The state faces a $600 million shortfall as tax revenues decline. Governor Janet Napolitano will talk about this issue and more during her monthly appearance on HORIZON.
Ted Simons:
Tonight on "Horizon," the governor has a new economic development model to help the state. She's also none too happy President Bush vetoed a health care plan for kids. Also, the governor is working on ways to slash the state budget because of decreasing state revenues. The governor will talk about all that and more next on "Horizon."
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Ted Simons:
Hello and welcome to "Horizon." I am Ted Simons. In the news today, Arizona Senator John McCain raised $6 million during the past three months for his presidential campaign. McCain has $3.6 million cash in hand and is expected to report a debt of $1.5 million. That debt is less than he reported in June. Rudy Giuliani was the top republican fund-raiser in the past three months, raising $11 million. Governor Janet Napolitano gave a speech today, to outline the new plan for economic development plan for the state. She announced the formation of Washington new group to plan economic strategy and the expansion of another group to promote Arizona on a global level. I'll talk to the governor about her new plan and other issues, but first here's a sound bite from today's speech. The economic model was called "project doctor" while it was being developed.
Governor Janet Napolitano:
The result is two-fold. The first is the creation of a new entity, the Arizona economic resources organization. Arizona economic resources organization, known as Aero. The second is the expansion of the Arizona Global Network. Now, let me talk about aero first and then I'll talk about the global network. What is it that they did from the beginning? Well, Aero is designed really to be our strategic direction maker so that we don't have a bunch of people deciding on directions from different places but we have put in one entity, the strategic thinking for our own state economic development. Arizona Global Network is the team that is going to be expanded to harness foreign and direct investment and to help market Arizona's assets globally. Aero is the strategic thinker, and Arizona Global Network is like the guided missile. Here now to talk about her new economic plan and other issues in Arizona is Governor Janet Napolitano. Good to have you here. Welcome to "Horizon."
Governor Janet Napolitano:
Thank you very much.
Ted Simons:
This new economic model, kind of a nice overview there as far as what you were telling the audience beforehand. How long was this in development and why is this necessary?
Governor Janet Napolitano:
Well, it's been in development over the summer in a team led by Ed Zito, and I asked a number of thinkers to come together and look at all the different things we were doing in economic development scattered throughout state government and the private sector and the not-for-profit sector, kind of an umbrella organization that would bring all of our assets together, that we have one place where we concentrate our strategic thinking and one place where we really concentrate our marketing efforts. That's what I announced today.
Ted Simons:
Is this the kind of thing the department of commerce might have been involved with more or at a different kind of level beforehand?
Governor Janet Napolitano:
Well, the Department of Commerce is involved in this right now, but it needs to be larger than the Department of Commerce. The Department of Commerce is an arm of state government. I wanted to include business leaders, I wanted to include the universities, Science Foundation Arizona, a number of entities that were all doing their own thing, but nobody was kind of harnessing them all in one direction.
Ted Simons:
Is this another aspect? I know you talk a lot about raising the state's profile. Is that what we're talking about here?
Governor Janet Napolitano:
What we're talking about is raising our profile not just within the United States but to the world and increasing our marketing, our foreign direct investment and, by those mechanisms, increasing jobs in Arizona and wealth in Arizona.
Ted Simons:
The 5 C's. Arizona, that's us. At least that was us. Are we the five C's anymore?
Governor Janet Napolitano:
No. You know, we will always have some of the five C's, but we're going to be increasingly diverse, and part of that is also what we're working on now. How do we make sure that, for example, the next time there's a residential housing downturn we don't see the state's economy immediately turn down with it? You do that by having a diverse economy. How do we make sure we're bringing in jobs that really pay very good wages, have pensions, retirement, all the kinds of benefits people want? You do that by having an educated workforce and having a strategy by which you bring those employers in and keep those employers here.
Ted Simons:
22% increase in exports. Job growth does continue. People still want to move here. Goodness, gracious, we know cub fans certainly want to move here as we've come to find out.
Governor Janet Napolitano:
Oh, yeah. [Laughter]
Ted Simons:
Sounds like things are going pretty well. How can they go better?
Governor Janet Napolitano:
Well, they're going well, but they could be going better. We want to see income levels going up, and I can tell from the state government side -- and I bet we're going to talk about the budget in just a minute -- revenues are going down. Why? Because our state economy isn't producing as much. And why is that? 'Cause it's so tied to residential housing.
