintenance can be privatized by making contracts with private companies to maintain roads to an objectively determined standard of smoothness and repair.²⁴ As an example of what can be accomplished, the state of Colorado recently privatized U.S. Highway 36 between Boulder and Denver to include maintenance.²⁵While cities do not administer highways, they can designate particular areas for privatization, perhaps initially as a pilot program. City road contract administrators would need to set performance standards of ongoing smoothness and repair in addition to standards of street quality to be met at the end of the contract. Performance contracting involves determining penalties for lack of performance and timeliness as well. Typically, such contracts are for terms of around five years and involve soliciting bids according to performance measures and yearly fixed rates the city would pay. Countries around the world have already implemented performance-based contracting in road maintenance, and parts of the United States are already seeing savings between 10 and 15 percent.²⁶

Figure 1: Annual Local Government Expenditures by City Services

Source: US Cencus Bureau, 2002-2011

Privatize Transit

The privatization of transit has shown itself a viable, effective option when cities make room for it. Private bus and van service presents itself as a solution, without direct government action, to urban transportation problems that occur in cities all over the world. The United States has seen these services spontaneously arise repeatedly in cities when highly regulated taxi services and government-provided mass transit underserve some areas.²⁷ Private transit can be relatively unobtrusive since the vehicles used are relatively small and nimble. Such services can stop briefly in front of peoples’ houses rather than cutting off a lane on city arterials as passengers disembark and embark. Also, routes are flexible, not fixed to a rail line or even necessarily a fixed schedule. Service can accommodate a variety of tastes and price points as well, by adjusting service such as number of interim stops, vehicle accommodations, and the number of fellow passengers. Finally, private transit creates economic opportunities for low-income individuals to provide the service by becoming drivers and even eventually owning their own fleet of vehicles.

High-end driver services like Uber, Lyft, and Sidecar have proven that more personalized, private transit services are in demand.²⁸ All three use smartphone software to match people needing a ride with private individuals willing to provide a ride in their personal vehicle for a fee. Uber operates in 36 U.S. cities as well as in cities in 26 countries. Lyft operates in 20 U.S. cities, often in competition with Uber. These services use technology and driver and rider reviews to ensure safety and quality of service without the heavy hand of regulation. The same technology that matches single riders with rideshare-service-affiliated drivers could be used to more efficiently route less expensive van services for multiple riders and already is being used, to some extent, for airport shuttle services and taxis. The technology could be more widely applied and even better developed for inexpensive van services but for the concern that transit authorities might interfere with these services’ development, as they have in various cities, and the fact that public transit is subsidized, making private van services all the more financially risky.²⁹

As private transit is accommodated, steps should be taken to phase out standard public transportation, including buses. Low-income riders can be assisted more efficiently with their transportation needs using an income-based transportation voucher system in a city with privatized transit.

2. Reforming Business Processes

Cities can reap great savings and become more efficient, making lower taxes possible, by streamlining several of their business processes. First, moving all employees to an at-will status can enhance productivity while saving money. Second, procurement processes should be reviewed to ensure transparency and competitiveness.³⁰ Another reform includes eliminating business preference programs that add layers of government without adding value for taxpayers and citizens.

Employment

Civil service protections, in an age of transparency, are arguably outdated and unnecessary. Communication, technology and the availability of informational outlets makes it possible for anyone treated unjustly to make their case known. Public knowledge of unfair practices on the part of a public employer creates a discipline all its own. Yet, many cities still follow civil service practice by granting what is, in effect, tenure for employees after only a short time of satisfactory employment. In Phoenix, as in many other cities, if an employee is evaluated after her first year as a good employee, she has the right to appeal demotion and termination decisions.³¹ The Phoenix Civil Service Board has overturned or modified as many as a third of personnel discipline actions. It takes a number of steps to terminate the employment of someone who has shown even egregious behavior.³²

