The 1912 Constitution of the State of Arizona is 87 years old. It was a remarkable document, well suited to our brand-new state. But years have passed, and there have been many amendments to the original document—some wise, some not. At least one more amendment is badly needed.

One provision (obviously the product of people who did not trust the judgment of politicians—possibly with good reason) allowed the state to issue General Obligation bonds only in the amount of $375,000. This was probably a huge sum in 1912—it is a pittance today.

A General Obligation bond pledges the full faith and credit of the state to pay interest when due, and to retire the bonds when due. If the credit of the state is good, the bonds could be sold for a low rate of interest. Using them would give the state access to the financial markets of the world. If a need existed to borrow money, it could be had at the lowest possible rate of interest.

Since the Constitution now practically prohibits issuance of General Obligation bonds, how is a rapidly growing state going to finance its capital requirements? High rates of taxation are economically and politically abhorrent. Failure to provide structures required by the state government for institutions and infrastructure was, and is, unthinkable. So, our state has used “innovative financing” with revenue bonds, lease-purchase agreements, and other very expensive means of capital finance, mainly because General Obligation bonds are not available to provide necessary capital.

As a state, we are not doing things which could and should be done. Our mental health facilities are inadequate; we are slowly cutting funding for our 3 great universities; and we are slowing highway and freeway construction because of inadequate capital investments in vital programs. Our present revenue structure has produced huge cash surpluses, but those surpluses did not last, either because of more realistic provisions for funding, or because of economic downturns.

Looking ahead, our need for capital funding is awesome. The Arizona Supreme Court has told the State that continuing to tolerate the disparity of resources available in education for our children is unconstitutional. The Court has practically mandated that the state provide the capital needed for ending inequality of education for children wherever a child may live in the state. This will require the investment of millions of dollars not only now but for the foreseeable future to provide adequate school plants.

Relying on our present revenue-producing system seemed adequate, but an economic downturn reduced dollar revenues, requiring retrenchment or even retirement of certain badly needed and greatly desired state objectives. Decisions have to be made which nobody in his right mind would want to make—cut investment or raise taxes to levels which would inhibit growth and bring hardship to our citizens.

We need to make available to the Legislature and the Governor a capability in financing which the 1912 Constitution has denied to us. It would require an amendment which I feel the Legislature should refer to the vote of the people of Arizona at the next election.

The amendment should allow General Obligation bonds to be issued under these conditions:

(1) Issuance must be authorized in definite amounts and for definite capital investments, by law.

(2) Proceeds from the sale of the bonds would be available from a Capital Budget, which would be separate from the General Budget.

(3) Interest on these bounds would be paid and the bonds retired on the due dates from any unobligated funds in the State Treasury, without need for an appropriation. (Interest and principal on U.S. Government bonds are paid in this manner.)

The availability of “GO” bonds would give the state government a much-needed “string” to its financial bow. In each budget period, the legislature and governor could finance capital outlays either from general revenues or from bond sale proceeds. This would provide flexibility which would protect the health of the general economy and save the taxpaying citizen from unforeseen changes in tax bills. Also, the availability of bond proceeds for general outlays, when needed, would release general revenue for other state needs which are now too often neglected. Since bonds would be issued only after authorization by law, a governor could agree or exercise the veto. Any temptation to go berserk in borrowing could be thwarted in many ways.

People are fearful of the political consequences of an amendment such as I propose, lest they be called a “big spender.” I do not believe that would occur if using this great asset to fulfill the needs of our citizens, present and future, in the most economical way, were made clear. As a matter of fact, the political risk, if any, could be in opposing it.