Voucher lawsuit

Nov. 15, 2006

Transcript:

Michael Grant:
Tonight on Horizon, Tempe-based U.S. Airways is making a bid for a much bigger carrier. If that merger happens, it would create one of the world's largest airlines. A lawsuit has been filed against two bills that set up voucher programs for disabled students and students in foster care. There is a revolution going on among America's 78-million baby boomers. We hear from Bill Novelli, CEO of AARP about his new book and how 50-plus Americans are reinventing America. That's next, on Horizon.

Announcer:
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Michael Grant:
Good evening and welcome to Horizon. I'm Michael Grant. Senator John McCain is taking more steps in his quest for the white house. He launched a web site today for his presidential exploratory committee, exploremccain.com, and he is expected to file papers tomorrow officially forming that committee. An exploratory committee, of course, is a first step toward a possible run. It lets candidates start to raise money and create campaign organizations. U.S. Airways, based in Tempe, is making an $8-billion dollar offer for bankrupt Delta Air Lines. You may recall, just over a year ago America West Airlines acquired the then-bankrupt U.S. Airways. Atlanta-based Delta is due to emerge from bankruptcy in 2007. Delta Air Lines has apparently declined the bid, saying the airline wants to remain independent. Here with more on U.S. Airways' proposal is Mike Sunnucks of the Business Journal. Mike, were you surprised by this?

Mike Sunnucks:
There's been some talk about U.S. Airways coming in and making a bid for Delta for a while. They launched it on everybody this morning. They did a conference call early in the morning east coast time. It caught people off guard a bit. It moved their stock off. It was an $8 billion offer, part cash part stock. Delta said they would look at it, but their plans were to emerge from chapter 7 on their own.

Michael Grant:
Nothing personal? Just they want to come out of bankruptcy like they went in to bankruptcy?

Mike Sunnucks:
Yeah, they said they'd take a look at it. There didn't seem to be any animosity there. Doug Parker the U.S. Airways CEO wants to get this done before they come out of bankruptcy, so they can get more value for their creditors and their shareholders, kind of mirroring the U.S. Airways deal, because U.S. Airways was in chapter 11 also.

Michael Grant:
Give me a comparison on U.S. Airways versus Delta.

Mike Sunnucks:
Delta's got $16 billion in annual revenue. U.S. Airways about 11 billion. Delta's got 47,000 employees, U.S. Airways about 35,000 system-wide, 11,500 here. Delta's based in Atlanta. U.S. Airways is obviously based here in Tempe. They didn't give any indication of whether the headquarters would stay here or go to Atlanta, which isn't exactly the best news for the valley.

Michael Grant:
Sure. Now, when America West moved on U.S. Airways, they were fairly complimentary. I mean, obviously America West a strong presence in the west, U.S. Airways more an eastern-based carrier, routes down to the Caribbean. Here you'd have a whole lot of overlap.

Mike Sunnucks:
Yeah, there's a lot more overlap. The hubs are close together. Delta has a hub in Atlanta; U.S. Airways has a hub in Charlotte. Delta has big operations in New York, U.S. Airways big operations in Philly. We have a hub in Phoenix for U.S. Airways. Delta has a hub in Salt Lake City. You could see a lot more overlap. Probably a lot more layoffs, because there'll be a lot more overlapping employees and operations. Parker said today in the conference call they hope to kind of replicate what they've done with the U.S. Airways merger, which has not a lot of layoffs, they've been able to do through attrition. The thing is, they're still melding that merger. They haven't carved out a deal with the airline pilots or some of the other unions. They're still melding that, trying to fix some of the service problems in Philadelphia in particular. So, this would exacerbate that. But they see it as, Parker and the U.S. Airways guys, see it as an opportunity to get a value and really become a dominant player in the sector.

Michael Grant:
I would think one of the other attractions they would find is that Delta obviously has a fairly significant international presence both east and west.