Moving to an at-will employment policy along the lines of that promulgated by the Texas Municipal League would free cities from extended, costly employment proceedings.³³ In 2012, the State of Arizona made this move, making all new employees subject to at-will employment with the exception of public safety personnel. Under the new law, supervisors are to adhere to a set of six principles that are intended to protect both taxpayers and employees from arbitrary managerial decisions and ensure that the best employees are retained and advanced.³⁴ Couple that with other state and national laws that prohibit discrimination and protect employees from repercussions for engaging in free speech, city managers would still have to document employees’ poor performance in order to impose discipline.³⁵ However, it would be far less likely that it would take years to terminate a problem employee.³⁶

Read the PDF version here

The benefit to taxpayers of moving to an at-will system would include savings from the removal of deadwood from public employment and improve service from city employees. The cost savings from not having suspended employees on the payroll could immediately save hundreds of thousands of dollars per year. Additional savings would accrue from preventing their accumulation of pension benefits. Finally, some savings will accrue from a more streamlined (but not eliminated) system of due process for non-performing employees.

Procurement

Municipal procurement policies typically require bids to be sealed, opened in public, and judged by a committee. There can be conflicts of interest in the bidding process, however, if the writer of the request for proposals (RFP) has been involved in similar projects and worked with the same vendors over a period of years. The writer can strategically construct a grading rubric that leads to a specific contractor being chosen even if committee members are unaware of any ulterior motives.³⁷ For these reasons, municipal contracting should be as transparent as possible. The following steps will help cities achieve fairness and transparency.

Tell Losing Vendors Why

When an award is made it should be accompanied with an explanation of why the vendor who received the award prevailed and specific reasons why other bidders did not. Some might fear that such an explanation from the city’s selection committee would hand ammunition to rival bidders who might sue if they see a decision as arbitrary. It is important, therefore, to not only make sure the decision is not arbitrary but to make sure proposal selection committee members are qualified to make such judgments. Then, the explanations must be clear and concise. In the end, the city might find that vendor bidding becomes more competitive because vendors will have a basis besides guesswork on which to improve their offers.

Write Performance-Based Specifications

Specifications can be too specific. A good example is Phoenix’s specifications for underground water pipe. They specify metallic pipe, which corrodes and eventually leaks. Other types of pipe such as PVC may have longer life and lower maintenance costs. Instead of specifying metallic pipe, Phoenix should specify in its RFP that the material should be suitable with a demonstrated low life-cycle cost. Even if the initial cost is a little higher, if the life-cycle cost is lower, that material should win the bid.³⁸ Other examples might include the specification of only certain roofing materials for a building when the real issues are pleasing aesthetics and longevity, specific personnel qualifications when general qualifications would be sufficient, and the specification of certain brands of materials. Strategies too focused on specific elements are risky, not only for taxpayers’ wallets and government efficiency, but legally as well.³⁹

Writing specifications that accurately describe the problem to be solved or the task to be accomplished or the purpose of a good or service is key. These performance-based measures allow firms to innovate and propose those innovations in their bids. Contract selectors generally have, or should have, the discretion to weigh a proposal’s risk, likely performance levels of bidders, their expertise, experience and practices, and the types of processes or materials they propose to use as well as other intangibles along with cost so that the lowest cost bid is not automatically the one selected if it involves achieving less than the best value for taxpayers.⁴⁰

End Business Preferences

Many cities have instituted local business bid preferences to give local businesses a bid advantage on city procurement contracts. Tucson, Arizona grants businesses a 5 percent cost preference in bidding on city contracts. That is, their bids will be evaluated as if they bid a price 5 percent less than they actually bid. This could apply to any size contract. The Arizona cities of Chandler, Mesa, and Tempe offer bid preferences between 1.5 and 2 percent on contracts under $50,000.⁴¹ The City of Los Angeles has a program for small and local businesses that gives them a 10 percent bid advantage.⁴²The State of Texas has a statewide bid preference policy that both allows for such preferences but also sets limits for cities and school districts.⁴³ The City of Chicago instituted a 2 percent local bid preference in 2012.⁴⁴ These programs are ubiquitous throughout the United States.

