The state government general fund shortfall in the next fiscal year is projected to be $2.4 billion. A projected shortfall of $1.6 billion will need to be closed through spending reductions and/or revenue enhancements. The Legislature has focused on reductions in funding to state agencies. However demand does not decline for most public-sector services during a recession. Spending reductions by governments during recessions also worsen economic conditions. State spending cuts would worsen and lengthen the economic recession. The negative economic effects from a personal tax increase would be less than those of a governmental spending decrease. The demand for university services also does not drop during recessions. Any reduction in funding for universities will have a negative and direct effect. A substantial decrease in state government funding for universities will have negative consequences beyond these short-term effects. Any action--such as budget cuts--that undermines the success of the state's universities also impairs the state's economy.
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- The Economic Effects of Government Spending Reductions Relative to Other Options: A Report From the Office of the University Economist
- Hoffman, Dennis (Author)
- Rex, Tom (Author)
- Identifier TypeLocally defined identifierIdentifier Valueazdocs: ASU 8.2:E 25/5/2009
Summary of the effects of a reduction in government spending relative to an increase in revenue -- Background -- Projected economic effects of balancing the state budget
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Hoffman, Dennis, and Tom Rex. The Economic Effects of Government Spending Reductions Relative to Other Options: A Report from the Office of the University Economist (Tempe, Arizona: Center for Competitiveness and Prosperity Research, L. William Seidman Research Institute, W.P. Carey School of Business, Arizona State University, 2009)