I grew up in California, and I lived through a number of economic downturns and housing market crises there. So I’m not stranger to fiscal pain. But some of the wacky ideas that Arizona’s government has proposed to resolve the $2.6 billion deficit (which is about a third of the entire budget) really take the cake.
- Phoenix Real Estate of Affairs: The House is on Fire!
A blog today by the Arizona Investment Council (The Economic Impact of Arizona Healthcare Budget Cuts Will Touch All of Us) talked about one of the proposals – cutting $1 billion in Arizona healthcare expenditures. That would take away healthcare coverage for 310,500 low-income adults and 47,000 kids. As if that’s not bad enough, the healthcare cuts would actually lower real Gross State Product (basically, the state’s total income) by $3.3 billion. Oh, and 42,000 people would lose their jobs.
Another proposal would save $63 million by transferring the Arizona Department of Juvenile Corrections to the counties – who admittedly have no idea where or how they’re going to take care of these kids.
I know that there are no good answers when you have to raise $2.6 billion in the middle of the worst recession since the Great Depression. But, still. . .
Which brings me to the Phoenix real estate market. Arizona has historically relied on population growth (everyone wanted to live in our affordable and sunny state) to keep the economy humming. Now that people aren’t moving here (or anywhere) from other states at the same pace, well . . . you know what the outcome has been.
But what if Arizona’s budget troubles make the state a place where no one wants to live, even when people start moving from one state to another again? What if we cut the heart out of the state’s public programs, out of education, out of infrastructure like roads, and companies don’t want to locate here? What if jobs don’t come back to the state?
That would be really bad for the real estate market.
In a recent podcast with associate professor of real estate at ASU, Jay Butler, the editor of Knowledge@W. P. Carey asked this insightful question: “Arizona has historically depended on in-migration to keep things moving. The housing market is certainly part of that. So whether or not Arizona remains or becomes a state where companies want to locate and create jobs is going to have an impact on how quickly or how slowly our housing market comes back, yes?”
Butler’s answer: Yes. “Arizona’s state and local governments have to keep both [the housing and the budget] balls in the air – how do you put the fire out now and what do you do with the building once the fire is out?”
I think that fixing Arizona’s budget mess is important from a social standpoint – I hate the thought of 47,000 kids not being able to go to the doctor. But there’s a powerful selfish motivation, too: the Phoenix real estate market will never recover if Arizona’s economy doesn’t recover. And that won’t happen if we don’t get our fiscal house in order. And to do that, we’ve got to put the fire out.
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