Journalists Roundtable

Sept. 14, 2007

Transcript:

Ted Simmons:
It's Friday, September, 14th. In the headlines this week, we'll discuss the economy -- how a recession might affect Arizona. The latest on the employer sanctions law. The issue was in a federal court today. And results of this week's elections in four valley cities. That's next on horizon.

Ted Simmons:
Good evening, I'm Ted Simons and this is the journalists' roundtable. joining me to talk about these and other stories are mike Sunnucks of the business journal, Mary jo pitzl of the Arizona republic, and Howard Fischer of capitol media services.

Ted Simmons:
Let's start of with the economy. There was a story out this week that income levels are not keeping pace with the price of housing. Mike, I know in smaller Arizona towns this is becoming a real problem.

Mike Sunnucks:
There was a state study that looked at the housing prices in relation to wages in places like globe and casa grade. It's the challenge. The prices have been going up despite the housing slowdown. There's not the kind of high-wage jobs that are there. Most of them are too far away for folks to commute to phoenix. It's a question kind of both they're not getting the type of jobs that we need in those regions.

Howard Fischer:
But you have to understand that figures are a little misleading. The issue is, what does a police officer make, what does a firefighter make, what does a teacher make, what's the median price of a home in median price means 50% of the homes are below that. clearly they're finding places to live. The other issue is, what percentage of your income should you be spending on a house? If you're using 25 to 30% which was the old standard, you can't afford it. But that's why people do work two jobs.

Mike Sunnucks:
In rural Arizona it's been a long way -- this way a long time. They don't have the job base or industry for folks to work. Basically government jobs and public jobs.

Mary Jo Pitzl:
However, you've seen an exception to that rule maybe in the superior-globe area where some of the mining communities are coming back with copper being such a lucrative commodity right now. They can't find housing for those people. Pretty good-paying jobs.

Ted Simmons:
And Payson, Flagstaff, areas that are second home communities where you have a real disparity of income here in terms of the folks that come up on the weekend in the summer and the folks that have to work.

Mike Sunnucks:
Rich folks coming up from Scottsdale and down here and California that come in and have these retirement homes or winter homes.

Howard Fischer:
It happens. But years ago I talked to the editor of the sodona paper. Where do your staff live? Cottonwood. Same thing in flagstaff may live down the road in Williams. The issue becomes, levels rise to what they do. What's the price of a home? The price a willing buyer and seller are willing to pay. To the extent there are unnatural constraints that affects it. But also commutes, why do people live in Maricopa and drive up to phoenix? That's where it's affordable. Why are people living in Coolidge and driving into chandler every day? It's affordable.

Mike Sunnucks:
A lot of these cities are not close enough to a job market where they can get an upper middle class or middle class living. There's no air service, no factory, no job center outside of -- in these small towns.

Ted Simmons:
The operative word is willing. The fact is, some of these people, effective acquired folks, nurses, firefighters, police officers will not be willing to put up with that anymore.

Howard Fischer:
That comes down to the nature of the free market. If in fact, if a hospital cannot get nurses at $17 an hour they will pay $20 an hour or $22 an hour. That is the nature of the free economy. And if people can't live there or people are unwilling to drive from Holbrook to flagstaff and can't get firefighters or police officers, something will happen. It's the nature of a free market economy. Unless you want socialism and the government controlling housing prices and then controlling the prices of what people are paid and if you want "the business journal"'s wages to be set for you by governor Napolitano? Come on now.

Mike Sunnucks:
She's the smartest person in the state. She would certainly know how to do it. Ironic thing is as we talked about houses being too expensive in the rural areas; we're obviously having a big housing cooldown and mortgage meltdown in big markets like phoenix.

Howard Fischer:
They going to get a lot cheaper. That's the other part of it. There are some interesting numbers out today about the issue of the subprime numbers, subprime. One of the numbers I found out this week from the census bureau data, did you know 20% of Arizonans are paying at least 40% of their income every month on a mortgage? And here's the other interesting thing. Out of 1.1 million mortgages in Arizona, 26% of these people have either a second or home equity line of credit. gee. Do you wonder why people are defaulting? How do these people get into liens? But we got them into the houses.

Ted Simmons:
The national economy in general, Arizona in particular. And mike, I know you were at a forum. Some sort of meeting of national economist basically saying we may already be in a recession.