Mike Sunnucks:
Yes. I think Delta flies to about 99 countries. I think U.S. Airways 36 countries. Delta has flights from L.A. to Asia and a lot of European flights. So that could bring international flights to the west. They were talking about that today. In the past, U.S. Airways hasn't been able to fly direct flights from say Vegas or Phoenix overseas because they don't have the big aircraft. Delta has some of those.

Michael Grant:
Right. Now, Delta says not interested. But it's really not Delta's call, is it?

Mike Sunnucks:
No. Their creditors and the bankruptcy court obviously get to look at all the organization plans put before them. They could decide that's the best way to go. Shareholders obviously have a say in this, too. Delta I think has until February to put forward their own reorganization plan and they're working on that. The other consideration is antitrust laws. In 2000, 2001, proposed U.S. Airways united merger was turned down by the justice department because of antitrust and competition concerns. And those two carriers, that scenario looks a lot like this scenario where you have big east coast markets, transcontinental, trans-Atlantic flights, and it could impact that. Parker said they were ready to deal with that including divesting some of those east coast shuttle flights.

Michael Grant:
Parker give any indication as to how long they were looking at this thing?

Mike Sunnucks:
There was a "Wall Street Journal" story three or four month ago. I think they saw the success they got from the U.S. Airways merger and by all accounts had done pretty well with that in kind of a tough operating climate. They've cut on profitable flights, their load factors are good. Despite some hiccups with high fuel prices and security restrictions that came over the summer, they've done pretty well. I think they see this as an opportunity to get even bigger and compete on a bigger stage.

Michael Grant:
You touched on this, but let me go back to it. Mike, my recall was that they really thought that they needed about two to three years to get completely done the integration of America West and U.S. Airways? So we've really still got, what about 18 months to two years of that transfer.

Mike Sunnucks:
They're still working on that. They still have service challenges, especially in Philadelphia especially with baggage claims. They've been trying to improve that. They still have to meld some labor agreements together. They had a deal with say, the U.S. Airways pilots and then also the America West pilots. Well, they need to bring those together. The pilots union was one of the big critics today of this announcement of the proposed Delta merger. They think they should focus on melding U.S. Airways and America West together first.

Michael Grant:
So I guess the next major flash point when Delta submits its proposal early next year to the bankruptcy court?

Mike Sunnucks:
Yeah, that will be the next one. They would take a look at that, the creditors, the bankruptcy court, the shareholders would all take a look at that, and then obviously the justice department would look at some of the antitrust implications.

Michael Grant:
Mike Sunnucks "Business Journal." Appreciate the information. Interesting development, life's a surprise. The State Legislature passed a couple of bills last session appropriating a total of five million dollars for school vouchers. Now, a lawsuit has been filed challenging those vouchers. We'll talk about the lawsuit and the voucher programs, but first, here's more on the situation.

Mike Sauceda:
Two bills were passed by the legislature last session that gives vouchers to parents of students who are in foster care or who are disabled. Senate bill 1164 appropriates 2.5 million to give Grants of up to $5,000 to the custodians of children in foster care. The law requires the money be directed by the parents and not the state. It can also only go to Grad schools, which do not discriminate. However, the law does not address whether the school discriminates based on religion. House bill 2676 established a voucher program that appropriates 2.5 million dollars to provide scholarships for disabled children. The money can be used at religious or nonreligious schools. Scholarships are based on funding formulas set out in state law. The lawsuit against the two bills has been filed by a consortium of civic and education organizations. It has asked the state supreme court to rule whether the funding violates the state constitution by providing funding for private religious schools. The constitution states no sectarian instruction shall be imparted in any school or state educational institution that may be established under this constitution.

Michael Grant:
Here now to talk about the lawsuit and the voucher programs is Representative Rick Murphy, who sponsored one of the voucher bills. Also here is Don Peters, a lawyer for the consortium of educational and civic groups which has sued. Gentlemen, welcome to you both.

Don Peters:
Thank you.

Michael Grant:
Representative Murphy, what's the distinction between the two? There are two voucher programs going on here, 2.5 million dollars a piece. What is the distinction between the two of them?