The City of Phoenix has two programs designed to give advantage to local businesses. The Small Business Enterprise program encourages larger businesses to subcontract with local businesses where city contracts exceed $50,000. The Local Small Business Enterprise program reserves contracts worth less than $50,000 for local small businesses when three or more local businesses make a bid for a contract, regardless of whether a lower bid is made from a non-local business.⁴⁵ Phoenix’s programs replaced earlier programs that worked more like those of other cities. The current programs seem designed more keep city employees with busy work than anything else.

All bid preference programs fail to minimize costs to taxpayers. Contractors who win a bid due to a bid preference provide no qualitative advantages since the preferences often apply only when two contractors are otherwise substantially similar. The only argument that can be made for such preferences is that they might keep tax monies local. Some regional economic models appear to make the case that keeping money local is economically beneficial, but this is really an argument against trade in general. Historical economic evidence proves that trade within and outside borders is always economically beneficial. Long-discredited Mercantilistic economic philosophies to limit trade outside certain borders were disproved even before Adam Smith wrote his famous tome, The Wealth of Nations, in 1776. Not only do these programs add costs for taxpayers, the added costs result in a redistribution of income from taxpayers to favored small business owners. And, the best quality of service and goods for taxpayers may not be attained. Finally, as is being increasingly demonstrated, these programs only foster more of the same in other cities as they compete to protect their local businesses and ultimately have a deleterious effect throughout the region and nation. Therefore, local business contract preference programs should be scrapped.

3. Defining and Concentrating on Core Functions

A key element in making cities attractive to business is to ensure governments focus on core functions and performing well. What many would consider core functions, such as providing roads and sewer, are very important to business formation and growth. By focusing on these functions, costs can be minimized and, in turn, taxes kept low, delays in construction minimized, and businesses can focus on doing business. Although a recent report based on surveys of entrepreneurs with fast-growing businesses makes the case that taxes and regulation are not a major factor in location decisions, the fact that these are relatively small businesses in fast-growth industries seems to be lost on the authors.⁴⁶ There is no denying the general trend of companies and people moving to generally less-taxed and regulated cities and states.⁴⁷

Determining what is a “core function” can be difficult and open to debate. Any determination of core functions must recognize that no government can possibly be all things to all people and do everything well. Government must be limited to those functions for which it is best suited and that are necessary but unlikely or impossibly accomplished through private means. Such endeavors as city-owned hotels, city-controlled development, city-financed art, and city-sponsored sports (like golf) are suspect. Core functions are likely to include police, some kind of provision for fire-fighting and emergency response, roads and other basic infrastructure like sewer and water.

There is a great deal of dispute regarding what constitutes core functions of different levels of government.⁴⁸ Many clearly consider providing for health and welfare with government furnishing medical services, food, shelter, and other services to those in need a core function. Others do not. Certain criteria for determining core city functions readily present themselves if one presumes that individual liberty is to be preserved to the highest possible degree. Questions to be asked and answered in the affirmative to determine if a function is core include: 1) Does everyone inarguably benefit?; 2) Do overall benefits outweigh overall costs?; 3) Is it necessary in order to prevent damage to lives and property?; 4) Is it necessary to allow for travel, trade, and access to property?; 5) Is it necessary to protect overall health and welfare?; 6) Is it necessary for one of these purposes but the private sector cannot otherwise accomplish it? One question purposely not asked is “Does it make me feel better?” That mentality forces cities to take a subjective approach instead of focusing on results. Since everything the government does is the result of coercive taxation, its results must be objectively beneficial to all.

These questions must be constantly asked and answered. Something once considered a core function might fall out of favor later or vice versa. One key to an ongoing understanding and consensus regarding core functions is to adequately understand their costs. This means a city must keep its finances in order and transparent so that the citizenry can understand those costs and make informed decisions.

4. Putting and Keeping City Finances in Order

When it comes to city budgeting and finance, two issues stand out as ripe for reform. First is pensions. Many municipal pension funds are struggling, and cities face huge liabilities. Across the country, state and local unfunded pension liabilities are estimated at $3 trillion - $10,000 for every man, woman and child in the nation.⁴⁹ Phoenix’s unfunded pension obligations alone amount to around $1.4 billion. Tucson’s are about half a billion dollars.⁵⁰ Phoenix and Tucson carry per-capita pension costs that exceed those of bankrupt Stockton, California.⁵¹ The other issue is transparency, which would include creating searchable databases of city transactions.

