Important Information About Phoenix Prop 1

Written on:August 12, 2011
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By Tuesday, August 30, Phoenix voters will decide the fate of Proposition 1, the so-called “Home Rule” budget measure. Below is information about Proposition 1 from the Arizona chapter of Americans for Prosperity, arranged in three sections:

I. Background
II. Policy Notes
III. Voter Activist Information

For a printable version of this document, use this link:

I. Background

Arizona has a municipal spending limit in its Constitution. This provision limits a large portion of city spending to the levels prevailing in 1979-80, with annual adjustments for population increases and national inflation. The population-plus-inflation spending limit formula is widely favored by fiscal conservatives as a means of restraining the growth of government. By preventing government budgets from growing faster than the combined rate of growth of population and inflation, strong constitutional spending limits can keep government from growing faster than the private economy that supports it.

Every four years since 1983, Phoenix voters have voted to lift Arizona’s municipal spending limit, voting for an alternative expenditure limitation, a measure known by its proponents as “home rule.” In Phoenix in recent years, “home misrule” is a more accurate description, given the profligate spending in the middle years of the past decade, and the multiple tax and rate increases that have been used to maintain excessive city spending during the recession.

Unfortunately, the typically low voter turnouts in the non-November, non-even year elections for the alternative expenditure limitations mean that many taxpayers are unaware of the elections. As such, the turnout for “home rule” elections tends to be dominated by city workers (who benefit directly from higher government spending) and by government-worker unions (which benefit from having more employees, and more highly-paid employees, on government payrolls).

Deceptive Marketing

In practice, and contrary to official descriptions of the proposition, “home rule” is not any kind of spending limit: it is a budgetary regime in which the Mayor and City Council can spend as much money as they can raise in taxes. Under “home rule,” the sky is the limit.

Arizona Republic columnist Robert Robb has a good description of the deceitful nature of pro-Prop 1 propaganda:

* Phoenix’s Proposition 1 deserves to be voted down just as punishment for mendacity.

In 1980, statewide voters limited annual increases in municipal spending to population growth and inflation. There was lots of flexibility built in. Local voters could allow the limit to be exceeded in any given year, or increased permanently by increasing the spending base.

Local voters were also given the ability to approve an “alternative expenditure limitation” not based upon population growth and inflation.

Phoenix and some other cities have adopted an “alternative limitation” that says the limit is whatever the city council decides to spend. That’s not an alternative limit. That’s no limit.

This alternative no-limit gets renewed every four years in Phoenix’s low-turnout, by-invitation-only elections. Proposition 1 would renew the no-limit for four more years.

According to the city, defeat of Proposition 1 would require spending cuts of $870 million. That means that city government is spending 30 percent more in real per capita terms than it did in 1980.

No wonder the city sales tax doubled during that period.

(Full column:

What’s at Stake

By August 30, Phoenix voters will cast votes on Prop 1, the latest alternative expenditure limitation measure. If the majority votes Yes—in favor of Prop 1—things will continue as normal. In other words, the Mayor and City Council will be free to continue increasing city budgets (and spending our taxpayer money) at irresponsible rates for the next four years (through the 2015-2016 fiscal year).

However, if the majority votes No–against Prop 1–Phoenix will have to reduce its spending to the baseline established by increases in population and inflation since 1980. This chart shows the alternatives:

According to city spokespersons, the failure of Prop 1 would make Phoenix reduce its current budget by roughly $870 million, beginning in Fiscal Year 2012-2013 (the fiscal year beginning July, 1 2012). That would be a reduction of approximately 25 percent of the city’s projected budget.

The city government and tax-taker interests have engaged in the usual scare campaign to promote the alternative expenditure limit (“home rule”). Voters can read the dire predictions in the voter information packet produced by the city. By contrast, AFP-Arizona believes that the city’s bloated budget could easily sustain a 25-percent reduction, and that the reduction would force the City Council to make long-needed reforms and achieve dramatic efficiencies in city operations. (More about that in the Policy Notes, below.)

Resistance is NOT Futile

Although “home rule” propositions usually pass by large margins (the 2007 version in Phoenix won 73 percent of the votes cast), they don’t always win. In November of 2009, voters in left-of-center Tucson narrowly rejected the Prop 400 “home rule” proposition. Given that Prop 400 failed by a few hundred votes, it is entirely possible that the home-made street signs put out by the Pima Association of Taxpayers were decisive in defeating the Tucson measure: The reason we haven’t heard much about the defeat of Prop 400 is that Tucson lost only $21 million in spending capacity out of a billion-dollar budget. Because of different fiscal circumstances prevailing in Phoenix, the consequences of defeating “home rule” in Phoenix would be much more dramatic–and as we argue below, very beneficial.

Phoenix City Council Members Should Stop “Shooting the Moon”

Even if Prop 1 passes, a close vote might convince the Big Spenders on the Phoenix City Council to pursue a more conservative ballot proposition in 2015. As it is, every four years, council members gamble on either: A) winning “home rule” and getting to spend whatever they want; or, B) losing “home rule” and being forced to reduce spending by large amounts (in this case, 25 percent) in order to drop down to the 1980 baseline. (And generally, the required spending reduction gets larger each time “home rule” passes—see the AFP-Arizona chart for a visual.) But the Arizona Constitution also allows for a third option, one that was exercised by Scottsdale in 2006: cities can ask voters to permanently adjust the spending baseline to grandfather in current spending levels. The only disadvantage for Big Spenders under the adjusted baseline option is that they would then have to limit spending increases for the next four years to the rate of growth of population plus inflation before getting another chance to gamble on “home rule.”