Ted Simons:
As far as the budget is concerned, we're talking shortfalls and these sorts of things.
Governor Janet Napolitano:
That's right.
Ted Simons:
You've got a plan now regarding deferred agency spending and hiring freezes and rainy day fund. Is that going to be enough?
Governor Janet Napolitano:
Yes. What I have done is say, let's assume that we will be short $600 million this fiscal year. And I think that's a pretty safe assumption. And how will we get the 600? First we tighten our belts, reduce spending. Secondly, we quit paying cash for buildings and pay for buildings over time just like you pay for a house over time. Third, we borrow a couple hundred million from our rainy day fund, still leaving a half a billion dollars in that fund, however.
Ted Simons:
Is this enough of an emergency -- I know the fund is there for emergencies. Is this an emergency?
Governor Janet Napolitano:
I think so. I think no one anticipated that the economy in Arizona was going to take such a sharp turn down over the course of the summer, and that's what the rainy day fund is for. It's raining a little bit. We can take some from that. We don't have to empty it by any stretch but take some, do what any business would do, any family would do, and that is pay for your bricks and mortar over time instead of paying cash for buildings and tighten our belts.
Ted Simons:
Is it legal for the state to pay for bricks and mortar regarding schools over time? Is this constitutional? Is it going to pass muster?
Governor Janet Napolitano:
Oh, certainly it is. We pay lease purchase, whatever, for all kinds of buildings and prisons, office buildings and the like. The only thing we don't do is for school buildings. Well, we need to keep building schools. We cannot not do that. But rather than paying cash for that, we can pay for them over time. By that mechanism drawdown 300 million, half of our shortfall, just by doing that.
Ted Simons:
What about cutting spending?
Governor Janet Napolitano:
I've proposed we cut 100 million from the existing budget, and we're going agency by agency now and finding places. We're not going to do it across the board. We're going to do it in a targeted way so that program and delivery services aren't affected.
Ted Simons:
s this deferred agency spending here?
Governor Janet Napolitano:
ome might be. Some might be just positions we don't hire for, procurements we don't do, new things that we don't start right away, for example. So, there will be a combination of things that go into that 100 million.
Ted Simons:
There are always arguments to cut more and cut more and do so by way of a special session of the legislature. Do you think a special session is necessary?
Governor Janet Napolitano:
Well, I don't think we can have a special session unless and until we have an agreement with the legislature and with me about what exactly we're going to do. I met with legislative leadership indeed this morning and said, I'm not adverse to a special session, but I don't think they're ready for one. They need a chance to review the options, and I said I've given you a plan. If you want to make some adjustments to it or so forth, give me your thoughts back. So I'm waiting on them.
Ted Simons:
In terms of timing governor, would it make more sense to do a special session now as opposed to waiting until January or until after the fiscal year is over and kind of getting started then?
Governor Janet Napolitano:
No, because we're doing the spending already.
Ted Simons:
We have the rainy day fund there. It's not going anywhere. In terms of bonding, we can do than in the course of the counter year of '08 and we'll be fine and be able to draw down the revenues that I've said. In terms of timing, we are ok. Again, to me, it doesn't make sense to bring them down and converse unless there really is an agreement and they're ready to get to action and pass the budget.
Governor Janet Napolitano:
Shortfalls now. Possible shortfalls later. What do you see as far as the crystal ball is concerned? Are we going to be talking about this in a few months, a year or so, other deferred agency spending, rainy day funds? What are you seeing as far as the future?
Governor Janet Napolitano:
Well, I think reasonably we can anticipate a tight budget next year as well, and then I am very confident and the economists are very confident by this then we will clearly have come out of the dip that we are in. Yes, we're going to have to be very careful about how we do things, recognizing that our population continues to grow. We need schools, teachers, public safety. We need health care, prisons. These are not luxury items we're talking about. These are the essentials within the state. And so we're going to have to manage our way through this, and we will.
Ted Simons:
Is it the kind of thing that your office and the legislature can compromise on as far as getting together in January and finding things that might have to be cut that may not be all that palatable but might have to be done if the shortfalls continue?