Rick Murphy:
Well, first of all they're not vouchers, they're educational scholarships. The governor has said that she wouldn't sign a voucher bill. And therefore since she signed them they must not be vouchers. But all kidding aside, there's 2.5 million dollars that's designated specifically for foster children. Not just any foster child, but a child who's been in foster care, who's had multiple placements. In other words, they've been moved from home to home to home, and therefore many times school to school to school, and who are below grade level in at least one core subject. So this is a very targeted program to children who are demonstrably not being served by the public schools they're in now.

Michael Grant:
I quickly scanned some background materials on the bills. And those background materials seem to indicate to me that attempt here was to pattern them fairly closely after I believe it was a voucher or educational scholarship program in Cleveland. Was the thought to try to bring them inside that United States Supreme Court opinion, which I think came down a couple of years ago?

Rick Murphy:
Well, clearly it made sense to us to pattern the program after programs that were already successful, for one thing, and for programs that had already been ruled constitutional and legal and everything else. Why beg for a problem when you don't need to?

Michael Grant:
Okay. Now, Don, let me pull you into the conversation here. I think that's one of the things that your lawsuit is highlighting is the federal constitutionality of these programs is not at issue because Arizona's constitution has a much more restrictive standard than the first amendment to the United States constitution, correct?

Don Peters:
Well, that is correct. Arizona's constitution has a provision, as do almost all states, that the U.S. constitution doesn't have, that prohibits compelling taxpayers to provide financial support for the propagation of religious views. That's been viewed as inappropriate since colonial times. It isn't that specific in the federal constitution but Arizona has a couple of very specific provisions which we think are violated by this.

Michael Grant:
Okay, Don, why don't you just summarize? Because I think you have three basic attacks on the Arizona constitutionality of the voucher program? You've covered one.

Don Peters:
There are -- yes. Well, the one sort of incorporates the others. But there is a provision which says public money cannot be appropriated for or applied to religious instruction. This bill would provide that the state is going to subsidize the tuition of students at private and religious schools. Part of what they will get in return is religious instruction, because that's what the religious schools do. That's the vast majority of the private schools that are out there. There's a separate provision in the Arizona constitution that says the state cannot appropriate money in aid of private or sectarian schools. Now, most onlookers seem to think, and I agree, that there's hardly a more direct form of aid than paying the tuition for the students who attend your school. Tuition is typically the lifeblood of a private school. There's a more complicated argument to summarize in a few words which is that the Arizona constitution specifies how the legislature is supposed to provide publicly-funded education. And the Florida Supreme Court has held there's no other way for the legislature to do it. We think that's correct in Arizona as well.

Michael Grant:
That basically goes to the general and uniform school system argument.

Don Peters:
Right.

Michael Grant:
Representative Murphy, here what the constitution says. I'm going to ellipse it, but "no public money shall be appropriated for religious instruction." Why wouldn't this violate that provision of article ii section xii of the Arizona constitution?

Rick Murphy:
First of all this, money is not being given directly to any school or even for a specific purpose of religious instruction. This money is for parents and its being given specifically to parents to let the money follow the student and let the parent decide where that child is best educated. And for example in the case of the foster care voucher -- or excuse me, the scholarship program but regardless --

Michael Grant:
It's just words.

Rick Murphy:
Yeah. We all know what we're talking about here, anyway. But the bottom line is, these students are demonstrably not being served in the setting they're in now. We can go back decades and see that the overall performance of children who have been in the foster care system is so far below the average student in Arizona that I think it's unconstitutional to leave things as they are, because those students are just not being served. And this is another tool in the tool box, if you will, to get them where they need to be.

Michael Grant:
I appreciate the distinction that you're trying to draw in terms of well, we're giving the scholarship Grant or the voucher to the parent, not to the school. But under the program, the private or perhaps religious school receives it, does it not, and then the state cuts a check directly to the private school. That seems to me very clear that cash is moving directly from the state to the school. Am I missing anything?