II. Policy Notes

There are many reasons to believe that the defeat of Prop 1–the alternative expenditure limitation or so-called “home rule” measure–would be beneficial for the people of Phoenix. Some of those reasons are listed below:

1. Limited government is good. The arguments for limited government could (and do) fill volumes, so we cannot possibly enumerate them here. For the sake of brevity, we will emphasize the argument that government should not take tax dollars (by force) to perform functions that individuals, families, churches, and voluntary associations should perform.

2. The City of Phoenix can serve as a model for reform. By cutting its budget by 25 percent, the City of Phoenix could show the state and federal governments how to achieve huge operational efficiencies. The state government has reduced its budget significantly from the peak spending achieved under Gov. Janet Napolitano, but it has done little in the way of operational reforms. And as we have all seen, the federal government has done nothing at all to cut spending—other than to shave a little off of the CBO’s projected budget increases for the next decade. Unfortunately, Phoenix has not been a model of reform thus far during the extended recession. Although its actual expenditures have leveled off somewhat, the city’s adopted budgets continue to climb, as the Big Spenders on City Council pass tax and rate hikes and wait for the elusive economic boom times to return.

3. Phoenix can cut its budget by at least $870 million, while increasing value to users of vital city services. The Arizona chapter of Americans for Prosperity has produced a worksheet showing some of the ways Phoenix can reduce spending:

Included in the spending targets for city agencies are oversight and transition costs for long-term private concessions (in future years, the transition costs would be reduced dramatically or eliminated). In many cases, AFP-Arizona urges the City of Phoenix to discontinue programs that do not belong among the proper functions of city government, and in some cases, we urge the city to return grant monies to the federal government. AFP-Arizona also strongly urges the city to use various modes of privatization to pay for the provision of city services. Privatized enterprises will operate services more efficiently than city departments, saving taxpayers money and providing better value to customers. In a nutshell, privatization comes down to three main options:

A) Contracting out through an open and competitive bidding process allows private companies to compete with city departments to win contracts to provide city services (with the important requirement that city departments and unionized personnel include the present value of all worker benefits–including overtime, health, and retirement–in their bids);

B) Granting long-term private concessions for maintenance, improvement, and operation of services such as parks, recreation facilities (including golf courses), airports, and libraries. Concessionaires should be incentivized through contracts to keep their facilities in good shape and to return city assets in excellent condition at the end of their concessions. Concessions should also granted to private companies that provide capital investments as part of open and competitively bid service contracts (as opposed to having the city create or maintain enterprise funds that are captive within the city structure); and,

C) Deeding city properties, including recreational facilities and parks, to neighborhood associations, to decentralize the ownership and management of those properties (in some cases, it may be politically feasible to sell assets outright to private companies, but some taxpayers may object to that approach, because they feel that they have paid for those assets through taxes).

4. Phoenix needs to reduce compensation for city workers. As Phoenix City Councilman Sal DiCiccio has documented–using official city data–the city awards its workers an average salary and benefit package close to $100,000 a year:

That compensation level is unsustainable, and is a slap in the face to city taxpayers, who make an average salary and benefit package closer to $50,000—if they still have jobs after the worst recession since the 1930s. AFP-Arizona urges Phoenix to reduce salary and benefit packages in most departments and for most city workers by about ten percent—roughly on par with the compensation levels city workers enjoyed in 2008.

5. Budget cuts would allow Phoenix to reduce taxes dramatically. For better or for worse, the failure of Prop 1 would not mean automatic tax cuts: the city could stow the surplus revenue in a rainy day fund or use the money to pay off capital debt. But AFP-Arizona believes that some of the savings from a Prop 1 failure should be given back to city taxpayers. Budget reductions would generate General Fund savings sufficient to enact two important tax reforms:

• $127 million could be used to eliminate the city’s primary property tax

• $28 million in savings could be used to repeal the egregious Food Tax that was enacted last year by a majority on the council with a mere 24 hours’ advanced notice and that went to pay for pay hikes for city employees.

III. Voter Activist Information

Voter Information

There are multiple voting dates, and early ballots are already in voter mailboxes. General Phoenix election information can be found here:

A map of the 26 Phoenix voting centers is available here:

Activist Information

As the Tea Party movement has demonstrated many times in its short existence, grassroots taxpayers activists can make a huge difference in the outcome of elections. Also, remember that Tucson’s Prop 400 “home rule” measure was beaten in 2009 by a few hundred votes–given the close margins, it is entirely possible that the hundreds of home-made street signs created by the grassroots activists of the Pima Association of Taxpayers made the difference.

AFP-Arizona encourages activists to make home-made street, car and yard signs, or to use soap to write slogans on their car windows. For more information and ideas on grassroots activism, contact AFP-Arizona Grassroots Coordinator Judy Hoelscher at or (623) 465-4767.

Finally, to join AFP-Arizona and to get our email action alerts, go to the top of this page ( and click on JOIN at top right.

For Liberty, Tom

Tom Jenney
Arizona Director
Americans for Prosperity
(602) 478-0146

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