Coyote Blog

My daughter is ready for her final (in-car) driving test to try to get her driver's license.  But it turns out that the AZ DMV only gives driving tests before 3PM each day.

This is yet another policy designed for the pleasure of government workers (who want to get home nice and early) and not customer-citizens.  Ask yourself:  Who are 99% of the people who take the in-car driving test.  Answer:  16-year-olds, also known as high school sophomores.  And what are they doing up until 3PM weekdays?  Why, they are going to school!

So I have to pull my daughter out of school to take the driving test.  But it is worse than that, because we can't just show up at 2:30, missing perhaps her last class.  The AZ DMV has this insane process that is essentially a series of chained queues.  One waits in line for the receptionist, who gives the "customer" a number based on what task they want to complete (license, tags, etc).  One then waits endlessly for this first number to come up, only to find that the person who calls you up can only complete half the task (at best), so you then have to wait in line for the next person to complete the next task, etc.

Well, reports from all the other parents tell us that if you show up two hours early (e.g. at 1PM), there is a very good chance you will not get the driving test.  If all the prior queues one must work through cause one to show up at the driving test queue even at 3:01 -- Sorry!  You have to come back another day and start all over.

This is obviously insane.  The chained queue process is nuts.  The fact that the one portion school age kids must complete ends before school is out is nuts.  The fact that the person who performs the last step in the chained process goes home first is nuts.

Until last year, and with my previous kid, we did not have to do this.  AZ had a very sensible law that allowed private licensed driving schools to give the driving test.  You could still go through the DMV, but for a $100 or so one could get this done via a high service, no-queue, work-on-the-weekend private company.  But of course our legislature ended this sensible service last year, ostensibly over concerns about quality, but likely because the DMV folks didn't like competition from outsiders who actually gave a sh*t about customer service.

When I read this in our local paper, alarm bells immediately went off:

A friendship cemented while working together on the state’s economic development efforts has led to a new partnership linking Roy Vallee, the former Avnet Inc. chairman and chief executive officer, with private developer Don Cardon.

Great, two folks who have focused on bringing crony corporatist benefits to selected local businesses and business relocations are going into business together.  I don't know these guys, I am sure they are fine folks, but my first thought was a business that leveraged their connections with government to create private profits.

Reading further, this seems like a good guess:

The two metro Phoenix business leaders say they will collaborate on large commercial developments, including those with a special public-interest focus and those with special complexities....

Cardon spent three years at the Arizona Commerce Authority, a public-private partnership, and the predecessor Arizona Commerce Department. Aside from that, he perhaps is best-known as a driving force behind CityScape, the three-block, $1.2 billion mixed-use development in downtown Phoenix. He cites as a strength his ability to bring private and public interests together on a project.

Yep, I definitely think I am on to something:

The firm will strive to encourage a “collective vision” and “make sure projects are worthy of investment and will be successful,” Cardon said. “Everything we do will involve public value, enriching the quality of life.”

You know the type of project -- the ones where the city / state / Feds justify investing millions of taxpayer money into private projects because "they create jobs" (like those at Solyndra).  In fact, the two partners are already polishing up this mantra, which I am sure we will hear over and over:

Deals typically will exceed $100 million and will create hundreds of jobs, both in the development stage and when complete, he said. The company , however, will maintain a fairly lean staff.

“We’re not a big employer, but we’ll be a job creator,” he said.

I want to make a couple of quick points:

• Investments whose primary return is "jobs" are not investments, because jobs are a cost, not an income stream.  Investing public money to create jobs means that one is investing money now so that it incurs costs later. 
• All successful capitalist enterprises that make  a profit by definition create "public value" and "enrich the quality of life."  Otherwise no one would buy their product or service and they would fail.  In fact, only publicly-funded projects can evade this sort of accountability.  When it is said that these projects deliver "public value," what is meant is that they deliver benefits that a few self-selected people have defined as somehow interesting to the public, but which it turns out the public (when given a choice) is unwilling to pay for.  Which is how we get the local town of Glendale continuing to subsidize an ice hockey team for $25 million or so a year.

I continue to have shipments lost - badly lost - recently at UPS.  After 10 years of not a single foul-up, UPS has now lost or mis-routed five important shipments of mine in just 3 months.  In several of these cases, shipments that were supposed to be overnight did not get delivered for 4 or 5 days.  More worrisome, the packages seemed to sit (according to the tracking) in random locations until I called and forced something to happen -- there did not seem to be any sort of automatic intervention to save or reroute them.  In the most disturbing case, a woman in Arizona called our office to tell us that our Florida payroll had just been delivered by UPS to her house.

This is particularly worrisome because most of our shipments are date critical - payroll that has to be somewhere on a particular date or bids that must be delivered by a certain time or be voided.  Recently we have taken to paying extra and shipping everything one day faster than we need to give UPS room to screw up - ie overnight when we actually have two days to the due date.  But even so, UPS has fouled two shipments up so badly they were late even with an extra day to spare.

My statistics memory is rusty, but my guess is that my very few samples of a very large system don't necessarily indicate a process problem to any significance.  Still, we are worried.  The problem is I don't know who to switch to -- we left Fedex when they screwed up two of our first three shipments.

The extent to which the media is aiding and abetting, with absolutely no skepticism, the sky-is-falling sequester reaction of pro-big-government forces is just sickening.  I have never seen so many absurd numbers published so credulously by so much of the media.  Reporters who are often completely unwilling to accept any complaints from corporations as valid when it comes to over-taxation or over-regulation are willing to print their sequester complaints without a whiff of challenge.  Case in point, from here in AZ.  This is a "news" article in our main Phoenix paper:

Arizona stands to lose nearly 49,200 jobs and as much as $4.9 billion in gross state product this year if deep automatic spending cuts go into effect Friday, and the bulk of the jobs and lost production would be carved from the defense industry.

Virtually all programs, training and building projects at the state’s military bases would be downgraded, weakening the armed forces’ defense capabilities, according to military spokesmen.