Pensions

The central problem with pension funds is that they are inherently risky for taxpayers. First, present and past employees are guaranteed lifetime benefits, putting the onus of funding said promises on taxpayers. In many cities pension funding has become the highest priority in government budgeting. Many states have provisions in their constitutions like Arizona’s that effectively declare pension benefits sacrosanct and prioritize pensions over every other type of spending.⁵²Second, pension systems contribute to “fiscal illusion” that adds risk for taxpayers. For example, early retirement schemes that appear to save taxpayers money during recessions actually push the added costs of early, previously unanticipated retirements to later generations through the pension systems. Lawmakers are constantly adding benefits that appear affordable, often pushed to do so by active employees and their unions, only to set up taxpayers for the inevitable day that investments’ values fall. Third, pension systems are inherently corrupting and corruptible, as pension spiking schemes in Phoenix and elsewhere have demonstrated.⁵³

Stockton, California, and Detroit have both declared bankruptcy, in no small part due to their pension obligations.⁵⁴ Policymakers in these and perhaps hundreds of cities around the country, succumbed to public employee pressure to increase pension benefits without any increases in pension funding. During the 1990s, pension funds were seemingly awash in an endless ocean of cash and often more than 100 percent funded. Pension benefit increases such as increased retirement multipliers, like the early retirement Rule-of-80, and double-dipping programs that allow nominally retired employees to earn salaries at the same time they receive pensions looked like no-cost ways to effectively increase government employee pay. The inevitable day of reckoning first came with the relatively modest recession in 2000, but before pensions could fully recover from that shock, the even bigger recession of 2007 hit.

Stockton appears to be coming out of bankruptcy, but still without confronting the pension issues. Taxpayers have suffered a tax increase in a city already hard-hit economically, and bondholders have been moved to the back of the creditor line.⁵⁵ After a federal judge determined that pensions were subject to reductions under Detroit’s bankruptcy, political battles to keep that from occurring continue to rage.⁵⁶ In both cases, taxpayers are left holding the bag either through reduced services or higher taxes now and in the future as borrowing costs rise and the financial holes in the pension systems are filled. Just 61 cities in the United States had a total unfunded pension liability of $99 billion, according to the Pew Charitable trust.⁵⁷ City finances will continue to suffer with forcing them to make personnel reductions in police and firefighting and to neglect infrastructure needs.

Cities can avoid these potentially devastating problems by moving away from pension (defined benefit) retirement benefits and toward 401(k)-style (defined contribution) retirement benefits. Taxpayers would only be liable for one-time, per-pay-period contributions to employees’ personal retirement accounts. Employees would have control over their accounts, which would be their exclusive property. In San Diego, a proposition to move public employees into defined contribution retirement benefit programs won overwhelming voter approval with 66 percent of the vote. In San Jose, California, major changes to the pension program to lower its costs passed by proposition with 69 percent of voters approving of the change. The benefits of such changes will take a long time to come to fruition, but they are worthwhile in order to secure the longterm financial viability of cities.

Financial transparency

Ensuring fiscal transparency can help cities streamline processes and reduce fees and taxes, all of which create a more hospitable business environment. With greater transparency, managers have more information at their fingertips and know that there just might be somebody looking over their shoulder. This encourages more careful decision making as watchdogs have a better chance of discovering inefficient government activity. Transactions should be posted online and include explanations in plain language of the purpose of each transaction. Accounting codes and categories are insufficient. Those who input the data would have to be counseled on appropriate privacy issues where necessary and coached on the proper balance between brevity and adequacy in the explanation. All such information should also be entered under oath.

