Arizona Pension System on Road to Recovery

Switch to Risky 401(k) System Could Cost Taxpayers Billions

PHOENIX--A new study by the Grand Canyon Institute found Arizona’s public employee pension system is on the road to recovery following The Great Recession. The study called “Arizona’s Pensions: On Track to Financial Sustainability with Retirement Security” shows reforms already in place, combined with some longstanding sound Arizona practices, have the state’s pension system on solid ground.

The study also analyzed the legislature’s efforts to replace defined-benefit pension programs with a riskier defined-contribution, or 401 (k), retirement plans, and found that switching to defined-contribution plans would actually increase costs to taxpayers.

“Arizona’s public sector pensions are financially healthy compared to many other states,” said Dr. Dave Wells, research director at the Grand Canyon institute, one of the report’s co-authors. “Arizona lawmakers have shown great foresight, and the changes that they have already made will strengthen the plans and make them more financially sustainable for the long term.”

Read the full release under news.

Impact of Losing Emergency Unemployment Compensation in Arizona

On Dec. 28, 2013, Emergency Unemployment Compensation (EUC) benefits terminated for 12,100 Arizona families. This will rise to 54,500 by the end of 2014, if they aren't reinstated and cost the state $174 million in economic benefits.

Arizona’s unemployment average weekly benefit ranks as the third lowest in the country, and is about 70 percent of our neighboring states. Nonetheless, the loss of $220 in average weekly compensation ($240 maximum) will in most cases place severe financial consequences on the long-term unemployed, leading to possibly loss of adequate housing, reliable transportation, and leading to a drawing down of savings—including often already inadequate retirement savings, or going into debt on top of the psychological burden unemployment places on people.

Figure 1: Households exhausting state unemployment benefits

Study Recommends Medicaid Expansion: General Fund Saves $1.2 Billion with 21,000 Jobs Created

The Grand Canyon Institute has released a comprehensive evaluation of the options that Governor Jan Brewer has regarding Medicaid eligibility under the Affordable Care Act in light of the recent Supreme Court decision National Federation of Independent Business v. Sebelius.

The Study recommends expanding Medicaid coverage to 133 percent of the federal poverty line. By qualifying for higher federal matching funds, that expansion authorized under the Affordable Care Act over the first four years of implementation would save the state’s general fund $1.2 billion over complying with the 2000 citizen initiative “Healthy Arizona” which raised Medicaid eligibility to 100 percent of the federal poverty line.

The report’s author, Dave Wells, the Grand Canyon Institute’s Research Director noted, “by increasing Medicaid coverage to 133 percent of the federal poverty line, the state would reap huge economic benefits. Compared to current policy, it would add 21,000 jobs created compared to 15,000 jobs created by following 100 percent of the Federal Poverty line. The 21,000 jobs would reduce the state’s unemployment rate by 0.7 percent, and increase economic growth in the state during the first year of full implementation by nearly 1 percent.”

The study’s baseline for job creation was current policy which froze enrollment for the last few year of adults without children under 18 and was done during the state’s budget crisis. Continuing that enrollment freeze would cost the state less than the 133 percent Medicaid expansion, but leads to no added job growth and would continue leaving thousands of childless adults unable to obtain health insurance.

Susan Gerard, a Grand Canyon Institute Board member and former Director of the Arizona Department of Health Services, cautioned “The economic downturn and rise in the uninsured has already put great strain on hospital finances from patients who need services, but are unable to pay. Regardless of whether Arizona expands Medicaid eligibility, the Affordable Care Act reduces federal monies that help pay for uncompensated care, so from a health and economic standpoint the current policy in the state is inadequate.”

George Cunningham, chair of the Grand Canyon Institute, explained, “ The payback on the state investment in expanding Medicaid to 133 percent of the federal poverty line is 5 to 1, more than $5 come into Arizona from the Federal government for every dollar Arizona expends. You can’t beat that return on investment.”

Governor Jan Brewer is reviewing options and has said she would announce her recommendation in January. Arizona’s Medicaid system goes by the acronym AHCCCS for Arizona Heath Care Cost Containment System.

The full study can be found here.

Water Expert Says Arizona Farmers Can Improve Yields with Less Water

The droughts that have struck farmers in the Midwest could be a warning sign for Arizona. The climate may get hotter and drier here, but we also expect substantial population growth. Where will the water come from? Many think the most logical solution is agriculture.

That may be true, but agriculture can adapt and thrive. Karen Smith, Deputy Director of Water Resources under Janet Napolitano and a fellow for the Grand Canyon Institute, says, “If we can reduce Agricultural water use by ten percent that could support up to two million more people and that needn’t mean we produce less either.”

Smith’s study “The Third Way: Accommodating Agriculture and Urban Growth” shows that using improved drip irrigation systems with less water crop yields can rise as much as 20 to 30 percent. The catch is upfront costs which might equate to $2,000 an acre, something many farmers struggle with or need incentives to undertake, even if the investment pays for itself in three to five years.

Policy changes the study recommends include property tax benefits to farmers who upgrade their irrigation systems to consume less, more federal funding for conservation programs, upgrading water systems to enable irrigation on demand, and most interestingly having water districts being able to invest in infrastructure to assist famers in using less water in return for access to the water saved.

Read the full report.

Grand Canyon Institute debates Goldwater Institute on Public Employee Compensation

Round One:

On April 5th, 2012, the Grand Canyon Institute's Research Director, Dave Wells, took on Nick Dranias of the Goldwater Institute over the issue of Public Employee Compensation.

Round one was on Horizon. Watch the debate here.

Round Two:

Then on June 1st the Goldwater Institute repeated many of the same arguments in an op-ed piece in the Arizona Capitol Times.

The Grand Canyon Institute responded with a thorough critique of the Goldwater Institute's claims and work on the issue in the Capitol Times on June 15th:

State could save $30 to $73 million annually by reforming sentencing options for nonviolent offenders

In an op-ed piece, "State could save money by reducing prison population," that appears in the Saturday, March 3rd, Arizona Republic, Former State Legislator and Grand Canyon Institute Board member Bill Konopnicki writes:

If in 2002 Arizonans were asked whether they'd like to move investments in our three great universities to prisons, they'd likely give a resounding "no!"

Yet that's exactly what we've done. In 2002, Arizona invested 40 percent more in universities than corrections. Ten years later the incarceration rate has risen, while universities have been severely cut, and the state is spending 40 percent more on prisons than universities.

Politicians harp on being "tough on crime," but we really need to be "smart on crime." States across the country are realizing they can improve public safety, enhance the likelihood of inmates reintegrating into society, and save money by reducing incarceration.

The full policy paper "Reducing Incarceration Costs While Maintaining Public Safety" here.

Read more: http://www.azcentral.com/arizonarepublic/opinions/articles/2012/03/02/20120302konopnicki-state-can-save-money-by-reducing-prison-population.html

Arizona Heralds Arrival of New Bipartisan Think Tank

Too often ideology, rather than economics, has guided policy in Arizona, with the result being a state that finds itself caught in an unsound fiscal situation with one of the worst structural deficits in the country. Arizona continues to lag in the development of a diversified, education-led economy, and relies on a greatly atrophied tax system that fails to provide the resources needed to sustain critical investments for the state’s future.

To remedy the dire situation, Arizona now has a new nonpartisan think tank, the Grand Canyon Institute, led by a bipartisan group of former state lawmakers, economists, community leaders, and academicians. The Grand Canyon Institute will serve as an independent voice reflecting mainstr