Public finance—taxes and other revenues collected by government and the expenditure of those revenues—always has been somewhat controversial because of wide philosophical differences among residents regarding the role that government should play in providing public services and in collecting taxes and fees from its residents. Recently, public finance in Arizona has become a prominent public issue due to the need to resolve the deficits that afflict state government and most county and municipal governments in Arizona.

Economic development leaders and public officials throughout the country are tending to the effects of a sour economy and huge state budget deficits when they would rather be creating quality jobs and new economy assets. According to the most prominent thinking on today’s knowledge economy, locally developed and exported technology will be the primary economic differentiator between future winners and losers. Thus, with long-term fiscal and economic health at stake, the 50-state race is on for advantages and leadership in science and technology. This report sheds light on these issues through an overview of Arizona’s standing in science and technology today, short case studies of four competitors in the west, as well as Arizona, and ideas for Arizona’s leaders to consider as they strive to give our state an edge.

The report includes original articles by Arizona policy practitioners and observers, reprints of pertinent articles by experts beyond Arizona, and a list for further reading. Articles of varying lengths and complexities are purposefully included so as to offer something to readers with different levels of interest in and knowledge of the subject matter.

The March 2006 responses to a statewide representative telephone survey show that a majority of Arizonans see science and technology research as a source of high-paying jobs and are every bit as interested in science and technology as leaders are. Arizonans "get" the benefits of a science and technology-based future and the power of science and technology to spawn desirable employment opportunities. Some cautions emerge as well, but even so, most Arizonans look to science and technology as integral to a bright economic future.

Despite several early attempts in the Arizona Legislature to modify the framework for where the newly-passed Proposition 200 money would go, the four accounts established in the original voter-approved Tobacco Tax and Health Care Act have been maintained as intended since 1995. However, large sums of Proposition 200 revenue – on average $90 million annually – have gone unallocated and unspent by the Legislature.

Arizona is one of the nation’s most urban states, and now it includes one of 20 “megapolitan” areas in the U.S. People have predicted for 50 years that Phoenix and Tucson would grow together into a giant desert conglomerate. That possibility has been seen as exciting, intriguing, and distressing. While a solid city along Interstate 10 is unlikely given the diverse land ownership in central and southern Arizona, the two metro economies are already merging.

Megapolitan: Arizona’s Sun Corridor, one of the first reports on a single megapolitan area, recognizes a more sophisticated technique for analyzing urban growth—that shared economic and quality of life interests are more important than physically growing together.

Scholars at Virginia Tech defined the megapolitans based on economic and growth patterns.
The Sun Corridor, which cuts across six counties from the border with Mexico to the center of Yavapai County, is the home of eight out of 10 Arizonans. In the next several decades, two out of three Americans will live in a megapolitan accounting for 60% of the population on only 10% of U.S. land.

Megapolitan offers a bold new picture of Arizona’s geography and its future opportunities and “megaton” challenges. This report presents a scenario for 2035 based on current trends. It analyzes the Sun Corridor and provides insights into the region’s global potential, water, governance, sustainability, and “trillion dollar questions.” It discusses the “tragedy of the sunshine” and asks the indispensable question: In 2035, do you want to live in the Sun Corridor?

A movement of the magnitude required for Arizona to become truly competitive in science, engineering and medical research needs a compass. The vision statement presented in the 2002 Flinn-Battelle "Roadmap" report was just that. Given Arizona’s progress in bioscience and scientific research since then, the challenges for 2006 and beyond are to achieve that original vision and also to expand the state’s aspirations. The pathway provided in this document presents ten fundamental, collaborative steps for navigating toward this goal.

Arizona is emerging from one of the worst state budget crises in the nation. Entering 2003, its projected deficit, measured as a percentage of the general fund, was the fifth largest in the country.1 The state had slashed spending in 2002 in the face of a $900 million deficit, but still faced a $400 million shortfall for fiscal year 2003 and an estimated $1 billion deficit in fiscal 2004. Although improved revenues have reduced the anticipated gap, fundamental underlying problems remain concerning the ability of lawmakers to control the budget. Some observers consider this a revenue problem, others a spending problem. Our concern in this paper is whether state lawmakers have enough control over either revenue or spending.