Governor Janet Napolitano:
You know, the essence of budget is compromise, and we've always managed to work our way through these situations before, but my goal is to do so in such a way that we manage our way through this. We balance the budget, keep the budget in balance, but we don't do so at the expense of our long-term future. We need to have a high-quality workforce. We need to have those assets in place. So we don't want to be cutting the universities, for example, K-12 education, for example. Those are the things we need so that that economic development we started talking about earlier in the show -- so that we have the workforce to sustain it.
Ted Simons:
Let's talk about something the Bush administration did recently regarding rejecting the S-chip program and the state health insurance program. There are a lot of numbers here regarding the federal poverty level and what percentage. Federally he wants to limit it. I think the state is even lower than where he wants to go. First of all, how much is Arizona affected by what the president wants to do, which is basically put the kabash on the whole thing, at least the growth the Democrats want.
Governor Janet Napolitano:
It's not the Democrats. Recognize that the congress passed -- this is state children's health insurance, bipartisan. I mean, they had 68 senators vote for this, enough to override a veto. That was bipartisan. It's very difficult to get a bipartisan agreement in the congress these days. The unfortunate thing is the president is in the distinct minority here. Now, the issue is insuring kids. In Arizona, we have an S-chip program. It's called Kids' Care. Just by population growth alone, not expanding eligibility but just getting the kids that are eligible into health care, under the president's plan, we would have a very difficult time doing that over time.
Ted Simons:
So basically your concern is what's going to happen in the future as opposed to how this would affect Arizona right now.
Governor Janet Napolitano:
Recognize the numbers we're talking about are five-year numbers, and so I'm thinking two, three, four years hence, what happens to kids in Arizona who are below the 2% of the poverty line. The federal poverty line is, well, really low. What we're really talking about is, in our country, we need health care. We have a huge number of uninsured. Yet we put a huge percentage of our G.D.P. into health care. What's going on here? We have a lot of disagreement about how you do health care for everybody. Children up to the age of 18 needs to be getting health care. It's a health issue, also an education-outcomes issue. There's a broad consensus on that, almost every governor in the country, Democrat and Republican alike, virtually everybody in the congress is in favor of this. I don't know who the president is listening to, but he's certain live not listening to parents.
Ted Simons:
It sounds like Senator Jon Kyl is listening to the president, saying this is more of a move to get private health care into the hands of government. I believe Representative Shadegg had something along the same lines.
Governor Janet Napolitano:
I don't know what they're talking about. If the private market wanted to insurance these children, they would be insured now -- insured now. We're talking about health care for children. So I think it's time for some of our representatives to quit reading the Bush talking points and think about what this really means for the people of Arizona.
Ted Simons:
Is this the kind of thing where, right now it's 350% of poverty level. President wants to bring it down to 250. In Arizona, Kids' Care is 200?
Governor Janet Napolitano:
200.
Ted Simons: I know you wanted to get back up to 300. Are we talking horse trading here, compromise? Is something going to have to happen as far as getting these sides together or does congress have the votes that might override?
Governor Janet Napolitano: I certainly the votes in the senate. The house, I don't know the count there. The issue is not that percentage so much, because whatever the percentage is, if you have a number -- it's a false argument, 'cause you always have to have an agreement between the state and the federal government on the percentage. That is not the issue. The issue is the money. And the president wants to spend 5 billion, and the congress wants to spend 35 billion. Well, 5 billion doesn't get you where to need to go. And over time, over five years, it would effectively be a cut for Arizona. 35 billion would allow us to cover the children who are currently eligible.
Ted Simons: Are you going to go back to the legislature next session and try to get more for Kids' Care?
Governor Janet Napolitano: We're going to do some things on health care. I don't know whether it's going to be specific to Kids' Care. We may have some other ideas up our sleeve.
Ted Simons: Speaking of health care and health insurance and such, couple of initiatives, apparently planned initiatives, making some noise here regarding keeping the option for those who want to have private health insurance there if and when -- and, again, this is from the initiative standpoint -- government-run health insurance takes precedent in some way, shape or form. I believe Dr. Mark Osterlow has got something going here and singer as well. Do these concern you, these initiatives?
Governor Janet Napolitano:
I don't know enough about them to say. I heard there was something floating around there. I can't really speak to it. I can say this, though. We have about a million people who are uninsured in Arizona. Now, some choose not to be insured by election, but most are uninsured because they simply can't get it. It's either too expensive or their employer can't offer it. We need to be looking at that population. Again, my view is that, at the very least, we need to be covering the children.
