Report questions future of Commerce department

A sunset review conducted by the state auditor general has recommended that between four and eight major functions of the Arizona Department of Commerce be eliminated, and that the remaining functions be transferred to other agencies.

The auditor general's report argues that programs administered by Commerce are either redundant or could be administered elsewhere. The auditor's plan would save between $1.2 and $4.2 million per year.

Reactions to the report were mixed. House Majority Leader Eddie Farnsworth, R-Gilbert, told the Arizona Republic that he favored abolishing the agency and would likely revisit the issue during the next legislative session. Others, such as Bob Hagen, chairman of the Southern Arizona Tech Council, expressed concern for the impact of the cuts on Arizona's efforts to compete nationally as a knowledge-based economy.

"It would be a tragic step backwards for southern Arizona's economy in general and its high-tech business community in particular if this partnership (with the Arizona Department of Commerce) was eliminated or dismantled in response to the Auditor General's report," stated Hagen in the Republic. "This is especially true in view of the fact that we are in the midst of the competitive fight of our life with other states to develop our high-tech business communities."

The Department of Commerce has released a response to the report, stating that the review "failed to measure the actual performance of the Department," and that the document contained "little information regarding legislative intent, program performance, accomplishments and constituent value/satisfaction." In the cover letter to the response, Commerce director Gilbert Jimenez communicated his disappointment with the findings, noting that they "make implementation of a 10-year statewide economic plan or any focused economic development effort impossible."

"This is foolhardy at a time when our economic base industries continue to erode," he said.

The auditor general's findings come as part of a required sunset review. A sunset agency or bill comes to an end after a certain period of time unless it receives legislative approval.

The services recommended for termination include small-business services; apprenticeship and pre-apprenticeship programs; economic information and research; and city and county planning advice and support. The report listed four other candidates for elimination, but added "advantages exist for the State continuing to perform these functions." They are: the International Trade and Investment Office; the Business Attraction and Office of Innovation programs; Rural Development assistance; and the Arizona Film Commission.

The report also recommended that the state continue to provide the following services, and that they be reassigned to other state agencies should Commerce be eliminated: the Arizona Job Training Program; staff support for the Arizona Workforce Development Council; the Energy Office; administration of private activity bonds; and the Arizona Military Airport Regional Compatibility Project.

The report also examined tax credits granted by the state to attract business. It concluded that the five tax-credit programs administered by the Department of Commerce have minimal impact on economic growth, and recommended that the Legislature consider evaluating current tax-incentive programs before they are renewed, extended, or expanded, and eliminating those that are not effective.

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For more information:

Business reaction, quotes from local business leaders

"State Commerce cuts urged," Arizona Republic, 09/27/2003

"Break up Commerce Dept., auditor says," Arizona Daily Star, 9/27/03

"State tax credits don't work," Arizona Republic, 9/28/03

"Getting tough on government bloat—not," Jon Talton column, Arizona Republic, 9/30/03

Office of the Auditor General home page and report

Department of Commerce response to the auditor general