Budget negotiations between the Governor and state lawmakers have finally borne some fruit. The two sides came to an agreement after a veto of the first budget and Governor Napolitano now holds the record for the most number of vetoes by a Governor. And the Governor met today with the nation’s homeland security director who was visiting the border in Arizona, all issues we’ll discuss with the Governor.
>> Michael Grant:
Tonight on "Horizon," budget negotiations between the Governor and state lawmakers have finally borne some fruit. The two sides came to an agreement today. That agreement came after a veto of the first budget and Governor Napolitano now holds the record for the most number of vetoes by a Governor. And the Governor met today with the nation's homeland security director who was visiting the border in Arizona, all issues we'll discuss with the Governor. That's coming up next on "Horizon."
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>> Michael Grant:
Good evening, I'm Michael Grant. Welcome to "First Thursday, the Governor on Horizon." More than a month after vetoing the first budget submitted to her by state lawmakers, the Governor and Republican leaders have reached a tentative deal. The budget must now be submitted to rank-and-file lawmakers. That process started with the budget being discussed in the Republican caucus this afternoon. Here is some reaction to the budget from the legislature.
>> Jim Waring:
Well, I think this budget accomplishes a lot of things for Arizona. It takes care of a lot of the points of contention, the kindergarten issue, the medical school issue that the Governor needed, but does a lot of things for Republicans as far as tax issues that we've been worried about, particularly the corporation tax credit with tuition stuff. So, I think it's good for everybody. We're still working on it, so it's not a completely finished product, but I think it does a lot of things that have been addressed before, but also adds a few new things that have made it palatable for everybody.
>> Michael Grant:
No new debts?
>> Jim Waring:
No new debts. I'm thrilled with that. We're paying cash for the schools, we're not bonding. It's a huge win for Republicans and for kids in the future that we won't have huge interest payments. I think it's a wonderful thing for Arizona.
>> Laura Knaperek: Well, the legislative process is one of compromise, and so there are a lot of Republican principles and issues in this budget, and then there are issues, obviously that the Governor has been pushing for the entire session. So I see that both Republicans can win in this budget, and the Governor can walk away and say that she's gotten what she wanted as well, and I think Arizonans will be better off for it.
>> Michael Grant:
Joining me now to talk about today's budget agreement and other topics is Governor Janet Napolitano. If everybody is happy, something must be wrong.
>> Janet Napolitano:
I think now, actually, there is agreement -- I wouldn't use that term. The members are still getting briefed on what is in the tentative framework of an agreement that the speaker, the president and I met about last night, and they will need to then move forward with legislation, so forth. We haven't seen the actual legislation. So there is a lot of work left to be done, but in my view, a successful budget for Arizona needed to include funding for all-day kindergarten, clean without a lot of stuff added to it.
>> Michael Grant:
$17 million, is that the number that is in this tentative agreement.
>> Janet Napolitano:
17,050 is the actual -- then I needed to include the funding for the first year of level one for the medical school. It needed to include adequate funding for childcare so we don't have a waiting list for childcare. It needed to keep expanding Child Protective Services, give me a way to restore general assistance and give some business property tax relief. These are the things that I have been talking about since January. The other important item still being worked out, we have discussions in principle, but nothing nailed down is funding for English language learners. We have a large number of children in Arizona that come from non-English speaking children we want them to read and write in English and do it as quickly as possible and it's going to take some funding.
>> Michael Grant:
That's a good point. I have heard estimates in the vicinity of $200 million.
>> Janet Napolitano:
Well, I think there are a lot of different estimates out there and ultimately how much we will need to invest in teaching children English, but this year, we need to make a serious down payment on moving forward. This has been studied to death. It's now time to put in place a process so that school districts can draw down some of the monies they need.
>> Michael Grant:
Let me cycle back to the tuition tax, business tuition tax credits. There is a $5 million increment in this to allow businesses to donate up to $50,000 with a $5 million cap?
>> Janet Napolitano:
I don't know what that particular number is, but as you know now, currently in Arizona, individuals can get a tax credit for contributing to private schools. The thing that was tentatively agreed to, and I must emphasize tentative, because the members now need to be fully briefed, and they are in that process now, was we would expand that to corporations at $5 million a year for five years. It would sunset after five years which would give us an opportunity to study what impact that really has, but also, the only schools that could qualify for giving the credit would be those where there were administering norm reference tests, preferably aims and publishing results. So that for the first time, if private schools want to show get tax credits they have to show student accountability.