Mike Sunnucks:
This guy is don Reynolds. He talked to a bunch of business folks out at the Biltmore. Texas economist with Wall Street experience. He believes we are headed in or towards some kind of recession, basically because the slow housing market, inflation on food and energy and the subprime equity problems are hitting consumer spending. Consumer speeding's maybe 70% of the economy. Those folks just aren't spending. You're seeing car dealerships starting to struggle, luxury items, discretionary spending down. Wall-mart's had problems with this. Their same store sales were down. So consumers are the big engine of our economy in the end. And the housing market and equity lines just aren't there for them. He said spending from home equity lines was about 8 or 9% of total consumer spending in the past few years. Folks just don't have that now. So there's concern that we're going to hit a recession. And the other thing was, we're going to have about 2% growth in the U.S. This year. That's going to be surpassed by Europe and china which I think the first time since World War II we've seen that.

Mary Jo Pitzl:
You heard some echoes of this on Wednesday at the capitol where the legislative budget committee has a group of financial advisers that comes in three times a year and gives them advice. Some of these fellows who are economists said, no, we don't really think it's going to be a recession. Certainly the conditions in Arizona aren't set up for a recession unless you get pulled in by what's happening nationally. Sales are still going up, things are still growing albeit slowly. Although a professor of a.s.u. Said we wonder if we'll look back on this quarter and say that's when the recession started.

Mike Sunnucks:
The mortgage bankers put out numbers recently. Most of your subprimes are in Nevada, California, Florida and Arizona. They're taking the bulk of that, the bulk of the delinquent mortgages and foreclosures right now. That's a concern for us. Usually you think of recessions, Michigan, Ohio and states like Arizona and Nevada are immune to that. But this one, it's so tide to the housing market, we may be at the center of it somewhat.

Howard Fischer:
And we would have to see, of course, whether in fact the federal government comes in and helps some of these people with sub primes. If you have suddenly 5 or 6% of homes you have people in default it does adjust. But back to Mary Jo's point of about things slowing down, do you know the number of years we've had 5, 8, 10% increase in revenues?

Mary Jo Pitzl:
20% one year.

Howard Fischer:
Of course things are slowing down here. This guy got himself a headline in the paper. We're headed back to recession. I god news to you. We're back to normal growth here.

Mike Sunnucks:
He was talking nationally. The national numbers don't look good.

Ted Simmons:
Do you delineate between nationally and Arizona?

Mike Sunnucks:
Arizona usually does better in these things. But with the housing market in here and California and Nevada, we're a little bit more -- a bigger victim this time.

Ted Simmons:
Apparently the state got a f this week for financial prosperity from who? Who was this, Howard?

Howard Fischer:
Oh. Some, you know, the problem with all of us in the field -- and I include myself occasionally as a journalist -- is some group puts out a report with some shocking data. And it's one thing if you know where they're coming from. You know if the children's action alliance puts out a report it will be one of the squishy lib things we're not spending enough on social programs. This is a group I never heard of. They gave Arizona an f because we don't have enough children insured, things like that.

Mike Sunnucks:
Looking at financial numbers. One interesting thing in there was we had the third highest percentage in any state of sub prime mortgages. Only Mississippi and Nevada had a higher percentage. Obviously California.

Howard Fischer:
We have more homes being sold in this state. Pinal County grew at a higher rate of homes.

Mike Sunnucks:
We're talking about a percentage of mortgages. That's not good for our housing market or our economy to have a high percentage of sub primes in there. Because obviously those problems are obvious. So when we have that therein there, that's something to be concerned about. I think our bankruptcy rates and foreclosure rates are not the best either.

Ted Simmons:
Was this study done to show disparity of income and the problem therein?

Howard Fischer:
Lord knows. This was to get somebody's headline in the paper again. Some group came out and somebody bite the it. Shocking.

Ted Simmons:
They got on Horizon. That's for sure. I referred to this a little earlier, state budget shortfall. Again, everything seems to come home to housing in some way, shape or form. This is reflected as well. Mary Jo, 226 some million odd dollars.

Mary Jo Pitzl:
Every year they look in their piggy bank and say how does it match up with the pro sections? The projections are falling behind what they project. So you might say the projections were overly optimistic.