Read the PDF version here

As noted above, city pension systems currently present the greatest financial threat to communities. Total traditional debt carried by the city can be determined from a city’s Comprehensive Annual Financial Report. However, total debt, including general obligation bonds, revenue anticipation bonds, and unfunded obligations for pension systems should be prominently posted. And gross amounts should not be the only posted numbers. Per capita debt should be included because taxpayers deserve to know how much they and their children are obligated to pay to other parties, especially when they are constantly asked to approve measures that create even more debt.

Taxation & Revenue

Good tax policy is not just about keeping taxes low. It is also about keeping taxes from fundamentally determining economic decisions and outcomes. Income taxes fundamentally discourage work effort, investment, and risk taking. Property taxes discourage investment. Sales taxes would seem to discourage consumption except that much consumption will take place, regardless, due to necessity and people’s natural desire to consume. Of these three types of taxes, sales taxes distort the economy the least if they are equally applied to all goods and services. In most instances, property taxes are the most stable form of revenue. However, the income tax is the least stable and does the most to negatively impact economic activity.

To the extent that cities have discretion over their revenue sources, they should emphasize sales taxes over the others. To the greatest possible extent, city services should be provided self-sufficiently through fees. Property taxes make some sense as sources of revenue for local roads since road use is somewhat related to property wealth, but by all means, cities should resist instituting a local income tax.

5. Reducing Regulation

Licensing

In general, city business licensing is best characterized as registration and most cities in Arizona are not particularly heavy handed with business regulation except with respect to zoning laws. Of interest, though, is the disparity in the fees among the different types of licensed businesses. Some businesses are more favored than others. Taking Phoenix as an example, application fees for amusements are over $100 per game.⁵⁸ Address curb painters pay $30.⁵⁹ Massage businesses pay $550.⁶⁰ Street vendors pay $150.⁶¹ Yearly renewal fees are lower for most businesses but similar disparities apply. Other cities show similar inequities.

All cities should review their business application and renewal fees for their necessity and rationality and consider whether occupations like curb painters and auctioneers should be regulated at all, even through mere registration requirements. In Phoenix, curb painters are regulated to the point of specifying the materials they should use despite the fact that homeowners are capable of evaluating them.⁶² Cities should review whether business permits and regulations are necessary.

Figure 2: Number of Licenses/Permits/Tax Registrations Required by City for Selected Businesses

Source: License123 website, https://www.license123.com/Businesses

Figure 2 shows the number of licenses and/or permits and/or tax registrations required of various businesses in a sampling of cities around the country. Some of the paperwork is required by state regulation and tax collection, but as illustrated by the disparities between Phoenix and Glendale, Arizona and between Los Angeles and San Francisco, clearly states are not the major culprits when it comes to requirements businesses must meet in order to open their doors.

Figure 2 confirms anecdotal evidence that Texas tends to be more lenient on business regulation than most. The number of filings required for this sample of businesses in Dallas averages less than seven, the lowest of the sample cities. It also confirms that San Francisco is particularly hostile to business with the average number of filings it requires at 15, a good deal higher than Los Angeles’ 9.2. In this sample of nine cities and according to the averages, Glendale, AZ is the second most regulating city while Phoenix is in sixth place.

One must wonder just what disasters are occurring in Dallas that the other cities in the list are seeking to avert. It is also interesting to see that although Phoenix ranks below New York in its business paperwork requirement overall in this comparison, Phoenix is worse than New York in its requirements on food trucks and family restaurants. Dallas serves an example of why cities should constantly review their business licensing and permitting requirements to see if they are more onerous than can be justified.

City licenses and permits should especially be reviewed for their job killing potential. What may seem like an innocuous regulation that appears to be simple common sense can practically kill a business. Phoenix serves as an example. A ubiquitous summer feature in many cities outside Arizona is the seasonal snow cone stand. These are often small, portable, temporary buildings built on skids or trailers located in a spot for the duration of the summer.⁶³ But they are essentially non-existent in Phoenix despite the very hot summers. The reason for this likely lies in the city’s mobile vending licensing law.