“It’s devastating and it’s outrageous and it’s shameful,” U.S. Sen. John McCain told about 200 people during a recent town-hall meeting in Phoenix.

“It’s disgraceful, and it’s going to happen. And it’s going to harm Arizona’s economy dramatically,” McCain said.

Estimates vary on the precise number of jobs at stake in Arizona, but there’s wide agreement that more than a year of political posturing on sequestration in Washington will leave deep economic ruts in Arizona.

Not a single person who is skeptical of these estimates is quoted in the entirety of the article.  The entire incremental cut of the sequester in discretionary spending this year is, from page 11 of the most recent CBO report, about $35 billion (larger numbers you may have seen around 70-80 billion include dollars that were going away anyway, sequester or not, which just shows the corruption of this process and the reporting on it.)

Dividing this up based on GDP, about 1/18th of this cut would apply to Arizona, giving AZ a cut in Federal spending of around $2 billion.  It takes a heroic multiplier to get from that to  $4.9 billion in GDP loss.  Its amazing to me that Republicans assume multipliers less than 1 for all government spending, except for defense (and sports stadiums) which magically take on multipliers of 2+.

Update:  I wrote the following letter to the Editor today:

I was amazed that in Paul Giblin’s February 26 article on looming sequester cuts [“Arizona Defense Industry, Bases Would Bear Brunt Of Spending Cuts”], he was able to write 38 paragraphs and yet could not find space to hear from a single person exercising even a shred of skepticism about these doom and gloom forecasts.

The sequester rhetoric that Giblin credulously parrots is part of a game that has been played for decades, with government agencies and large corporations that supply them swearing that even trivial cuts will devastate the economy.  They reinforce this sky-is-falling message by threatening to cut all the most, rather than least, visible and important tasks and programs in order to scare the public into reversing the cuts.  The ugliness of this process is made worse by the hypocrisy of Republicans, who suddenly become hard core Keynesians when it comes to spending on military.

It is a corrupt, yet predictable, game, and it is disappointing to see the ArizonaRepublic playing along so eagerly.

I personally support much more open immigration, as do many other libertarians.  When I get push-back from my libertarian friends, it generally is on two fronts:

• You can't combine open immigration with a welfare state -- this leads to financial implosion
• Open immigration allows illiberal, anti-democratic people to take power through the democratic process (a phrase I stole from here, though it is not actually about immigration).  In the name of liberty, we let people come in and vote for authoritarian illiberal measures.**

I agree that both of these are real problems.  The key for me is to disassociate legal presence in this country from citizenship.  It should certainly be possible to have multiple flavors of legal presence in this country.   At level 1, anyone can legally be present, seek employment, buy property, and have access to certain services (e.g. emergency services).  At level 2, history of working and paying payroll and income taxes gets more access to welfare-state sort of programs.  Over time, this may or may not lead to full citizenship and voting rights, but there is no reason we can't still be careful with handing out full citizenship while being relatively free with allowing legal work and habitation.

** I have observed a US internal version of this.  People run away from California to places like Arizona and Texas to escape California's dis-functionality   But as soon as they arrive in their new home, they start voting for the exact same crap that sank California.

The best time to argue for general principles is when they work against one's own interest, to firmly establish that they are indeed principles rather than political opportunism.  Two examples:

First, from a topic rife with political opportunism, the Supreme Court a three-judge panel recently ruled Obama's NLRB not-really-recess appointments were unconstitutional.  I think that was the right decision,  but a President has got to be able to get an up or down vote in a timely manner on appointments.  As much as I would love to see all of Obama's appointments languish for, oh, four years or so, and as much as I really don't like his activist NLRB, having to resort to procedural hacks of this sort just to fill administrative positions is not good government.  The Senate rules (or traditions as the case may be) that even one Senator may put a hold on confirmations is simply insane.  While I am a supporter of the filibuster, I think the filibuster should not apply to certain Constitutionally mandated activities.  Specifically:  passing a budget and appointment confirmations.

Second, readers of this blog know how much I dislike our sheriff Joe Arpaio.  He was unfortunately re-elected a couple of months ago, though the vote was closer than usual.  This week, an Arizona group who also does not like Joe has announced it is going to seek a recall election against him.  Again, as much as I would like to see Arpaio ride off into the sunset, this practice of gearing up for recall elections just days after the election is over is just insane.  It is a total waste of money and resources.  While I don't like to do anything that helps incumbents, there has to be some sort of waiting period (perhaps 1/4 of the office term) before we start this silliness.

Arizona is generally more intelligently managed, at least fiscally, than California.  But while that state still is treated seriously for all its dysfunctionality, Arizona is often a media laughing stock.  This is in large part due to the fact that Conservatives in the Arizona legislature just can't seem to stop themselves from proposing a few absurdly goofy pieces of legislation each session.

House Bill 2467, sponsored by Republican state Representatives Bob Thorpe, Sonny Borrelli, Carl Seel, T.J. Shope, and Steve Smith, proposes the following:

"Before a pupil is allowed to graduate from a public high school in this state, the principal or head teacher of the school shall verify in writing that the pupil has recited the following oath:

"I, _________, do solemnly swear that I will support and defend the Constitution of the United States against all enemies, foreign and domestic, that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge these duties; so help me God."

Smith and Shope are also in on House Bill 2284. Whereas current Arizona law says students in public schools can opt out of doing the pledge if they so choose, Smith's and Shope's proposal says only a child's parents can let them avoid reciting the pledge.

So they want to make it harder to opt-out of the current loyalty oath (Pledge of Allegiance) and then add a new loyalty oath.

Historically, loyalty oaths are the hallmark of dictators, the Caesers and Hitlers of the world.  In a free society, loyalty is earned by a government.  When government officials demand a blank check in the form of a loyalty oath that pledges allegiance no matter what the government does, watch out.