>> Michael Grant:
Any low-income earmark for those monies?
>> Janet Napolitano:
We didn't means test it in our discussions. That may be something that members want to raise as the actual budget documents get written up.
>> Michael Grant:
Here's the thinking that I'm hearing from the Republican side of the aisle. Okay, we'll settle for $5 million, and then next year when we negotiate with the Governor, we'll say, well, fine, if you want that, let's take business tuition tax credits to $10 million.
>> Janet Napolitano:
Yeah, well, you know, you can always speculate on what's going to happen next, but I'm focused on what needs to happen now. What needs to happen now, is we need to move Arizona forward. We need to expand all-day kindergarten. I'm hopeful that we will now be beyond the perennial fight on all-day K and now that we will have two years expansion we will now naturally fall into completing that. We need a new medical school. We need that investment. We need it started now so that doctors can begin training in another year, year-and-a-half. We need to make sure we're taking care of our kids, very, very important, something that we haven't been very good at in the past. And then importantly, for jobs and job retention, we need to be competitive with other states on the business tax side. I think we've got some nice agreements on that.
>> Michael Grant:
Here's what I'm hearing from the Democratic side of the aisle. There is some grumblings on tuition tax credits.
>> Janet Napolitano:
Right.
>> Michael Grant:
That Democrats feel that you in one quote I heard, was sold us down the river.
>> Janet Napolitano:
Well, you know, for some in the Democratic caucus, this is a real sacred cow, and I appreciate that. I respect that, but when you look at everything else that's been restored in the budget, everything else that's going into the education community out of this budget, $45 million for -- to help teachers with their retirement benefits, all-day K, no hard cap on de-seg. funds, I could go on and on and on. This is a very good education budget. I know some of the Democrats are unhappy, object on the other hand as I said to Democratic leadership this afternoon, tell me a better deal would we get given the complex of the legislature. You have to compromise, give-and-go and move on.
>> Michael Grant:
Particularly in the past months, six weeks, this budget really wasn't about money, was it? In many respects, it was about that kind of ideology on both sides of the aisle?
>> Janet Napolitano:
That's right. I mean, I think some Democrats are unhappy. I know lots of Republicans that are unhappy. I think that means we constructed a pretty fair compromise.
>> Michael Grant:
Well, I don't know.
>> Janet Napolitano:
You know, as you know, when you settle a lawsuit or what have you, you have naysayers on both sides, but in my judgment, the benefits overall of this budget far outweigh some of the things I don't particularly like in it, and we should be moving forward. We should be, you know, be pleased that the things that need to be in there for the investment in Arizona's future are in there, and then we come back next year and go at it again.
>> Michael Grant:
I realize it's not your call, but I'm curious, did either the senate president and/or the house speaker indicate if they were going to try to stick to what they have been trying to do, which is to have 31 Republican votes for this budget in the house and 16 Republican votes for this budget in the senate?
>> Janet Napolitano:
No, we didn't discuss that.
>> Michael Grant:
Okay. Let me shift to the tax side of this equation. Intel tax -- so-called Intel tax break is in there, but I understand it's tied in some fashion to additional investment in the state? Am I anywhere close --
>> Janet Napolitano:
It's called sales factor and it really is -- it triggers off if the company makes a billion dollar investment in the state, they can take what's called an 80% sales factor, business tax reduction on their sales. The bill as originally put in, we have some problems with, because in the out years, it could be inordinately expensive. With our projected population growth, we need to make sure we are keeping the tax base in such a good way that we don't end up in a deficit four, five years from now when we expect to have 2 million more people in the State of Arizona. So we've got amendments. We're still trying to work that out. I think the business property tax reduction, which is the number one business priority on the tax side --
>> Michael Grant:
25-25% on property valuation over what a 10-year phase-in?
>> Janet Napolitano:
10-year phase in.
>> Michael Grant:
That's in there?
>> Janet Napolitano:
That's the business community's number one priority. What they said to me over and over again is that's what they need the most. When I look at the landscape of Arizona and how this will impact small businesses and help them, so forth, I think they've got a good point to be made.
>> Michael Grant:
So on the Intel sales factor, it doesn't necessarily require additional investment to qualify, but it has a threshold investment level of a billion dollars to qualify?
>> Janet Napolitano:
It's what I would call an investment trigger for that to occur. The question is, what do you do with companies that have out of state sales that haven't invested a billion dollars but they want a sales factor break, too. Do they get to be a free rider along with the billion-dollar investor? That's where the differences are occurring.