According to Phoenix law, any “stand” “designed to be portable and not permanently attached to the ground” constitutes a “mobile vending unit” if anything is to be sold from it.⁶⁴Snow cone stands meet this definition. Phoenix law requires that mobile vending units on private property be “removed from the site during the hours of non-operation” and mobile food vendors are not allowed to operate between the hours of 2:00 am and 6:00 am.⁶⁵ In other words, in the City of Phoenix the law specifies that a classic snow cone stand or any other business operating in a similar manner cannot operate using a common business approach that prevails in other cities. Moving a temporary building, even one the size of a snow cone stand, every evening would be prohibitively costly.

This law, which essentially prohibits very small startup food businesses, limits upward income mobility. It prevents entrepreneurial activity that was once the backbone of the vibrant American culture of pulling one’s self up by dint of hard work and risk-taking. It is not at all clear why the city insists that relatively temporary structures be removed in the night except that this rule helps to prevent competition for what might be considered more permanently established businesses. City law also favors food service in permanent structures by prohibiting anyone from managing more than one mobile vending unit at a time and requiring that a mobile vending licensee have a permanent Phoenix resident as an agent.⁶⁶

Minor Home Maintenance Permitting

Cities often require residents to obtain permits and inspections to replace gas appliances, replace roofing, perform minor rewiring, install landscaping and irrigation systems and construct small out buildings on their property.⁶⁷ Construction requirements often concern zoning regulation such as setback requirements. Others are due to alleged safety concerns. Much of the time, cities act as third-party experts on behalf of homeowners who otherwise know very little about basic construction, wiring and plumbing. In any case, there is a significant potential for safety and quality issues to arise if work is done improperly and the city is attempting to prevent problems.

Data pointing to the benefits of permits and inspections for remodeling is scant, however. Moreover, today there is less of a need for third-party experts as there is a great deal of information about proper construction on the internet and through home improvement centers. Many cities in Arizona have abandoned many of their permit requirements or have created exceptions for two reasons. First, there are obviously too few permits being issued in comparison to what one would expect. That is, clearly, residents are opting not to obtain required permits. The City of Chandler, AZ, for example, gets fewer than a thousand permits per year to replace water heaters when the number of permits should be several thousand per year. This leads to the second reason for eliminating this and other permit requirements. Despite the dearth of permits, houses are not catching on fire and water heaters exploding in the City of Chandler or other cities in Arizona. It turns out homeowners are not as ignorant as permit requirements seem to assume.⁶⁸

Regardless of the magnitude of permit and inspection fees, the steps involved in obtaining them take time, which is a cost in itself. A homeowner doing minor rewiring or installing a ceiling fan for the first time also has to deal with the invasion of privacy that permits and inspections entail. With these inconveniences, it’s highly unlikely that even a majority of do-it-yourselfers bother to obtain a permit. Do-it-yourself homeowners concerned about their lack of knowledge can hire inspectors if they wish.

Permitting does not just impact do-it-yourself projects. It also impacts the cost and inconvenience of hiring a contractor. Consequently, homeowners are less likely to have work done or will delay it, depending on its nature, partly based on the time and expense of permitting. Although permitting costs and delays might seem minor, they do marginally negatively affect economic activity and are one more potential reason someone might choose to live elsewhere.

Conclusion

Municipal governments learned hard truths during the recent recession. Some in other states have even had to declare bankruptcy, and are losing jobs, businesses, and citizens. The key to revitalization lies not in giving favors to specific industries, but in creating a climate favorable to all business development. Streamlining government processes, reducing regulatory burdens, and improving government transparency are simple steps cities can take to get on the path to balanced budgets and economic growth.