A few other observations:

• I love the part in the oath above that says "I take this obligation freely."  Sure.  We won't give you the diploma you have in every other way earned without taking the oath, a diploma practically required to function in our society, but the oath is voluntary.  This is the kind of double speak that is a hallmark, along with loyalty oaths, of a dictatorship.
• Apparently to graduate in Arizona, this would force every student to acknowledge the existence of God
• I understand what it means for the President to preserve and defend the Constitution.  But what does it mean for the average high school graduate?  Just what is this obligating them to do?  And what is the penalty for not doing it?
• I would gladly trade having all high schoolers in the state embrace this oath for simply having our state officials, in particular our Sheriff Joe Arpaio, being true to this oath.

Kevin Drum, looking at this chart...

.... concludes

Republicans like to say we have a spending problem, not a taxing problem, but the evidence doesn't back that up. Total government spending didn't go up much during the Clinton era, and it's actually declined during the Obama era. In the last two decades, it's only gone up significantly during the Bush era, the same era in which taxes were cut dramatically.

I have several comments about this craziness, but I need to preface it with an observation, an observation that I presume my readers have already figured out, unlike the willfully blind of the reality-based community.  This is the total of all government spending at all levels, not just Federal.  In fact, had he shown Federal spending (likely more appropriate given he is trying to draw conclusions about Presidents), the numbers would have continued up over the last few years.  Only a substantial decline in state and local spending has offset the increase in Federal per capital spending.  Which leads us to a few conclusions, starting with the most obvious:

• Under our Constitution, last I checked, the President had exactly zero to do with local spending.  Obama actually was a sort of exception to this, attempting to prop up local spending, or at least to prop up union civil service payrolls, in the 2009 stimulus.  However, this is well behind us and all this did was put off the financial reckoning in state and local governments.
• It is odd that Drum should claim this proves that all is well, since if it is so, it is due to a lot of governments, many of them majority Republican, following exactly the opposite strategy than the one he advocates.  In other words, they showed fiscal restraint, which somehow allows Drum to argue that Obama should therefore show lack of restraint.  I am not sure how improving state and local financial position by doing the opposite of what Drum advocates is a logical justification for the Feds doing what Drum advocates.
• This shift in the spending mix from state and local to Federal is actually a fiscal disaster in waiting.  Local spending has far more accountability, where spending stays close to voters so that those who pay taxes can assess the spending's merits and effectiveness.   Further, most state and local governments must operate with a balanced budget and are banned from deficit spending.  The Feds have no such restraints.
• The fact that many state and local governments live within their means does not somehow make the federal government's debauchery justified.  Seriously, this is like saying that Greece does not have a spending problem because overall EU spending has declined.
• Even state and local spending is declining only because the government is on cash rather than accrual accounting.  If states do not fund their pension obligations in a year, realistically they are still incurring the liability, but cash accounting would show that spending is declining.  In this sense, cash spending is a poor gauge of the real health of state and local governments.
• Everyone always shows these spending charts by red / blue President.  It would be interesting instead to see them by red / blue Congress.

Update:  Drum responds to others making similar arguments here.  He modifies the chart to include just federal per capital spending, and unsurprisingly, it is up steeply in the first year of Obama's Presidency but flatish (not down) after that.  Drum draws the conclusion that Obama's spending is OK because Bush's was worse.  Huh?  This is the bizarre tu quoque team politics game that drives me insane.  Bush sucked on spending.  Bush with a Democratic Congress in his last years sucked worse.  Obama has sucked.   None of this somehow proves spending is not a problem.

His chart says this:  Real (meaning adjusted for inflation) per capita (meaning adjusted for population growth) Federal spending is up something like 47% in the last 10 years.  Anyone feel like they are getting 47% more value?

Of late I have been seeing a lot of examples of people trying to claim that complex, even chaotic multi-variable systems are in fact driven by a single variable.  Whether it be CO2 in climate or government spending in Keynesian views of the economy, this over-simplification seems to be a hubris that is increasingly popular.

The worst example I believe I have ever seen of this was in the editorial page today in the Arizona Republic.  Titled Arizona vs. Massachusetts,  this article purports to blame everything from Arizona's higher number of drunk driving accidents to its higher number of rapes on ... the fact that Arizona has lower taxes.  I kid you not:

In the absence of discernible benefits, higher taxes are indeed a negative. We would all like to keep more of what we earn. That is, if there are not other negative consequences. So, it is reasonable to ask: What do Massachusetts citizens get for these increased public expenditures? A wide range of measures from widely disparate sources provide insight into the hidden costs of a single-minded obsession with lower taxes at all costs.

The results of such an investigation are revealing: Overall, Massachusetts residents earn significantly higher salaries and are less likely to be unemployed than those who live in Arizona. Their homes are less likely to be foreclosed on. Their residents are healthier and are better educated, have a lower risk of being murdered, getting killed in a car accident or getting shot by a firearm than are Arizonans. Perhaps these factors explain the lower suicide rate in Massachusetts than in Arizona as well as the longer life spans.

None of this supposed causation is based on the smallest scrap of evidence, other than the spurious correlation that Arizona has lower taxes at the same time it has more of the bad things the authors don't like.  The authors do not even attempt to explain why, out of the thousands of variables that might have an impact on these disparities, that taxation levels are the key driver, or are even relevant.

Perhaps most importantly, the authors somehow fail to even mention the word demographics.  Now, readers know that I am not very happy with Arizona Conservatives that lament the loss here of the Anglo-Saxon mono-culture.   I think immigration is healthy, and find some of the unique cultures in the state, such as on the large tribal reservations, to make the state more interesting.

However, it is undeniable that these demographic differences create wildly different cultures between Arizona and Massachusetts, and that these differences have an enormous impact on the outcomes the authors describe.  For example, given the large number of new immigrants in this state, many of whom come here poor and unable to speak English, one would expect our state to lag in economic averages and education outcomes when compared to a state populated by daughters of the revolution and the kids of college professors (see immigration data at end of post).  This is made worse by the fact that idiotic US immigration law forces many of these immigrants underground, as it is far harder to earn a good income, get an education, or have access to health care when one does not have legal status.  (This is indeed one area AZ is demonstrably worse than MA, with our Joe-Arpaio-type fixation on harassing illegal immigrants).