>> Michael Grant:
Let me pick up a couple of viewer questions. First question relates to Governor Napolitano's record number of vetoes. Does the fact that you have vetoed more legislation than any other Governor in Arizona history make you think that you must be out of step with Arizona voters because after all, they voted for the legislators that are sending you the budget?
>> Janet Napolitano:
I look at it the reverse. I think the legislature -- I look at each bill one by one, I don't use a batting average to score whether I'm going to veto or not veto. My view is what I'm trying to do is veto the legislation that's outside the mainstream of Arizona. They've sent me a boatload of that stuff. I veto it and give them reasons. Some of the bills I veto and I'm very clear in the veto message, if we do this, then I will be able to sign the bill. A good example is the forest health bill, which I vetoed earlier this session. I said these are the problems with the bill. We need to fix it. They have now gone back and fixed it, and I anticipate that in the next day or so, I will get a forest health bill that takes care of those concerns that I can sign. So there are two kinds of vetoes. One is a veto saying I will never, ever approve this kind of legislation.
>> Michael Grant:
I hate this thing.
>> Janet Napolitano:
This thing will not happen on my watch, unless you override me.
>> Michael Grant:
Right.
>> Janet Napolitano:
But there is an equal number of vetoes that say, look, these are the problems -- because we actually -- unlike -- we actually have a little more time sometimes I think than the legislature does to actually read the bill, think it through, work it through folks who have to implement it and identify problems, and so we can say, look, these are some issues that need to be dealt with, let's clean this up, then we can sign it into law.
>> Michael Grant:
Let me go to that second category, though. Your approach is pretty much, as I understand it -- certainly it's the way you deal with it with the press, to say, hey, listen, till it hits my desk, I'm really not going to signal what I think about it.
>> Janet Napolitano:
Publicly.
>> Michael Grant:
Publicly. Couldn't a more constructive approach and an approach followed by some Governors is no, I'll actively engage in the process while it's working through. I'll say, listen, point one, point two, point three are stinkers.
>> Janet Napolitano:
We do that. We do actively engage. I have a full-time legislative staff that is actively engaged, but sometimes at the legislature they want to test me whether I really am serious when I say I'm going to veto this or not. If you send me a voucher bill, you get a veto. You send me a quote, forest health bill that has us fighting forest fires by legislative committee, it's going to get a veto, and so, the legislators are fully cognizant on the major bills we're watching about what my position it. Now, what I don't do is express an opinion on all 1500, 2,000 bills, whatever it is, that are introduced in session or that may be working their way through, why? Because most of them will never make it all way through and it seems to me that I don't have to respond on every bill and get into a debate with a legislator who has a pet issue or a pet project. So, we are down there. They know the bills that we're working. They know the bills that we have problems with, and we go from there.
>> Michael Grant:
Okay. So you are more communicative with them, then you are with us?
>> Janet Napolitano:
Yeah, sorry about that. But I like you all very much.
>> Michael Grant:
Our second viewer question is in regards to what would amount to a pay cut for state employees. On July 1st, Arizona's teachers and state employees are facing a very large mandatory retirement contribution increase. Could you ensure that the final 2006 budget will cover this increase for them, so that the take-home pay for these dedicated public servants won't be even lower than it is currently, wrote a dedicated public servant is my suspicion, but what's your answer to that?
>> Janet Napolitano:
I would say the budget is designed to protect these dedicated public servants from that contribution increase.
>> Michael Grant:
We didn't cover that. What's in this budget for employee pay raises?
>> Janet Napolitano:
It's different categories. Public safety employees are going to get a large increase, that would include DPS, Department of Corrections, department of juvenile corrections and the Attorney General's Office are all pay raises that are part of what I call a law enforcement pay package. All employees will get at least enough raise to cover whatever their increase in retirement benefit or retirement contribution to ASRS is, and we have set aside $45 million or so that will be going out for teachers to cover a similar contribution expense.
>> Michael Grant:
Incidentally, are there any so-called triggers in this budget if the economy continues to --
>> Janet Napolitano:
It's a tentative agreement.
>> Michael Grant:
Understood. In this tentative --
>> Janet Napolitano:
I respect the 90 members of the legislature who now need to be able to say yea or nay, but, no, between -- I think given our revenue picture now and where we are, triggers are not a good public policy device, so I have not suggested any triggers.
>> Michael Grant:
Why not?
>> Janet Napolitano:
I don't think we need them. I think we ought to pay for what we've agreed to pay for, do it straight up and flat out, and then if extra revenues are coming in, we set those up for things that we're going to need in the next fiscal year.