Read the PDF version here

References

Cities across the country struggled through the recent recession, and several even declared bankruptcy, including Stockton and San Bernardino in California, Harrisburg, Pennsylvania, Central Falls, Rhode Island and, perhaps most famously, Detroit, Michigan. Stockton’s decline has been harrowing as its finances have so declined that essential services, especially the police, have been reduced. The city’s gang and narcotics teams had to be disbanded even as the city saw its murder rate hit an all-time high in 2012. The city is learning to fight back with help from the county sheriff and changes to its policing methods, but real long-term damage has been done to its reputation. Even before its bankruptcy, Detroit had a plan on the table to reduce costs by demolishing abandoned houses and commercial buildings. The city’s decline has been so thorough that it has been used as an example of what happens to buildings in its Life After People series.Monday, May 12, 2014 - 09:55Driving Economic GrowthHow Cities Can Build Incentive for Business CreationCity & Local Reform Business & Job Creation Government Accountability Government Red Tape In the News Report Policy ReportYes PHXXXX.pdf Pages from PHXXXX111.pdfBy TopicsByron Schlomachtrue

Legislators and ACA Carve Out Millions for Special Interest

bwilson — Tue, 18 Mar 2014 18:08:28 +0000

PHOENIX - The state’s economic development agency has formally awarded a $2 million loan to a small, northeast Arizona railway, fulfilling what Goldwater Institute attorneys believe is an unconstitutional special law.

The Goldwater Institute obtained records this week from the Arizona Commerce Authority that show the agency is providing the loan through its $25 million annual “Arizona Competes Fund.” State law requires that the agency use this fund to give grants to companies for expansion, or to relocate their operations to the state. The bulk of the fund comes from state income tax withholdings.

Last summer, legislators and Gov. Jan Brewer made a special exception to the spending restrictions on the fund and approved a state budget bill provision that was tailor-made to give a loan to a Navajo County enterprise. As it turns out, the business in question was the Apache Railway Company, a small rail spur in Snowflake that currently employs eight people.

The Apache Railway near Snowflake in northeast Arizona employs eight people who repair and maintain box cars, train engines, and the rail

The last-minute legislative favor has heightened concerns among some legislators and watchdog organizations that the ACA staff and board of directors have used Arizona Competes Fund to finance pet projects. No clear evidence of this has emerged in the agency’s brief three-year existence. However, a recently released Goldwater Institute investigation has found that even if such questionable spending practices were a problem, the public would likely never know. This is because the laws governing the ACA exempt its staff and its board of directors from the typical disclosure and transparency requirements that other state agencies must abide – all in the name of protecting competition and trade secrets.

Goldwater Institute attorney Jon Riches said the special loan to the Apache Railway is undoubtedly “a brazen example of cronyism.”

“The loan violates the ‘Special Law’ provision of the Arizona constitution,” Riches said. “The primary purpose of this provision was to prevent bureaucrats and lawmakers from playing favorites with taxpayers’ money.”

The Apache Railway was nearly shut down in late 2012 when its owner, the paper-mill company Catalyst, laid off more than 250 workers and closed its paper mill. Catalyst tried to auction off the rail to a scrapper for profit.

The railway and former mill also are on the same property as a biomass plant that was opened by Sen. Bob Worsley, R-Mesa. Worsley has said he had nothing to do with the Snowflake effort to obtain a loan through special legislation.

Arizona rancher Stephen Brophy and Snowflake city officials said in interviews with the Goldwater Institute that they had intervened with the rail’s sale, and negotiated an agreement with the mill’s buyer to save the railway. They then proceeded to contact state officials for additional financial help, asking for a loan that they could leverage when applying for federal rail grants to buy the railway and ensure its future.

The railway’s supporters have said they believe the rail could one day be used to haul potash for fertilizer from mines in the area. Those mines have been planned for years but have yet to open. The rail’s biggest customer currently is the Hormel Foods-owned company Farmer John, which relies on Apache Railway to haul livestock feed from a Burlington Northern Santa Fe cross-continental line to its only Arizona hog farm, near Snowflake. The rail also has been used to store BNSF’s unused freight cars.

Read Arizona Commerce Cronies: Picking and Choosing Winners With Your Tax Dollars

Apache Railway Company: Revised Loan Commitment

Americans Must Unite Behind the Compact for a Balanced Budget

bwilson — Wed, 22 Jan 2014 19:20:41 +0000

Unprincipled politicians use unlimited debt to buy votes today while shifting the costs of their policies to non-voting future generations. There is no effective political check to stop such behavior—except to impose a strong constitutional limit on the use of debt.