By the way, it turns out Arizona actually does pretty well with Hispanic students vs. Massachusetts  -- our high school graduation rate for Hispanics is actually 10 points higher than in MA (our graduation rate for blacks is higher too).  But since both numbers are so far below white students, the heavy mix of Hispanic students brings down Arizona's total average vs. MA.   If you don't understand this issue of how one state can do better than another on many demographic categories but still do worse on average because of a more difficult demographic mix, then you shouldn't be writing on this topic.

Further, the large swaths of this state that are part of various Indian nations complicate the picture.  AZ has by far the largest area under the management of tribal nations in the country -- in fact, almost half the tribal land in the country is in this one state.  These tribal areas typically add a lot of poverty, poor education outcomes, and health issues to the Arizona numbers.  Further, they are plagued with a number of tragic social problems, including alcoholism (with resulting high levels of traffic fatalities) and suicide.  But its unclear how much these are a result of Arizona state policy.   These tribal governments are their own nations with their own laws and social welfare systems, and in general fall under the purview of Federal rather than state authority.  The very real issues faced by their populations have a lot of historical causes that have exactly nothing to do with current AZ state tax policy.

The article engages in a popular sort of pseudo-science.  It drops in a lot of numbers, leaving the impression that the authors have done careful research.  In fact, I count over 50 numbers in the short piece.  The point is to dazzle the typical cognitively-challenged reader into thinking the piece is very scientific, so that its conclusions must be accepted.  But when one shakes off the awe over the statistical density, one realizes that not one of the numbers are relevant to their hypothesis: that the way Arizona runs its government is the driver of these outcome differences.

It's really not even worth going through the rest of this article in detail.  You know the authors are not even trying to be fair when they introduce things like foreclosure rates, which have about zero correlation with taxes or red/blue state models.  I lament all the negative statistics the authors cite, but it is simply insane to somehow equate these differences with the size and intrusiveness of the state.  Certainly I aspire to more intelligent government out of my state, which at times is plagued by yahoos focusing on silly social conservative bugaboos.  I am open to learning from the laboratory of 50 states we have, and hope, for example, that Arizona will start addressing its incarceration problem by decriminalizing drugs as has begun in other states.

The authors did convince me of one thing -- our state university system cannot be very good if it hires professors with this sort of analytical sloppiness.  Which is why I am glad I sent my son to college in Massachusetts.

PS- If the authors really wanted an apples to apples comparison that at least tried to find states somewhat more demographically similar to Arizona, they could have tried comparing AZ to California and Texas.  I would love for them to explain how well the blue state tax heavy model is working in CA.  After all, they tax even more than MA, so things must be even better there, right?  I do think that other states like Texas are better at implementing aspects of the red-state model and do better with education for example.  You won't get any argument from me that the public schools here are not great (though I work with several Charter schools which are fabulous).  For some reason, people in AZ, including upper middle class white families, are less passionate on average about education than folks in other states I have lived.  I am not sure why, but this cultural element is not necessarily fixable by higher taxes.

Update- MA supporters will argue, correctly, that they get a lot of immigration as well.  In fact, numerically, they get about the same number of immigrants as AZ.  But the nature of this immigration is totally different.  MA gets legal immigrants who are highly educated and who come over on corporate or university-sponsored visa programs.  Arizona gets a large number of illegal immigrants who get across the border with a suitcase and no English skills.  The per-person median household income for MA immigrants in 2010 was $16,682 (source).  The per-person median household income for AZ immigrants was $9,716.  35.3% of AZ immigrants did not finish high school, while only 15.4% of MA immigrants have less than a high school degree.  48% of AZ immigrants are estimated to be illegal, while only 19% of those in MA are illegal.  11% of Arizonans self-report that they speak English not at all, vs. just 6.7% for MA (source).

The various cities in the Phoenix metropolitan area have spent a fortune renovating ten spring training fields for 15 major league teams.  I have seen a number like $500 million for the total, but this seems low as Scottsdale spent $100 million for just one complex and Glendale may have spent as much as $200 million for theirs.  Never-the-less, its a lot of taxpayer money.

The primary subsidy, of course, is for major league teams that get lovely facilities that they use for about one month in twelve.

But these subsidies always get sold on their community impact.  But that economic impact turns out to be really narrow.  For in-town visitors, the economic impact is typically a wash, as money spent on going to sports games just substitutes for other local spending.  But these stadiums are held up as great economic engines because they attract out of town visitors:

Cactus League baseball and year-round use of its ballparks and training facilities add an estimated $632 million to Arizona economy, according to a study released Monday by the Cactus League Baseball Association.

The study found that 56 percent of the 1.7 million fans attending games this past spring were out-of-state visitors and the median stay in metro Phoenix was 5.3 nights.

Spring training accounted for $422 million in economic impact in 2012, up 36 percent from the previous study in 2007. Both were done by FMR Associates of Tucson.

One of the flaws of such studies is they never, ever look at what the business displaces.  For example, for local visitors, they never look at local spending sports customers might have made if they had not gone to the game.  All spending on the sports-related businesses are treated as incremental.   For out-of-town visitors, no one ever considers other visitors coming for non-sports reasons who are displaced (March was already, without all the baseball, the busiest hotel month in Phoenix) or considers that some of the visitors might have come to the area anyway.

However, let's for one moment of excessive credulity accept these numbers, and look at the out of town visitors.  56 percent of 1.7 million people times 5.3 nights divided by 2 people per room is 2.52 million room nights, or at $150 each a total of $378 million.   So most of their spring training economic impact is hotel room nights.  This by the way is the same logic that supports various public subsidies of local college bowl games.

Which begs the question, why are we spending upwards of a billion dollars in taxpayer money to subsidize sports teams and hotel chains?  If the vast majority of the economic impact of these stadium investments is for hotels, why don't they pay for them, or split the cost with the teams?