Howard Fischer:
226 million is not in the one month or fiscal year. What happened is we ended the last budget year with a surplus of 226 million less than we thought. We still ended with a surplus. The problem becomes, this fiscal year's budget is so squeaky tight that they want to end the year with $1 million. So you're already 225 million the hole starting the year. That's the problem. And that's where you have to decide can we dig out of.

Mary Jo Pitzl:
Right. That's the consequences that lawmakers and the governor are weighing right now. Should they try to pull in the spending reins a little bit on state government? And although some lawmakers are saying we really need to get in there and do this right away. Let's cut it short and not have pain down the road, leadership is taking a more reflective position, so is the governor. And they're waiting for recommendations.

Mike Sunnucks:
I think it's interesting to look at the fact that since Napolitano has been in there, we've raised government spending a good bit, all day kindergarten, and these other programs and cut taxes at the same time, which is something the republicans push for. This is the problem at the congressional level is we cut taxes for the affluent and everybody else but we spend all this money. So I'm surprised that they're not starting to look kind of at long-term -- we can't just cut tax and extend government and do all these other mandates.

Mary Jo Pitzl:
And have balance?

Howard Fischer:
I'll give you a larger lesson to this. You know what the root was? Back in 1994 the state Supreme Court said individual school districts can't be required to build their own schools. In 1998 we adopted something called student first which made the state responsible. Took over $250 million in obligations for that year. But didn't take over the taxes. Oh, we can absorb it. Well, the 250 is now $400 million a year. We have not raised taxes. Do you wonder why things are tight when you take over an obligation and then don't raise the taxes? School tax is going down because their bonds are getting paid off but the state never made up for it.

Mike Sunnucks:
I think its voters. Voters like tax cuts and they like a lot of spending on feel good items like universities and early childhood and all day kindergarten. And voters continue to do these two dichotomous things.

Ted Simmons:
Will we see a special session of the legislature on all this?

Howard Fischer:
The reason I think not is because there are two ultimate fallbacks of the one is we have a rainy day fund. Now, I don't think it's raining but there are lawmakers who are doing this and waiting for raindrops to come. The other thing is, there are budget gimmicks. Every month the state is supposed to pay close to $200 million in state aid. If you take the money that's due in June '08 and pay it in July '08 you put that money back in the budget.

Mary Jo Pitzl:
They were proud they got a budget out this year without any gimmicks. You going to go back on that?

Howard Fischer:
Shocked. But you can't get the kind of cuts that you need. The governor said she's instructed her department heads to kind of look around for the nickels and dimes in the couch and what don't you have to spend. But if we're going to have to take 200 to $400 million out of the budget, nobody's willing to do that. There isn't the political will to cut that kind of money.

Ted Simmons:
No political will now by way of a special session, is there a political will come January with half the fiscal year gone?

Howard Fischer:
That makes it even harder. Because if you need to cut the equivalent of $200 million over a full year, it means you cut the equivalent of 400 million in spending over six months.

Mike Sunnucks:
They'll do the nickel and dime stuff and raid the funds they raided before. Not cut taxes. It's so undermandated.

Ted Simmons:
Let's talk about employer sanctions law. Howie, you were at a hearing to regarding. This.

Howard Fischer:
Mary Jo and I went.

Mary Jo Pitzl:
Here we go.

Howard Fischer:
It was scintillating. Let me tell you. You put seven lawyers in a room and you suck all the air out. This essentially was a procedural hearing. As you know, on one hand some business groups and other hand Mexican legal and American education fund are challenging the law. They're saying it's pre-empted the state law to punish employers is pre-empted by federal law, due process arguments. They're trying to figure out how to get this whole case heard before January 1 when the law takes effects. The judge said he will definitely give them at least a ruling from his level by January 1 that's all very nice. Whoever loses will go to the ninth circuit. what's going to happen is businesses will be in a situation on January 1 or beforehand, because by computers and have to register with the federal government to use this database to check new employees of what do we do? Who do we check? Who gets to enforce the law? Are county attorneys going to be out there looking for people? So the judge promised a ruling as fast as we can. But when you're dealing with such issues, that takes awhile.

Mike Sunnucks:
He's not in a vacuum. These businesses are supposed to be following federal immigration law anyway. I-9's and checking folks. So the business folks act like, oh, this is all new to us. Some of these requirements are just piggy-backing on what they should be doing already under federal law.