>> Michael Grant:
All right. You vetoed the guns in bars bill. I wasn't astonished by that development, but let me give you a hypothetical.
>> Janet Napolitano:
Uh-huh.
>> Michael Grant:
Let's say a bear walks into a bar, how are you going to protect yourself?
>> Janet Napolitano:
I'm just going to give them great pause.
>> Michael Grant:
I get it.
>> Janet Napolitano:
You were asking for that one.
>> Michael Grant:
We talked about that on the Friday edition a couple of Fridays ago. You had a tremendous amount of cover on that bill. The restaurant association hated the bill. Did you figure you wouldn't get if I votes from the National Rifle Association in any event?
>> Janet Napolitano:
Well, you know, I've worked with the NRA closely on a number of matters. In fact have signed virtually all of the bills they were pushing not only this session, but the last two, and I met with the president of the NRA before the veto to hear her out about the arguments pro and con. It's not as clear-cut a case as people would like to say, but I looked at it ultimately as a gun safety issue, not a gun ownership issue.
>> Michael Grant:
Would this bill have been more palatable if it had been directed to restaurants that happen to serve alcohol instead of including bars?
>> Janet Napolitano:
Pure bars? I don't know, I don't think the tourism industry would have liked that and the restaurant industry obviously would have opposed it still --
>> Michael Grant:
As for the concept, it seemed to be one of the more stronger sides.
>> Janet Napolitano:
I think a more salient issue was who had the obligation to post signs. Do you post signs if guns are allowed or do you post signs if you must keep them out? And, I think that -- that many would have said, look, if I'm a private property owner and I want to post a sign that says bring in your guns, I ought to be entitled to do this, but the way the bill came to me it was the reverse, the private property owner who didn't want guns was required to not only post signs but maintain them and then if something were to happen, make sure he could prove that he had a sign up, it was visible and all of that kind of stuff.
>> Michael Grant:
Right.
>> Janet Napolitano:
So I think that was a more important issue.
>> Michael Grant:
Someone characterized the bill as being just one large boon for sign companies?
>> Janet Napolitano:
Sign companies would have been very happy. But think about a place like the Bank One Ballpark, which has establishments inside that sell alcohol. How do you possibly sign every entrance to there or -- I was told that the Biltmore hotel has 46 different entrances that would have to be maintained and so forth, and that was a burden they didn't want to have to assume.
>> Michael Grant:
You also vetoed a bill that would have put a private prison in Mexico. What was wrong with that idea?
>> Janet Napolitano:
Oh, it -- first of all, it was illusory. It would require major treaty amendments between the United States and Mexico, which aren't going to happen. Secondly, it created this whole private prison commission to do the private prison as opposed to the Department of Corrections, which actually has the responsibility for prisons. Thirdly, there was nothing to suggest that this would save the State of Arizona one nickel in terms of inmate costs, and fourthly, I think it would subject the State of Arizona to an inordinate amount of potential liability. So as you can see, I'm not a fan of that idea. You know, I recognize a whole host of bills have been coming to me that I think are fueled by a legitimate frustration with the failure to control the border, and the ones that I think will help or help with law enforcement, I'm signing. I signed the human trafficking bill. I signed the bill making -- committing a crime while you are here illegally, making that an aggravator. But a lot of the bills when you read them and think them through, they cast the net far beyond those that are here illegally and penalize American citizens and that is not Arizona's way.
>> Michael Grant:
Would you sign a bill just hypothetically if it came to your desk that said that illegal aliens have to pay out of state tuition to attend Arizona universities?
>> Janet Napolitano:
I'm not going to comment on that because that bill may get to my desk. So we'll see.
>> Michael Grant:
Now we're getting back to what you said a couple of minutes ago.
>> Janet Napolitano:
That bill is balled up.
>> Michael Grant:
Bill Brotherton has tacked on a series of employer sanctions on the bill, realizing you are not going to tell me one way or the other, but just in theory, does that make that concept more palatable to you if it deals with the business side of the equation as well as the illegal alien side of the equation.
>> Janet Napolitano:
As somebody who has been working the Arizona border issues since the early '90s, I think that if you really want to stem the tide of illegal immigration, you have to do more on the employer side of things, because the incentive to cross illegally when you are in an economy where there are no jobs, there is no money, no future, is huge. So, if we're ever going to deal with that, we've got to deal with the employer. We've got to deal with real immigration reform. You know, we are -- we are the unfortunate, I think, victims of a federal immigration system that is broken. I think immigration proponents and opponents would agree that the system is broken. We need more law enforcement, but we also need immigration reform.
