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.

In a rapidly growing desert metropolis such as Phoenix, the question of which water conservation measures and factors actually save water and which do not is an obviously important one. The water-related decisions made today and in the years to come will have lasting impact on the future of this area, including upon its sustainability. Estimates from the City of Phoenix suggest that, in non-SRP-areas, water demand will exceed water supply by the year 2025--absent droughts or intervention.

This report documents and analyzes the results of a multivariate regression analysis designed to estimate the effects on residential, single-family water consumption of a host of factors, particularly water conservation policies.

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.