Arizona awarded a B for government spending transparency

Taxpayers remain in the dark when it comes to economic-development subsidies.
Monday, April 14, 2014
Alia Beard Rau

Arizona ranks 19th in the nation for its transparency in government spending, according to a new report from the U.S. Public Interest Research Group Education Fund. But the state's taxpayers remain in the dark when it comes to economic-development subsidies.

The group's fifth annual report ranks states based on their government websites with the goal of encouraging "checkbook-level information on government spending." They say taxpayers should be able to easily see payments the state has made to individual companies, as well as details about purchased goods, services and other public benefits.

"Transparency promotes fiscal responsibility, bolsters public trust and checks corruption," said Serena Unrein, a member of the group's Arizona chapter.

Arizona, which maintains, was given a B grade and ranked among the "advancing states" that have expanded information available online. Five years ago, Arizona received a failing grade.

The six states that got A grades provide public access to checkbook-level data details on the companies awarded economic-development subsidies, including details of the benefits the companies were expected to provide and what was actually delivered.

"We've seen that these states haven't scared off business or economic development by making this information available," Unrein said.

Arizona in 2011 spent nearly $100 million on corporate tax credits, according to the state's tax-expenditure report. There is no public information available about which companies were given the tax credits and why.

Arizona Rep. Darin Mitchell, R-Litchfield Park, introduced legislation this session that would have required the Arizona Department of Revenue to annually make public information on economic-development tax credits. House Bill 2586 passed the House unanimously but died in the Senate after the business community spoke against it.

"The public has a right to know where public money is being spent and whether the public is getting any results," Mitchell said. "I don't know who can argue with that."

State business leaders argued that the bill proposed providing incomplete information without context that taxpayers would need in order to understand it.

"The bill proposes that we reveal this information to the public and we allow them to make their own decisions," said Chad Heinrich of the Greater Phoenix Chamber of Commerce. "But we're not providing a complete picture for them. With that information, we won't be able to judge the effectiveness of the program."

Kevin McCarthy of the Arizona Tax Research Association said revealing such tax information would drive companies away from Arizona.

"Income taxes are not supposed to be transparent," he said. "The confidentiality of income-tax returns is very, very important. This would do irreparable damage to economic development."

Scott Mussi, executive director of the Arizona Free Enterprise Club, said Arizona falls short when it comes to shedding public light on economic-development tax credits and incentives.

"We need to make sure that when the state is picking winners and losers, the money should not be going to the people who are most politically connected," he said. "Right now, it's nearly impossible to evaluate the merits of the program. We have no idea where the money is going and how it's being spent."

Byron Schlomach, an economist with the Goldwater Institute, said access to such information is vital to ensuring that government is acting fairly, equitably and efficiently.

"The disposition of taxpayer money should never be an industry secret," he said.