PS- as an aside, it seems that to be successful in the corporate state, one needs ready access to consultants who will put absurdly high numbers on the positive impact of one's government subsidies.  It's like money laundering, but with talking points.  Take your self-serving spin, hand it with a bunch of money to a consultant, and out comes a laundered "study".  In this case, the "study" architects are FMR Associates, which bills itself as specializing "in strategic research for the communications industry."  The communications industry means "PR flacks".   So they specialize in making your talking points sound like they have real research behind them.  Probably a growing business in our corporate state.

... because it really annoys public officials when you don't vote for the candidates they have approved.

Every write-in entry must be verified with the list of legitimate write-in candidates for that election, by a three-member review team. In the August primary election, Maricopa County elections officials saw the biggest ratio of fake-to-legitimate write-in candidates in recent memory: Among 90,433 entries in write-in slots, 1,738 were votes for legitimate write-in candidates.

Each fake entry cost Arizona counties money and manpower and slowed down the tabulation process, said Maricopa County Recorder Helen Purcell, who oversees elections.

“They think they’re making some kind of a statement or being cute,” Purcell said.

The rise of write-in candidates - over 90,000 in one small-turnout primary election, strikes me as a very interesting untold story about the election and a metric of voter frustration with the whole process.

So don't be afraid to go off the board -- it is your right, no matter how much it irritates petty bureaucrats.  Mal Reynolds for President!

In 2010, Arizona v0ters passed proposition 100, a 1% "temporary" sales tax increase that was meant to help fill in the budget hole created by the recession.  The tax was only to last 3 years.

It is pretty clear that by the end of 2013, when the tax expires, the rationale for the temporary tax cut will have passed.  Already the state's finances are improving and all signs are that by 2014 the economy and real estate market should be greatly recovered.

But, having got taxpayers used to paying the higher tax, supporters of big government and public employees unions have put a proposition on the ballot this year (204)  to make the 2010 tax increase permanent.  The tax extension will go to a mish-mash of new programs.

This is how the government spending ratchet works.  A "temporary" tax increase is justified in a fiscal emergency to fill in a recession-created hole.  Government insiders decide they like having more money, and make the tax permanent.  The new money is used to create brand new programs.  Then, in the next recession, when all these brand new programs are now "essential" and "beyond the reach of even the worst austerity", a new, even higher "temporary" tax increase is necessary.

From Byron Schlomach at Goldwater:

For this calculation, actuaries assume a rate of return on all the money invested. The assumed rate of return, or “discount rate”, makes a big difference in how big current liabilities might be. For example, if you invested enough now to pay back a $100 debt in 10 years and you expected a rate of return of 5 percent each year, you would need to invest $61.39. But, if you expected an 8 percent return each year, you would only need to invest $46.32 today.

Arizona’s government pension funds use a discount rate of either 8 or 8.25 percent, considerably higher than the 5 percent they have actually earned over the last decade. Consequently, while Arizona’s unfunded pension liabilities are officially $16 billion, a huge sum, the unfunded liabilities using the actual rate of return of 5 percent are more like $37 billion. That’s $5,800 for every man, woman, and child in the state.

I frequently write here that almost never does a month go by, even in a state where I have operated for over 10 years, that I don't discover yet another tax I owe or license I must obtain.

Today, I got a note from the state of Arizona that we must license our two septic pumping trucks with the state.  Already, these are licensed each year with the County in which they operate, a process that includes a fee (of course) and an inspection by the County.  Now I have to fill out a bunch of forms to send the exact same information to the state, with yet another fee (of course) and the need for another inspection each year by the County.  I asked if my current County license would suffice to cover the inspection, and I was told no.  So, to operate this truck in Arizona I must

• Fill out forms and send fee to County
• Get inspected by County
• Fill out forms with the same information as already sent to County and send fee to State
• Get inspected yet again by County, but this time on the state form
• Repeat every year

It is interesting to note that the state does nothing except file my form and bank the fee.  This is just another money and power grab -- more cash for the bureaucracy and yet another useless task (filing these forms and sending out compliance letters, etc) to justify their headcount.  Then the next time someone suggests "brutal cuts" to state budgets, everyone can scream that the rivers will run brown with sewage because the state won't have the people to collect all the paperwork that duplicates what the County already collects.

Just after wasting an hour or two of my time with this (and sending it to my managers to waste days of their time), I got a happy note from the US Census Bureau that I had been selected to file quarterly reports about my business (they have a special survey of the lodging business -- I presume they do this for other industries as well).  I wrote back:

To Whom It May Concern:

I am not sure what we have done wrong to be punished with this extra workload, but unless I hear back from you that this report is required of us by law under threat of some sort of dire consequence, we will not be filling it out.

We are a small company and only I, the President, am equipped to fill out this form.  We already fill out your annual survey and it is incredibly time-consuming for us, for it asks for data in ways we do not normally track it.  Further, it asks for our P&L in a form that does not match GAAP accounting, which causes all sorts of difficulties in completing it.  And we don’t normally compile results on a quarterly basis, only annual, so this report would be particularly onerous.  We actually have to run a business here.

Finally, I might add, I am loathe to send the government yet more data since this data will likely just be used as a justification to raise my taxes or increase our regulatory burden.

So no thanks.

PS- let's just assume the "you have a crappy job" jokes have already been made and move forward from there in the comments.

For those who may be interested, we are having a one-day conference on public-private partnerships for park operations on November 7 in Reno, Nevada.  The US Forest Service and those of us in the business have gotten a lot of inquiries from recreation agencies over the last year or so.  These folks are trying to keep parks open despite declining budgets.

The USFS figured out a way to do this over 30 years ago, and only now are other agencies starting to copy the model  (California State Parks just started using it this year, for example).  The USFS, like most agencies, charges a fee for the public to visit certain parks or to use campgrounds.  They found that they could not cover their high operating costs with just these user fees, and so had to use a lot of general fund money to keep the parks open.  Many complain that public recreation user fees are too high, but typically they cover only about half the agency's costs to run the park.  When general fund money started to go away, the USFS faced park closures, exactly the situation today in many state and local parks agencies.

