Stimulus plan aims to give state’s economy a boost
With Arizona’s economy exhibiting signs of serious trouble, a coalition of business, civic, nonprofit and educational groups is advancing a plan that will kick-start the state’s economy.
The group, called SPEED (Stimulus for Economic and Education Development), has proposed an economic stimulus package that would give the state a multibillion-dollar jump start and head off a long-term state economic recession.
The coalition is proposing a $1.4 billion construction stimulus program that would revive the beleaguered construction industry and invest state resources in revitalizing the three state universities’ decaying infrastructure and in building badly needed new facilities.
The state appears headed for a recession that is expected to be deeper – and last longer – than the economic difficulties other states will experience. The housing market has plummeted, retail sales are weak, jobs are being lost and the state is facing budget deficits of $1.15 billion in 2008 and $1.73 billion in 2009.
The state’s problems likely won’t be solved by the national economic recovery plan, as consumers are unlikely to spend enough money to make the needed impact. The Arizona economy is too dependent on construction. When there is a downturn in the residential or commercial markets, there is not sufficient strength in other parts of the economy to offset the decline, and the entire state suffers longer and more severe recessions than the nation as a whole. The construction industry lost 5,300 jobs in January alone, its fifth consecutive month of losses.
To address the issue, Arizona needs a more diverse knowledge-based economy, but to achieve that would take a decade or more to accomplish. The quickest way to get the state’s economy moving forward again is to reverse the sharp decline in the construction industry and put it to work on the university facilities that will educate those students necessary to grow the knowledge economy.
Providing the facilities to educate more college graduates is paramount to the state’s economic future. Increasing the percentage of high school graduates who go on to earn their college degrees by just 1 percent returns about $2 billion more to the state each year.
SPEED’s economic stimulus package has two goals: to get Arizona’s economy moving forward by reversing the sharp decline in the construction industry, and to help Arizona develop a more knowledge-based economy so it is better prepared to handle economic downturns.
The economic stimulus package will:
• Create about 14,000 new construction jobs and another 16,000 related jobs. The initial $1.4 billion construction investment more than pays for itself – it would result in a long-term impact of about $1.9 billion to the private sector, with a direct tax revenue impact to state and local communities of about $140 million.
• Make long-needed infrastructure repairs, updates and renovations in Arizona’s university facilities, build new facilities for state universities ahead of enrollment growth – and, thus, help Arizona build a diversified, knowledge-based economy.
These projects include existing plans for ASU’s Tempe campus, including new school of construction, as well as new laboratory space for recruiting high-quality faculty members; ASU’s Polytechnic campus, with renovation of the Health Sciences Center building; the Phoenix Biomedical Campus, with continued expansion of campus; the University of Arizona, with a new environmental and natural sciences building.
All the state’s universities, would share $525 million in needed, previously deferred repairs at all campuses, including ASU’s Polytechnic, Tempe and West campuses.
Long-term capital financing would fund the package. The universities will pay 20 percent of the debt service over the 25-year course of the bonds. The state will not begin payments on debt service until fiscal year 2010.
While some may wonder if this is a good time to build, given the state’s current budget constraints, it is the perfect time because the pace of construction activity is slow right now, so it is cheaper to build. In addition, debt financing costs less when interest rates are low, as they are now. Finally, the first state debt service payments will not begin until the time when the state should be in economic recovery and revenue has increased, in part from the additional state tax collections on these construction projects and their impact.
Why this plan?
The infrastructure at the state universities is in disrepair and is insufficient to educate Arizona’s growing college-bound student population.
Building renewal and deferred maintenance for the state university system has reached critical levels, at $525 million. This is the highest level in the history of the university system. Also, the amount necessary for critical capital projects to meet the growing student population has reached $911 million.
Without a greater number of college graduates, Arizona’s economy will be unhealthy.
By 2020, there will be an estimated 260,000 new jobs in Arizona requiring a higher education degree and another 167,000 open from retirements. That means producing 30,000 new graduates a year, and the state is only at two-thirds that level. Without investing in the state university system, including its physical infrastructure, the state will not be able to meet the demands of industry.