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Happy New Year! Fiscal Year, That Is

This month marks the beginning of Arizona’s new fiscal year. What do you think fiscal year 2018 looks like compared to ten years ago? You may be surprised!

• General revenues to the state are below where they were 10 years ago – despite population growth of more than 650,000.

• The Rainy Day fund balance is $240 million LESS than it was ten years ago. It doesn’t look like we’re ready to weather the next recession.

• Ten years ago, $55 million was being diverted to private schools through the private school tuition tax credit; in 2018 that amount has more than tripled with the addition of two more tax credits plus the empowerment scholarship vouchers.

• Basic state aid funding for public schools has dropped more than $300 per student – that’s not even taking inflation into account.

• The corporate income tax rate is down; so are total state appropriations as a share of our economy.

Are We Getting Our Money’s Worth in Job Creation Dollars?

Return on Investment (ROI) is a simple concept, meaning: What are we getting for the money we’re spending?

Last year, the quasi-public state agency, Arizona Commerce Authority, was given more than $30 million in taxpayer dollars to create and retain high quality jobs. This year they’re requesting a little less, but still substantial, $26.8 million.

What has been the ROI? According to a recent Arizona Auditor General report, it’s hard to tell, but what we can tell is that it falls far short of expectations. In fiscal year 2014 (the period covered by the audit), $4.3 million from the Arizona Competes Fund (known as a “deal-closing” fund), was awarded to four different companies. That $4.3 million got Arizonans a commitment from those companies to create a little over 2,000 jobs.canstockphoto10794492 (1)

Note the word “commitment” versus “created.” The Auditor General noted the difference and cited that as one flaw of the Commerce Authority report that is supposed to give Arizona taxpayers a summary of what was done with their money. So far, only 257 jobs have been created out of the over 2,000 committed from last year’s awardees.

Yet another problem noted by the Auditor General is that “although statute requires the Authority to report median wages, it reports average wages” instead. An average of wages could be easily skewed by one high paying job, whereas a median wage is the middle wage of all the jobs created. So, without a report on the median wage, we don’t know the quality of the jobs being committed by these companies.

The lack of accountability is troubling, as it’s not clear if Arizona taxpayers are getting an adequate ROI based on what is reported by the Authority. As the Auditor General concludes: “Without clear information about the State’s return on investment, it may be difficult for decision makers to make informed decisions about Arizona’s economic development activities.”

In reviewing the reports from the Arizona Commerce Authority, we found that three years into their five year plan to create 75,000 higher wage jobs, companies had committed only 5,846 jobs. Fewer than half, 2,310 positions, have actually been created.

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