The USFS found that private operators with a lower cost position and more flexibility could keep these parks open using just the user fees, and in fact actually pay the USFS some rent.  So instead of having to subsidize the park's operation with tax money, the parks began to generate funds for the USFS.

It took decades to get this right.  The USFS made mistakes in how they grouped parks into contracts, how they wrote the contracts, and how they did oversight.  The private companies made operating mistakes and some failed financially at awkward times, since when this program started there did not exist a pool of experienced operators.  But over the years, many of these problems have been worked out, and most privately-run sites operate to a standard at least as high as publicly-run parks.  Here in Arizona, three of the top five highest-rated public campgrounds are operated by private companies in the USFS program.

At this conference, both private operators and agency people experienced with this model will describe how it works as well as years of hard-won lessons learned.

The conference is free to most government agency officials, academics, and media and we have obtained a really inexpensive $49 hotel rate  (since by definition the agencies most interested in the model don't have much money).   The web site that describes the agenda and logistics is here.  Readers of this site who don't fit one of these categories but would still like to attend can email me at the link in the above site and I will get you in.

An interesting set of data I read the other day:

In 2011, the Arizona Health Care Cost Containment System, Arizona's Medicaid program, paid for 53 percent of the state's 84,979 births, while private insurance paid for 42 percent, according to state statistics. The remainder were paid for by individuals....

Sen. Sylvia Allen, R-Snowflake, estimated that including pre- and postnatal care, it costs Arizona about $7,500 per birth for a delivery with no complications. Using those estimates, the 2011 deliveries would have cost Arizona taxpayers nearly $338 million....

In 2010, 58 percent [of Arizonans] had private insurance and 18 percent were on Medicaid.

So, 18% of Arizonans are having 53% of all births.  Another way to put this is that the 18% of people who get this procedure from the government for free account for half the demand, despite the fact that these folks are the ones who, if rational, should be the least likely to have a lot of births because they presumably have the most difficulty affording an extra mouth to feed.

God forbid I start sounding like some crotchity Conservative, but I continue to be amazed that pregnancy is treated as an "emergency procedure."  It strikes me that unlike, say, cancer, individuals can choose to avoid this condition fairly easily if they can't afford it.  I certainly know my wife and I put FAR more deliberation into having children than we did any other decision in our lives.  There is a terrible tension here - no one wants to turn away an expectant mother and endanger her child, but freely giving away an expensive procedure without any sort of restrictions nearly begs for a baby boom.  Those who try to argue that Obamacare won't increase health care expenses (in other words, arguing that demand curves don't upward) only have to look at these numbers.

PS-  Apparently, our state legislature is appalled by these numbers.  This is the same legislature that has proposed about a zillion abortion restrictions over the last year.  It will be interesting to see if fiscal issues change anyone's thinking on the abortion issue now that there is suddenly a $7500+ incentive to allow an abortion.

Update -- Thinking about this, I think the 18%/53% comparison is directionally correct but the difference is exaggerated due to Medicare.  I doubt Medicare delivers many babies, but a large part of the AZ population is on Medicare.  If the numbers were reset to show the percentage of Arizonans of child-rearing age on Medicaid, the number would be north of 18% but likely well below 53%.

Arizona has always had a pretty intelligent rule that driving schools that have been certified by the state can actually give kids their written and driving tests.    They get a certificate they take to the DMV where they then get issued the physical license.   Kids who can't afford the school can certainly go into the DMV to take the tests, but since our DMV is swamped with insane waits, it is nice to have an alternative.

Until now.  Apparently, for reasons that entirely escape me except perhaps to pander to state employees' unions, all kids must now take their tests, written and driving, at the DMV.  So, the DMV's solution to insane waits is to... increase demand on their services.  Awesome.  Sounds eerily similar to Obamacare's solution to ER waits.

In my younger, more naive days, I would have drawn the following lesson from this story:  "Never create a business plan predicated on subsidy checks from the government.  They may stop at any time."  I still think this is mostly true, as FirstSolar is finding out.  But my sense is that a range of folks from GE to Kleiner Perkins still get their checks.  So one may cynically rewrite the rule: "Never create a business plan predicated on subsidy checks from the government unless you are confident you have the political connections to guarantee and expedite the payments."

It seems like local solar company perfect power tried to feed at the government trough without actually having sufficient clout in the corporate state.  Bad idea

About 100 Arizona homeowners who paid $4,500 up front for solar-power systems fear they may never get their rooftop panels after being left waiting for months by the installation company.

Angry homeowners are demanding their systems or refunds. The company, Perfect Power Solar, is blaming the delays on federal government red tape.

Perfect Power owner Lynn Paige said the company has cash-flow problems because energy grants that were supposed to provide substantial funding of the solar systems aren't being approved quickly enough. She pledged to deliver the systems or refund all customers by the end of the year.

Treasury officials would not comment on the situation. Government e-mails sent to Paige suggest Perfect Power's grant applications were incomplete. In them, officials point to problems with submissions and warn of potential denials.

Industry experts and owners of other solar companies in Arizona said that the grant program is fraught with risks for solar companies and that some built business models based on future payments from the government without the financial reserves to cope with delays. They describe the situation as a high-tech gamble that some companies lost.

Residential solar-power systems cost $15,000 to $40,000. The Section 1603 grant program, part of the American Recovery and Reinvestment Act, offered developers cash to offset 30 percent of the costs. Although the program was not available to homeowners, some companies tapped the grants to sell residential solar systems as leases. A company would install and own the system, then lease it to a homeowner.

Program rules required developers to complete installations before they could apply for reimbursement. But funding was not guaranteed, and even after systems were built, the government delayed approval of some applications and denied others.