Rick Murphy:
Well, the courts -- this is not a distinction I'm drawing. This is a distinction the courts have drawn. The courts have already ruled that the scholarship tax credit, for example, is perfectly fine and constitutional and that it does not violate these very same provisions. And that is still money that is being directed from the state that the parent decides which school they're going to put their child in. And the state pays for it. And this is really not any significant difference from that.

Michael Grant:
Don, it's a pretty good point the Supreme Court has said that the tuition tax credit program is in fact constitutional.

Don Peters:
Yes, they did. That was in Cotterman versus Killian. The difference here is a significant difference. In that case the court said there's no constitutional problem, because no public money is ever appropriated. In the nature of a tax credit, in the court's view, the money never does reach the public coffers and so these two constitutional provisions which turn on appropriations of public money were not technically violated. Here the bills call very specifically for appropriations. Money is coming out of the general fund. It's been received by the state. So we clearly have appropriations of public funds here.

Michael Grant:
Let me go to another point, which is basically this: although a lot of private schools are religious, not all private schools are religious. The state is certainly not -- I don't think you allege -- instructing a parent that once you receive this education scholarship or voucher, you need to go to a catholic high school to cash it. So how is the state aiding the religious institution? It is the parent that is electing either to go to a non-sectarian or a sectarian school.

Don Peters:
Well, there are several answers to that. Part of it is that we know that statistically in the United States about 82% of the children who attend private schools attend religious schools. That's most of what is out there. So we know that because those are the private school alternatives that are available in a significant majority of the cases they're going to be used for religion. But the constitutional provision that talks about aid prohibits aid either to private schools or religious schools. So you don't have to get into whether it is private or religious for purposes of that clause. Now, it is the parent's choice but there are a lot of court decisions saying simply plugging in an intermediary doesn't solve the problem. If the state can't fund education, they can't do it by routing it through the parent to a private or religious school.

Michael Grant:
Representative Murphy, this bill was in the hopper but it passed fairly late. Did you or other sponsors, supporters of the measures seek advice from legislative council? Or rules committee obviously normally discharges the function of determining whether or not legislation is or is not constitutional to get any kinds of opinions at the legislature in relation to the constitutionality of the programs?

Rick Murphy:
Well, sure. We consulted with the various staffers that we have that are familiar with the nuances of the issue to make sure that we drafted it in such a way that it would be constitutional, it would be proper.

Michael Grant:
and they advised you that it was constitutional and proper and okay?

Rick Murphy:
Yes, absolutely. The Cotterman versus Killian decision actually, for that matter, did -- there was a portion of that decision-- that did say that even if the money does touch the state's accounts, because it's going to the parent and the parent is making the election that that would not be a violation. So I don't believe that there's a violation. The staff and the attorneys who looked at it didn't believe there's a violation. And there's a lot of legal precedence to say it's perfectly appropriate to help these students this way and make sure they get the education that the constitution requires them to have.

Michael Grant:
All right. Well, I suspect we will return to this subject. Don peters, incidentally real quickly, this is filed with the Supreme Court and I assume they will establish a schedule for deciding whether or not to take it up, right?

Don Peters:
Yes. They tentatively said January 4 is the date to decide whether or not they will take the case. They don't have to.

Michael Grant:
That's right. We know that. Don Peters thanks for joining us. Representative Rick Murphy thanks to you as well. There are 78-million baby boomers now in our country. The largest generation ever recorded in this country is nearing retirement age. Today's 50-plus Americans are refusing to rock their retirement away. They are redefining the workplace, their communities, health care and public service. Bill Novelli, CEO of AARP writes about that in his new book, "Fifty Plus, Igniting a Revolution to Reinvent America." Merry Lucero spoke with Novelli about his book and how boomers are transforming America.

Merry Lucero:
Bill welcome to Horizon and thanks for joining us. What inspired you to write this book?

Bill Novelli:
The premise of the book is that number one we're all living longer in America. So longevity is a great gift. Secondly we've got 78 million baby-boomers moving into their mature years. Half of them are 50 or older. When you turn 50 in America now you have half your adult life ahead of you. We've got both longevity and numbers and opportunities to do great things.