Ted Simons:
Is this -- it seems as though, as with everything, there's an ideological boundary line here.
Governor Janet Napolitano:
Do you think? [Laughter]
Ted Simons:
Whether it's private or government run. Can we have folks that want the private insurance getting the private insurance, at the same time allowing for those who simply can't afford private insurance a method of receiving insurance?
Governor Janet Napolitano:
Recognize in Arizona, we run our Medicaid system differently than any other state. It essentially is a private system. All we do is we pay private companies to procure health care for those who are economically entitled to it. So we have what's called a capitated system, but it is heavily infiltrated with private market ideas. So let's not get caught up in ideology. Let's think about health care in general and how we can improve it in general.
Ted Simons:
Let's switch gears here and talk about the board of governors' conference. Has Rocky Point changed? Has that place changed over the years?
Governor Janet Napolitano:
Unbelievable. Every time I'm down there, there's something else being built and lots of beachside development. Lots of Arizonans, I think, are buying condos down there.
Ted Simons:
No kidding. As far as the conference is concerned, what were you looking for, in terms of coming out of this conference, and what did you wind up with?
Governor Janet Napolitano:
Well, it's a couple things. First of all, it's a conference that includes the states on the northern side of the border and then the six states in Mexico bordering the U.S. plus some relevant federal officials. It's a conference held every year. And we wanted some agreements reached involving methamphetamine trafficking, involving pharmaceuticals, involving trading commerce. Those were all done. I was listening to President Calderon of Mexico who was there with us. I wanted to hear his commitment to putting resources into the northern part of his country, particularly on the law enforcement side. He's made those assurances now a couple of times. Now we need to see them. And then Governor Schwarzenegger and I met with Secretary Chertoff, the secretary of Homeland Security, and that was pretty brass tacks about the border, what's going in, what's taking so long. He was able to explain to us some of the difficulties he's encountering and what he's working through as well.
Ted Simons:
What is taking so long with that virtual fence down there?
Governor Janet Napolitano:
It doesn't work. [Laughter] The problem is this is -- it's called a virtual fence because it's kind of a radar technology-based thing as opposed to a physical fence. The first 28 miles were supposed to be operational this summer. They're not because of the computer systems that underlie them were not sufficiently integrated. I'm told that the president of Boeing has told the Department of Homeland Security that we will be operative this month in October. So let's see if that happens.
Ted Simons:
Interesting. We'll look for that.
Governor Janet Napolitano:
Yes, we will.
Ted Simons:
I guess by next year, though, we won't be looking for too much in the way of National Guard troops. Did you talk with the secretary about "Operation Jumpstart" and what's going on with that?
Governor Janet Napolitano:
I said I don't care what you thought a year ago. This "Operation Jumpstart" has worked. We really are seeing illegal immigrant apprehensions go down. Fewer are trying to cross because of their presence there. Why move them? Well, they said they need the guard for other things. So they're going to reduce the guard presence at the border, reduce the number. They've added 500 border patrol agents in Arizona. So they tell me. I don't get to go down and actually count boots on the ground, but that's the number they're giving me. The whole issue is: are you sufficiently securing the border between the ports of entry? We need more law enforcement resources in Phoenix because, if you get through that border, you're going to get to a major city. Usually, to go somewhere else in the United States, some stay here but a lot of times to be transported elsewhere and we need ice increased up here as well.
Governor Janet Napolitano:
Was there enough of an emphasis on the illegal immigration problem at the conference on this do you think?
Ted Simons:
Oh, yes. Oh, yes. It was talked about among the governors, with the federal authorities of both countries and the like but not exclusively so, because we have to recognize there are a lot of issues, a lot of things we have going on between Arizona and Mexico, not just illegal immigration. We have legal immigration. We have trade. They're our largest trade partner. We have tourism and travel, environmental issues, public health issues, all the rest because of our geographic proximity.
Ted Simons:
There was a quote by the president of Mexico Felipe Calderon regarding people having the right to work wherever one can make the greatest contribution. I thought that kind of stood out a little bit. Your response when you heard the president say that?
Governor Janet Napolitano:
Well, I think what he was talking about was that this is fundamentally an economic migration from Mexico to the United States, and it's an economic migration fueled by the fact that we have more jobs up here that pay better than Mexican jobs are paying. The economy of Mexico is growing. That dynamic may change over time, and I think he was saying he recognizes that. But what he was saying is don't look down on people because they emigrated to find work.