This is not a partisan point. It is a policy fact. Our nearly $20 trillion national debt is the proof. Both parties have caused it. Unlimited debt leads to unlimited spending on unsustainable programs—whether foreign or domestic, military or civilian—no matter who is in charge of Washington.

The political class in Washington seems to have forgotten its conscience. We cannot trust the debtor to set its own credit limit. We must impose outside oversight.

The Compact for a Balanced Budget would do just that.

Now being advanced by legislators in Arizona, Arkansas, Alaska and Georgia, the Compact uses an agreement among the states to advance and ratify a powerful balanced budget amendment. The amendment would limit spending to cash flow from taxes except for borrowing from a constitutionally-fixed line of credit—to handle cash flow volatility and emergencies.

To ensure that line of credit is not abused, the core of the Compact’s amendment is a requirement of outside oversight for any proposed increase in the federal debt. Specifically, any increase in the federal debt limit would require approval from a referendum of the states.

By design, the Compact makes the goal of achieving a balanced budget amendment obtainable—not an armchair pipe dream. The Compact transforms the amendment by convention process into a “turn-key” operation, allowing the states to agree in advance to everything it involves – from the text of the proposed amendment, to the application to Congress, to delegate appointments and instructions, to the selection of the convention location and rules, to the ultimate legislative ratification of the amendment. This cuts the number of enactments needed to get the job done under Article V of the United States Constitution by more than 60%. It also prohibits the oft-cited fear of a runaway convention.

With this powerful balanced budget amendment in place, Washington would no longer have the ability to set its own credit limit and write itself a blank check.

The Compact for a Balanced Budget promises the outside oversight needed to restore fiscal responsibility and provides a real remedy for the fiscal damage done by Washington. And it can actually get the job done.

It’s time for Americans to show that restoring our country to fiscal health is not a partisan policy objective.

In the News RSS

Florida's Personal Learning Scholarship Accounts

PLSA Moms

Julie Kleffel

Melissa Ward

Ashli McCall

Information

In The News

NPR: Families With Disabled Kids Fire Back Against Teacher's Union Lawsuit Over New Program

The Good, The Bad, and The Ugly: A Review of Arizona’s Fiscal Transparency Efforts

Introduction

The Good

The Bad

The Ugly

Recommendations

Conclusion

MEDIA ADVISORY: HOBBY LOBBY DECISION IS A SMALL VICTORY, BUT IT DOESN’T STRIKE THE HEART OF OBAMACARE

FOR IMMEDIATE RELEASE: AMIDST PRESSURE OF LAWSUIT, CITY ENDS GROSS 'PENSION-SPIKING' ABUSES

FOR IMMEDIATE RELEASE: SCOTUS decision in NLRB v CANNING only first step to curb executive overreach

The Right To Try

Everyone Deserves the Right to Try

Patient Stories

Lorraine's Story

Tracy's Story

Mikaela's Story On Good Morning America (3/27/2014)

Nick's Story on Colorado Daybreak (5/16/2014)

Right To Try: Kathy's Story

National Coverage

Right To Try on The Kelly File (5/5/2014)

Goldwater Institute CEO Darcy Olsen

Discusses Right To Try with Stossel (3/27/2014)

CNBC's Street Signs talks Right To Try (5/6/2014)

Sign Brigg's Legacy Petition for Access

Clippings

Resources

How Cities Can Drive Economic Growth in Five Easy Steps

Introduction

1. Privatizing Services

Privatize Trash Collection

Privatize Park Maintenance

Privatize Golf Courses

Privatize Road Maintenance

Privatize Transit

2. Reforming Business Processes

Employment

Procurement

Tell Losing Vendors Why

Write Performance-Based Specifications

End Business Preferences

3. Defining and Concentrating on Core Functions

4. Putting and Keeping City Finances in Order

Pensions

Financial transparency

Taxation & Revenue

5. Reducing Regulation

Licensing

Minor Home Maintenance Permitting

Conclusion

Legislators and ACA Carve Out Millions for Special Interest

Americans Must Unite Behind the Compact for a Balanced Budget

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