If this was one of Kliener Perkins' companies, for example, Ray Lane would just call the White House and get his money released. If your solvency depends on continued flow of taxpayer cash, you better have the clout to keep the money flowing or you are likely to get hosed.  Bureaucracies tend to have default answers of "wait" and "no".  Those are the answers average people without pull are going to get.  The "yes" goes to those who cut through the red tape from the top.  These yeses, like the ones to Solyndra, only make it more likely everyone else get the "no" answer, as the agencies need to show they are being particularly diligent to offset the impression of sloppiness they get from the Solyndra-type cases.

Retroactively, the company's leadership has figured this out, that to survived at the government trough, they have to go political

Paige has asked customers not to file complaints or talk to the media about problems the company is facing.

"It has been very unhelpful ... that a few customers have chosen to write very negative letters to the BBB," she wrote in a May e-mail to customers.

Instead of filing complaints, Paige said, customers should write to Arizona U.S. Sens. John McCain and Jon Kyl to request their help in freeing up the government grant money and to pressure the Treasury Department....

That month, the BBB revoked Perfect Power's accreditation and gave the company an F rating. The company had 16 complaints filed against it the past year. The registrar shows four open complaints against Perfect Power; a fifth complaint was listed as settled or withdrawn.

Forget about the customers.  Let's just focus our attention on our two Senators.

This is pretty awesome.  Using Google's auto-suggest which is based on their most frequent searches, Renee DiResta created a rollover map of state stereotypes.  Here is Arizona's, the rest are here.  Via Flowing Data

I have picked up my family and moved to a rental house on the California coast for a month.  I am still working, but experimenting with getting out of town for the hot Arizona summers.  I may or may not take the opportunity to cut back on blogging for a month or so.  I haven't decided.

New taxes are frequently sold as protecting police, fire, and education, though these together represent barely 25% of all US government spending.  Where does the rest go?  It's a giant bait and switch, made worse by the fact that even within these categories, new headcount is more likely to be added in administrative and overhead roles rather than in promised functions such as "teachers".  This is the subject of my Forbes column this week:

There is a way to reconcile this:   While increases in education spending are sold to the public as a way to improve results in the classroom, in reality most of the new money and headcount are going to anything but increasing the number of teachers.

Let’s start with an example from the city of Phoenix, New York.  Why this town?  Am I cherry-picking?  In fact, I was looking for data on my home town of Phoenix, Arizona.  But I have come to discover that while school districts are really good at getting tomorrow’s cafeteria menu on the web, they are a little less diligent in giving equal transparency to their budget and staffing data.  But it turns out that Phoenix, New York, which I discovered when I was looking for my home town data, publishes a lovely summary of its budget data, so I will use it as an example that helps make my point.

The city’s budget summary for 2012-2013 is here.  Overall, they are proposing a 0.4% increase in spending for next year, which initially seems lean until one understands that they are projecting a 4% decline in enrollment, such that this still represents an increase in spending per pupil faster than inflation.  But the interesting part is the mix.

What are the two things politicians are always claiming they need extra money for?  Classroom instruction and infrastructure.  As you can see in this budget, only two categories of spending go down:  classroom instruction and facility maintenance and cleaning.  Administrative expenses increase 4% (effectively 8% per pupil) and employee benefits expenses increase just under 1% despite a total decline in staffing.  Though I am not very familiar with the program, one irony here is that the fastest growing category is the 8.7% growth (nearly 13% per pupil) in spending with BOCES, a New York initiative that was supposed to reduce administrative costs in public schools.  In other words, spending increases are going to everything except the areas which politicians promise.

I don’t think these trends are isolated to this one admittedly random example.  The Arizona auditor-general recently did a study on trends in education spending in the state.  They found exactly the same tendency to reduce classroom spending to pay for increases in administrative headcounts.

Read it all, as they say.

If it's June, it must be time for me to mock Arizona budget games.  To save re-writing the old post over and over, here is what I wrote several years ago.

In May of this year I got a form from the Arizona Department of Revenue that said my company was now large enough to make estimated sales tax pre-payments.  Some states do this when you are large enough - they don't like you holding their sales tax money a whole month until the reporting deadline, they want their cash in hand.  Its a pain, so I sighed, but we did it.  We prepaid estimated full-month June sales tax in mid-June as required, rather than in mid-July when the payment would normally be due.  Note that we still have to fill out all the sales tax reports in July, so paperwork is doubled, not to mention the extra work to reconcile between the estimate and actual results.

So this month, I was looking for the July pre-payment form.  I figured the July pre-payment must be due soon, so I called the Department of Revenue and asked where my form was.  They said there was no form for July.  The pre-payment is only one time.  I said, "its only for June?" and they said yes.  You can see the blank form online is hard-coded for June.

Then it dawned on me:  Arizona is on a June 30 fiscal year.  The entire point of this exercise is to pull July revenues into June to artificially inflate the prior fiscal year financials.  Wow - all those pious government workers artificially manipulating results just like an evil old corporation.  Because there is absolutely no other reason to do this for just one month.  The time value of money gained is dwarfed by the costs of changing your payment processing approach for just one month, and is certainly dwarfed if you consider the extra taxpayer effort required (which of course the government never does).

But it's even worse!  Because, in effect, this only worked one time -- the first time.  The first time they did this, they helped the fiscal year.  But now, pulling forward July this year just offsets losing the July revenues from last year.  So politicians have saddled us with a tax process that costs the government more money and the taxpayer more time and has no benefit beyond generating a slightly more positive press release about the budget for some politician several years ago (whatever year this was first implemented).

While this may be familiar territory for readers of this blog, I have a post up at the Privatization blog on the history of private operation of public parks.  In this article I quoted one of my favorite over-wrought criticisms of private operation of parks, this time from the San Francisco Chronicle:

The question is, how will these agreements work over time? If parks remain open using donations, what is the incentive for legislators to put money for parks in the general fund budget? And who is going to stop a rich crook or pot dealer from taking a park off the closure list and using it for fiendish pursuits?

LOL.  "Fiendish pursuits?"

