KJZZ: This Analysis Shows Arizona Would Gain $13.6 Billion From Affordable Housing, Childcare Investments

Despite our divisive times, Arizonans largely agree on many major issues. They want affordable housing, investment in child care and post-secondary education. They like dual enrollment so students can earn high school and college credits at one. They’re OK with investment in major transportation projects like freeways and public transit.

The Center for the Future of Arizona has polled on this for decades — and the findings are consistent. Even Republicans and Democrats agree on this stuff.

But now, the think tank is taking that consensus one step further, putting real numbers behind these priorities. What would it look like if Arizona actually invested in these priorities? What does Arizona stand to gain?

Economist Jim Rounds of Rounds Consulting Group carried out the analysis and, well, the results are striking: Think upwards of $13 billion in economic gains.

Rounds joins The Show to talk about this more.

Full conversation

LAUREN GILGER: So how did this come about, first of all, this collaboration?

JIM ROUNDS: So I've always admired what CFA has done. And I was in a meeting that had nothing to do with any of these topics, really. And Dr. Francis and I just started talking and I said, have you ever thought about monetizing some of the things that the voters want? And we just started talking from there, and we came up with this idea, and I really like the way that it's moving.

Like, I've talked to you all before in different interviews where I always said, we need more calculators down at the Capitol. We need to do these types of analyses of items so that we can decide: is it going to cost us more than we're going to get in return? Because we have limited resources and it's going to be even more so the next couple of years.

GILGER: Yeah. OK, so let's talk big picture. First of all, the findings here are pretty massive: $13.6 billion in economic gains across these categories. Did this surprise you?

ROUNDS: The numbers didn't surprise me as much as ... just in the past, I've always been skeptical of how much voters really understood. They're making decisions about voter initiatives, and usually whoever has the best sign or the tagline ends up winning. And I thought, well, we actually need experts, we need lawmakers. We need the voters to delegate to people that could become more knowledgeable.

But this showed me that voters actually know what they're talking about on a lot of the important pieces. And the economic findings were very strong in the same areas where the voter preferences were very strong. So that was surprising. And it opened my eyes to the fact that maybe we have to trust what the voters want and that these types of surveys are valuable as long as we can add the little bit of math on the end.

GILGER: OK, so let's get into that math a little bit and some of the specifics here, starting with child care. I mean, everyone knows this is a big issue. Families are grappling constantly with how to pay for it. The average cost, you say, is $1,200 or so a month for a family in child care.

We're facing at the same time a big shortage of child care workers. 70% of voters, CFA has found, agree that, you know, we should fix this. This is a priority. But what would that look like? Like, how much would it cost the state to invest in something like child care?

ROUNDS: Well, that's the question. So when you do a return on investment, you first have to figure out what the economic gains are. And, and then once you identify that, you identify, what can we do to get to that point so that it meets the assumptions? And our assumption was that we'd get rid of the imbalance in supply and demand and we'd have enough access to childcare that is reasonably affordable. Prices keep going up.

And we found that if we could have everybody having access to child care that's looking for child care, I think the average household was saving around $800 a month or something like that. And that's with child care. And that goes into other economic development issues, too, because we need parents that want to work to have access to child care so that they're working and then they're paying taxes and paying more money into the things that we need to invest in other areas of government.

So it goes back and forth. So you kind of have this dynamic benefit that can grow rapidly if we can come up with some efficient ways of implementing it.

GILGER: So you can decide how much you want to invest based on how much you want to get back, essentially.

ROUNDS: Yeah. But you have to make sure that if you want to invest a small amount, but you know that it's going to have a positive ROI of 2-to-1, if you invest $20 million, you're going to get double that back within a certain period of time. That's part of the analysis. But in a lot of cases it just has to be 1-to-1 or better for the things to break even fiscally.

But those aren't the real popular projects. The popular ones are when we go in and say there's a 5-to-1 return within three years. You're helping foster kids. We're working on child care, and we're working on another item as part of this socioeconomic development package that's being put together by some clients or some friends or us just working as a think tank.

So it's fun to do this because we're getting better services, but we're not charging the public as much. I mean, who can argue against that?

GILGER: Yeah. And with child care in particular, there's these kind of long term ripple effects, right. Like early childhood education leads to big payoffs down the road for like the next generation. So way down the road.

ROUNDS: Yeah. Well, the tightest — doing different regression analyses in the past, this is where I nerd out a little bit, the tightest correlation between academic performance and another variable is household income. And when we have households that are better off, they're able to invest in things like health care, they're able to invest in other items that also lift academic achievement.

So again, it, it started off being an analysis of five separate items, but it was one of those Venn diagrams where the circles overlapped. You know, not just like the Olympic circles, where it overlaps one at a time. All these circles were coming together, which I think is how we've always described the economy, that a lot of things interrelate and we have to work on everything, but we have to also understand that there's costs and we have to do it efficiently.

GILGER: That's really interesting. I want to talk about affordable housing as well. This is one, it seems like everyone can agree there's a major problem, but no one can really agree on how to solve it. What approach did you take in this analysis in terms of how to even tackle this issue?

ROUNDS: Well, in this particular one, and again, these are just starting points in the discussion, we wanted to find out what would happen if everybody was able to pay just, or the income-constrained individuals were able to pay 30%. Because as income goes down, it doesn't just go up to 35, it goes into the 40s for the lower-income households.

And so the policy, you have to have different policies for different income groups. But overall, we had each household saving about $8,000 a year. We would create about 100,000 new jobs across the state and about $600 million in state and local tax revenues.

So you get back to that ROI. Can we spend $600 million, $300 million would be the state, roughly, can we spend $300 million at the state level and create that many new housing units so we can get down to a more affordable level? And I would say yes. I mean, we have ideas on how to do it with no taxpayer costs. And I'm hoping that the Legislature will listen to some of those.

But that's a topic for another show.

GILGER: Well, last question for you in the last 30 seconds here is the rubber hit the road question, right? Like in terms of taking these kinds of priorities, this return on investment, which can be very impactful, how do you get this across to lawmakers? Where do you want to see this implemented?

ROUNDS: They're already responding. We started the ROI analyses on some health care projects in the past, then on university investment, and now we do it on most of our own fiscal analyses. The state will issue there, ours includes dynamic impacts, but the idea is to use this more universally on all the major projects that could have a dramatic impact on the state because it's not necessarily the topic like it's good or bad.

It's, are you implementing it properly or are you not, in a lot of cases. So again, more math, the better.