Merry Lucero:
You've had a long and varied career before becoming AARP's CEO. What from your career experience do you bring to this book?

Bill Novelli:
Well, I feel as though my whole career has been training for my AARP job. If you look at the AARP mission, it's to enhance the quality of life for all, i.e. all generations as we age. So I think it's a stirring mission. It's a wonderful mission. It makes me want to go to work every morning. And the premise of the book as I say is that we can really do something to change America.

Merry Lucero:
Are yesterday's boomers today's 50 plus Americans, reinventing America?

Bill Novelli:
Well, they're reinventing retirement. They're reinventing the work force. The market place is changing very fast because it's a huge market that many companies want to take advantage of. So yes, they are at the center of the reinvention of America.

Merry Lucero:
So much of what we've heard up to this point is so much doom and gloom. Social security is not secure, pension plans are crumbling, retirement systems are going away. But you take a real positive stance on some of these social issues. Why?

Bill Novelli:
Well, I think the glass is two-thirds full. And the reason why I say this is that we have always as a country reinvented ourselves. We've always risen to the crises that we have. And we can do it again. The newspaper accounts that say, can we afford to grow older, the answer is yes. We cannot only afford to grow older but we'll be a better society as a result of this.

Merry Lucero:
In what way are 50 plus Americans working to transform the healthcare system so it better serves them and better fits their lives?

Bill Novelli:
People are healthier today than they have been in the past, especially as they enter their older years. But at the same time, we need to be smarter health consumers. We need to ask doctors and hospitals, what does this cost? Make sure that we don't become the victims of medical errors and just become smarter health consumers for ourselves and our families. Beyond that, we need to demand change. We need to get more prevention into our system. We need to take care of chronic diseases. Because the majority of people nowadays have chronic diseases, not acute disease or acute care needs. And then there's the whole area of long-term care. What we need to do there is fix the system that really doesn't work at all. And there's more opportunity for people to live at home as they age and as they need care. And that would not just improve their lives but it would save a great deal of money.

Merry Lucero:
In what way are 50 plus Americans getting more involved in their communities?

Bill Novelli:
People are involved in their communities. And it's a good thing because we need that kind of civic involvement. In the book there are many stories about people who are doing that sort of thing as volunteers, as workers and in many other ways. And yes, the boomers, however, because they work longer, tend to be involved more on an episodic basis. They might take a project or take a cause and fight for it and then back away and then come back again. So there are opportunities. But also you have to understand how boomers operate.

Merry Lucero:
Are boomers getting more politically involved or is it that younger generations just get less and less politically involved?

Bill Novelli:
As people age they tend to vote more. So people 50 plus are a huge part of the American electorate. But we don't do enough. We can't just vote. We have to be informed voters. We just can't be rubber stamp voters. So we need to hold our elected officials accountable. We need to get the '08 presidential candidates talking about all these key issues. So it goes beyond just voting. It really means being an informed citizen, speaking out, raising our voices.

Merry Lucero:
Is this book just for 50 plus Americans? Or is it for people maybe in their 40s who are considering some of these issues now, too?

Bill Novelli:
Well, the book is called 50 plus. But in truth, I would say the people in their 40s would also enjoy reading it, and if you're interested in political science or gerontology or current events, it would be useful to almost any age. I believe the 50 plus generation are the people who would get the most out of it, but it's not just written for them.

Merry Lucero:
Finally what would you like people to take away after they've read this book?

Bill Novelli:
I would like people to understand -- and many people already do -- that these are exciting times. These are times of great opportunity. And if you're an older American today, really the world is our oyster. We have so much opportunity to change this country, to give back, to enjoy life and to help others to lead better lives.

Merry Lucero:
Bill Novelli it's been a pleasure speaking with you.

Michael Grant:
Thank you Merry.

Michael Grant:
Thank you very much for joining us on this Wednesday edition of Horizon. I'm Michael Grant. Have a great one. Good night.