I also had an article there a while back about government accounting systems and how they make such privatization efforts difficult:

Back when I was in the corporate world, "Make-Buy" decisions -- decisions as to whether the company should do some task itself or outsource it to companies with particular expertise or low costs in that area -- were quite routine.  Even in the corporate world, though, where accounting systems are built to produce product line profitability statements and to do activity-based costing, this kind of analysis is easy to get wrong (in particular, practitioners frequently confuse average versus marginal costs).

But if these analyses are tricky in the private world, they are almost impossible to do well in the public sphere.  Grady Gammage, a senior and highly respected research fellow at Arizona State University's Morrison Institute, has as much experience with public policy analysis as anyone in the state.  Several years ago, he spent months digging into the financial numbers of Arizona State Parks, with the full cooperation of that agency.  A critical question of the study was how much it actually cost to operate a park, vs. do all the other resource and grant management tasks the agency is asked to perform.  Despite a lot of effort by Gammage and his staff, he told me once that the best he could do was make an educated guess --plus or minus several million dollars -- as to how much of the Agency's budget is spent actually operating parks vs. performing other tasks.

The reasons that this is so hard is that the parks agency's budgeting process was not set up to determine true net operating gains and losses at parks.  It was set up, like most public accounting systems, to enforce accountability to different pools of money that have been allocated by the legislature for certain tasks.  This tends to lead to three classes of problems that cause public make-buy decisions, as well as ex post facto third-party analyses, so difficult.  Since I am most familiar with the parks world, I will discuss these three issues in the context of parks:

No, not the Affordable Care Act, though we need to get rid of that, too.  In this case I am talking about the Arizona Commerce Authority.  This is one of those ubiquitous local / state "development" efforts that mainly consists of handing out corporate welfare to a few well-connected companies who threaten to leave or build their new plant somewhere else.

Dru Stevenson at the Privatization blog has been nice enough to invite me to blog from time to time over at his place, despite the fact that we do not always agree.  But we are in total agreement on this effort:

Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency.  The same complaints that business advocates make about the welfare system apply to government programs to help businesses - the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace).  It has a chilling effect on market-driven innovation, improvements in efficiency, or "creative destruction." The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky.  The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend's businesses (or to their suppliers, in hopes of getting discounted inputs).

The problem is also that other firms - firms that might be more efficient, providing better goods and services at lower cost - face higher entry barriers when the existing holders of market share are bolstered by government handouts.  In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses.  There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful.  The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market.

I encourage you to check it all out.

The reason this made his privatization blog is that Arizona has actually privatized this function to an independent business group.  Though an advocate of privatization in many realms, this makes me queasy for a couple of reasons:

• I can't get excited about privatizing an activity that should not be occurring, or is, as Stevenson so ably explains, actually detrimental
• I am comfortable privatizing operational things -- landscaping, running buildings, cleaning bathrooms, etc -- but privatizing the handing out of political patronage is an odd one for me and I don't really know how to think about it.  On the one hand, this is essentially what the PPACA (Obamacare, the other ACA) is doing with difficult decisions like determining which procedures should be on the must-cover list for insurers by putting them in the hands of independent groups.  But I have criticized those provisions of the PPACA for lack of accountability, and I believe the same arguments apply here

The only quibble I have with the criticism of the Arizona group is that, like many criticisms of privatization, it does not actually make a comparison to government-run efforts.  Sometimes even mistake-riddled private efforts can be better than disasterous public management.  For example this criticism:

According to Arizona PIRG's report, only two of the 13 incentive programs even track how many jobs or other benefits they generate -- and none disclose that information publicly. For all its business-savvy rhetoric, the ACA can't demonstrate performance if it doesn't track results. Only one program publicly discloses what companies promise to deliver for their subsidies. Worse still, only 4 of the 13 programs even disclose which companies received subsidies or how much. And when companies that receive subsidies fail to deliver on promised economic development benefits, the ACA can reclaim taxpayer subsidies for only one program, and there is no way for the public to see if this ever happens.

None of this is good, but note that for most similar state-run development programs, the number of programs that track their results is usually less than 2 in 13, the number is usually none.  And the fact that there is some sort of clawback provision on funds is better than exists in most state relocation and other subsidy programs.  In fact, most third-party reviews of state-run corporate relocation and plant location subsidy awards show that they universally fall well short of their pr0mised benefits, though this analysis is really hard to do because there is so little transparency in state activities of this sort.

My quibble, then, is that I am not sure the bad results here are a function of privatization or just the activity itself, as state-run efforts seem to do no better.

Update:  I have written before about government corporate subsidies and attempts at venture capital investment in the context of the "big shot" effect.  Many times I have come to suspect the biggest beneficiary of these programs is to the administrators themselves, who have no money of their own and wouldn't ever be trusted to manage a private portfolio but get to act as "big shots" with other peoples' money.  They get the psychic benefit of being little junior Donald Trumps.  This seems especially evident to me with Glendale, AZ, but seems to be an element of all these schemes.

Apparently an Arizona Catholic High School forfeited their state finals because the other team was playing *gasp* a girl at second base.  I am not really familiar with this sports league they are in -- it must be made up of smaller schools who choose not to join the AIA, which is the league most high schools (including ours) play in.

These are private schools in a private league, so I guess they can do whatever they want, but this just seems bizarre in the extreme.   I would guess that their players were irate.

My son plays in the smaller division of the AIA, and we run into teams that play girls from time to time in baseball and a bunch of schools that play girls on their soccer team (the rule generally is that girls can play on the boys team if there is no girls' equivalent of that sport at the school).  I have never before heard of another Catholic school having a problem with this, and given that this is Arizona, there are a lot of Catholic schools knocking about.

In fact, I always find it kind of cool to see girls out there.  I remember a few weeks ago we were playing a team who had a girl at third base who the boys thought was pretty attractive.  I laughed pretty hard when my son took a big chance to stretch a double into a triple.  I knew exactly what he was doing --he wanted to be on third base!

I suppose this will be a better object lesson for the Catholic boys than any gender-equality propaganda film.   Adopt Victorian attitudes about women, lose the chance to play for a state championship.