>> Michael Grant:
Speaking of which, Michael Chertoff, the new Director of Homeland Security was in Arizona today. You met with him down at the border, down at Douglas?
>> Janet Napolitano:
Yeah were, we were down at the port of entry there.
>> Michael Grant:
What did you talk about?
>> Janet Napolitano:
Well, he was getting briefed. I've known Mike Chertoff for a long time. We were U.S. attorneys. But he really doesn't have a familiarity of the southwest border, the Arizona border, which has become, I think, known nationally as a weak link in our national homeland security and immigration system. He was down there. He was getting briefed on how the port works, what's going on, what kind of technology is now employed, and what the border patrol really needs to do its job.
>> Michael Grant:
How long are we going to continue to hear, we are not doing enough on the border, and continue to not do enough on the border?
>> Janet Napolitano:
You know, it is -- you know, there are some things that are turning my hair prematurely gray, and this is one of them. Every time I hear --
>> Michael Grant:
It's kind of distinguished.
>> Janet Napolitano:
Thank you. We're going to add 500 more agents, I almost want to roll my eyes because we've been getting these promises a long time. When you get down to the nitty-gritty, how many are you hiring, how long does it take you to train, how come you haven't opened up a second training facility, how come the president hasn't asked for full funding for these efforts? What is going on here? And, again, Arizona is bearing the brunt of this. Mike Chertoff got a real pretty good briefing today from myself and Senator Kyl and McCain.
>> Michael Grant:
One of the comments I heard from Chertoff seemed to indicate that he realizes it is not just an illegal immigration problem, but it's also very much a terrorism and security issue. That's not to say that others haven't recognized that, but he seemed to be immediate on that issue.
>> Janet Napolitano:
Yeah, he understands it. He's a former U.S. attorney. I think he was formally ahead of the criminal division for the Department of Justice, and he was from New Jersey where they have port issues and other things like that that relate heavily to terrorism. So he clearly understands that aspect of it. The other aspect, though, that was brought out today, and I thought very well by the border trade alliance in Douglas is, we also have a trade relationship with Mexico, so we need the infrastructure to facilitate the legitimate traffic back and forth and to do that quickly and efficiently, the longer those lines are, the longer a semi-truck full of produce has to wait to crossover, whatever, that is a real business hardship. Lots of businesses on both sides of the border, families on both sides of the border. So you've got to do the terrorism, the immigration, and then have the infrastructure that is really needed for the legitimate traffic that is going to go back and forth between Arizona and Mexico.
>> Michael Grant:
Next week, base closings are scheduled to be announced. I understand that those are pretty closely guarded secrets, but do you have any indication at all as to what the recommendations are?
>> Janet Napolitano:
No, I think there are as many rumors about that as there are needles on a pine tree, but we'll know when we know. We've been told that the initial list -- this is just the first step in quite a lengthy process, that the initial list will be made public next Friday, but we're also hearing that that may be moved up to Thursday or even Tuesday. Whatever it is, we'll be prepared to respond and move forward.
>> Michael Grant:
Luke possibly the one most at peril?
>> Janet Napolitano:
Hard to say. I mean, I can't get in the minds of what the DOD recommenders are, but when I think of Luke, I think of the fact that every F-16 pilot that has flown in Afghanistan or Iraq has trained right here at Luke.
>> Michael Grant:
Has trained at Luke. You can't beat the weather conditions. Well, Governor Janet Napolitano, we appreciate the information. It was nice getting breaking news with the tentative budget agreement, because as you know --
>> Janet Napolitano:
And obviously there are many, many other issues. This is an $8.2 billion dollar document.
>> Michael Grant:
Thank you. You can check out a transcript of tonight's show or see what's coming up on "Horizon" at our web site. That is located at www.azpbs.org. When you get to the home page, scroll down, click on the word "Horizon."
>>Larry Lemmons:
At the State Capitol, Governor Napolitano and Republican leaders come to an agreement on the state budget. We'll look at where each side compromised to make it happen, and former Governor Fife Symington decides not to run in the 2006 Governor's race. Join us for the Journalists' Roundtable Friday at 7:00 on "Horizon."
>> Michael Grant: Thank you very much for joining us on this Thursday evening. I'm Michael Grant. I hope you have a great one. Good night.
Janet Napolitano:Arizona Governor;
