More Kicking the Can Down the Road

TW: Here is another insane transaction by a local government to avoid make hard choices by essentially covering budget shortfalls with the equivalent of a home equity loan. This time it is a state, Arizona and they make no qualms about setting aside money for the future. They claim all options have been exhausted. This is hopefully a political lie. Because if it were true then it would mean Arizona is functionally bankrupt. They just do not want to make tough choices- raise taxes, cut spending/services etc. They just want to kick the can down the road.

The proposal will get noticed because it involves a sale/leaseback of the state capital but what they are using as collateral is relevant only symbolically, the real issue is these deals take money from future taxes and apply it to the present. They are also going to use the old trick of privatizing prisons by selling the right to manage the prisons. Classically bad policy.

From Arizona Republic:
"Legislators are considering selling the House and Senate buildings where they've conducted state business for more than 50 years.

Dozens of other state properties also may be sold as the state government faces its worst financial crisis in a generation, if not ever. The plan isn't to liquidate state assets, though.
Instead, officials hope to sell the properties and then lease them back over several years before assuming ownership again.

...allow government services to continue without interruption while giving the state a fast infusion of as much as $735 million, according to Capitol projections.

For investors, the arrangement means long-term lease payments from a stable source.

...Earlier this month, Republican Gov. Jan Brewer vetoed such sale/leaseback provisions along with most of the rest of a fiscal 2010 state budget plan sent to her by the Legislature.
But the provisions are expected to return as part of a GOP-led legislative budget proposal surfacing this week. Although Brewer spokesman Paul Senseman called sale/leaseback deals "one of the governor's least favorite options," he conceded the likelihood that they'll play a key role in any plan to close a state shortfall estimated at $3.4 billion.

The state may have little choice. Reserves already have been drained, easier fiscal gimmicks are virtually tapped out, and there's no political will for spending cuts of the size and scope needed to close the deficit.

"This is the predicament we find ourselves in," said Tom Manos, a Brewer budget adviser. "We've exhausted the better options."

...While the state is looking to sell and lease back selected properties, it also may try to contract out the operations of some prisons. The concessions provision is expected to be included within the new budget proposal, and legislative analysts believe it could generate as much as $100 million (on top of the sale/leaseback revenue) for state coffers. Private, for-profit prison operators would bid for the right to manage selected facilities, but the state would maintain ownership."
http://www.azcentral.com/news/election/azelections/articles/2009/07/29/20090729assets0729.html