In a paper released by the Goldwater Institute on December 18, 2008, "A Fresh Start for Arizona: Proposals for Closing a Billion-Dollar Budget Gap," Byron Schlomach puts forth recommendations for closing the deficit in the state government general fund. The following notes are an attempt to illustrate the consequences of the spending reductions recommended by Dr. Schlomach, along with some considerations about the philosophy apparently embodied in the recommendations.

This brief report provides conceptual perspectives on public investment using debt financing. Empirical evidence of the relationship between public investment and economic activity is provided, showing that moderate levels of debt do not impair economic growth and may provide a stimulus to growth. Arizona's public debt currently is low relative to national standards. Related to this low debt, public investment in infrastructure has fallen behind the state's population and economic growth over the last 15 years. Because of low interest rates and a construction slump that will reduce construction costs, current conditions are ideal for public investment using debt financing.