Ted Simons:
Real quickly, I would not touch on C.P.S., which is not fair to be real quick with C.P.S. because there just seems to be problem after problem. I want your assessment of the agency and what does the agency needs to do a better job.
Governor Janet Napolitano:
Well, I think the agency is actually -- has improved quite a bit over the last years. And if you look, they've had some cases with bad outcomes, which all of us -- you know -- it's a tragedy when a child dies. Nobody wants a child ever, ever to die. But the agency, if you look at the 30,000-foot level, the numbers are good. They're improving and so forth. We have to recognize that C.P.S. is not the only entity involved with child safety. We all have a responsibility here, and lots of folks need to step up to the plate. We ought to quit blaming C.P.S. for everything.
Ted Simons:
Do you want to see more legislative action in the way of drug testing, counseling when red flags pop up?
Governor Janet Napolitano:
One of the things that came out in the legislative hearings which were held a week or two ago was the need for more resources in the substance abuse area, because that is such a big factor in a lot of these child abuse cases.
Ted Simons:
Ok. Real quickly, again, because we're kind of returning out of time, transportation. It looks like we're going to be talking about toll roads again come next session. Your thoughts on toll roads in Arizona.
Governor Janet Napolitano:
Well, I'm not a fan of tolling for existing roads, and I don't think we should do that nor do we need to, but we're certainly looking at a lot of transportation options state-wide not just on roads but rail and other transit modes as well. Big topic coming up for us no doubt.
Ted Simons:
Text messaging in Phoenix looks like a go. Do you want to see it banned all over the state?
Governor Janet Napolitano:
We'll see what happens. I wouldn't be surprised if a bill -- be surprised if a bill weren't introduced this year, and I'll comment on it if and when it gets to my desk.
Ted Simons:
Right now everyone's excited about sports. You've got the Diamondbacks, the Mercury. You've got the Mercury as champions of their particular sport and the Diamondbacks playing as well. It's exciting, isn't it? I mean, it's the kind of thing where the community can get together.
Governor Janet Napolitano:
Well, we were talking earlier. We were both at the Diamondbacks game last night. It was just a lot of fun. The place was rockin'. The Mercury won the WNBA championship. The Cardinals are 2-2 and the Sun Devils are undefeated. I don't know the last time all that has happened in the same period. It's a lot of fun.
Ted Simons:
To put another fun tone on this. You go to the ball park and see Cubs everywhere, Chicago people all over the place.
Governor Janet Napolitano:
Not last night, though.
Ted Simons:
Not as many as we thought there was going to be. That's for sure. But is that something that Arizona has to realize in terms of legislative things, in terms of growth, in terms of raising the state's profile? It is such a transient kind of an area. I mean, people come and go here so much.
Governor Janet Napolitano:
Well, it's also young, and we have a lot of new growth that's occurring. We're still one of the fastest-growing states in the country, and so we welcome people from all over the United States. But I'll tell you, if we're in the major league playoffs and we're playing here at home, we're wearing Sedona red. It's Diamondbacks country.
Ted Simons:
And if they are coming out here -- and apparently there's no stopping them no matter what -- there has to be a way to get that knowledge worker base that you're looking for and a way to raise the state's profile; there has to be a way to do that with that exponential growth.
Governor Janet Napolitano:
And that goes right back to where we started. That's why we need our project on strategy, and that's why we need to increase the Arizona Global Network, our marketing arm.
Ted Simons:
Diamondbacks in four?
Governor Janet Napolitano:
I'm with you.
Ted Simons:
All right. Governor, thank you so much.
Governor Janet Napolitano:
Thank you a lot.
Larry Lemmons:
State lawmakers are trying to find more money for more roads. A couple of things they're looking at, toll roads and a sales tax hike. And the state court of appeals ruled this week that denying bail to illegal immigrants charged with certain felonies does not violate their constitutional rights. "The journalists' Roundtable" Friday. Thanks again to Governor Napolitano for joining us on "Horizon." Coming up next "Horizonte." and of course tomorrow, as you heard, the "Journalists' Roundtable". Have a wonderful evening. I'm Ted Simons. Good night.
Janet Napolitano:Governor of Arizona;