Mary Jo Pitzl:
Some of the requirements specifically to enroll in the pilot program called E. Verify, that's new and that's causing some pain. even though they're into a pretty tight time frame, in this case it appears from what they decided in court today will get heard sometime late this fall, early this winter, but well before January 1 businesses aren't going to have a lot of time. But businesses -- businesses attorneys said they are advising their members to just wait. Don't bother enrolling in this program. Wait until December. Let's see what happens.

Mike Sunnucks:
A lot of businesses don't want any rules. They don't want the federal rules that are existing or tougher state rules from Arizona, Colorado and the other states.

Howard Fischer:
Let me tell you why the attorneys are saying don't enroll in the program. Once you enroll, you agree to let federal labor officials come in and look at your books. You have a waiver there. That's why they want to hold off as long as possible. Enroll in the basic pilot and once the law takes effect I won't use it. Once you've enrolled you say come on down look at my books.

Ted Simmons:
If the judge says no is there a plan b?

Howard Fischer:
I'm sure there is. What they'll do is look at the judge's ruling to determine exactly what he said. If the whole field is pre-empted then there's not much for the legislature to do other than appeal. But if the judge says, this part of it, for example the due process that will determine if employees truly are here illegally, you can't use this process, he'll give them a road map.

Mike Sunnucks:
The courts in Pennsylvania ruled against the local Hazelton ordinance. There's some indication they may take that route with the state law, too.

Ted Simmons:
The state law, federal law deal also comes up, I think, in the co2 situation over in California. Now we hear that governor would like to do a little around action in Arizona?

Howard Fischer:
It goes beyond that. The California resources board said cars sold in that state after 2016, they will have to have an average reductions of 30% of carbon dioxide emissions. The idea is this causes global warming. I'm not going to sit here and not play scientist.

Mike Sunnucks:
Give us the line, Howie.

Howard Fischer:
We'll put in a lock box. Never mind. You've got a question of what the authorities do around here. See, in California they actually passed the law back in 2002 to regulate co2. There is no law here doing that. The governor insists that what is already in existence in the state environmental code gives her the authority to direct the head of department of environmental quality to enact these things by rule. Let me tell you. I've talked to some lawmakers today. The essential response is, she's doing what? And even the other part. Let's even assume that she's right. Let's even assume there is statutory authority. California resources board said complying with this will add at least $1,000 to the cost of ever car and truck sold in the state. Should that be a policy decided unilaterally by the governor or is that something best left to the legislature?

Mike Sunnucks:
The legislature will not pass. This never pass this with republicans in charge there. So obviously she's playing political reality and hard ball there and going around them.

Howard Fischer:
But does that make it right? The issue is, she may be right, you know, if you want to be green or whatever else. But there are still things -- like it or not, people like the legislature -- let's say it's the policy making body. Should she be bypassing it?

Mike Sunnucks:
The argument she has the executive power. The agency, a.g. Has the power to set those rules. Everybody will argue that and sometimes the executives are right.

Howard Fisher:
Like 122 executive orders since she's been governor.

Mary Jo Pitzl:
I think she'll tell you all of them have been exactly correct. How many have had legal challenges? I think this might be headed for a legal challenge because of the heavy stakes. It does show it's not easy being green. [laughter]

Ted Simmons:
Oh, my goodness. All right. With that let's go back stop you, Mary Jo, and talk about local politics and find out if it's very easy being Phil Gordon these days.

Mary Jo Pitzl:
Apparently about 77% of the folks that bothered to cast ballots in phoenix' election voted to give the mayor a second term.

Ted Simmons:
What's he doing right?

Mary Jo Pitzl:
What Phoenix mayor hasn't been re-elected when he or she has stood for re-election? I think there's a general sense that people in phoenix are generally happy disconnected, not too fussed by what their government is doing. Specifically with Gordon, I think he has sort of -- he gives a sense of great energy, of concern, of sort of a nice guy.

Mike Sunnucks:
He's very moderate, he's very pro developers, pro business, and he's a democrat. Not way on the right or the left. I think people like that. Doesn't seem as overly partisan. The opponents he's had in these races are unknown.

Howard Fischer:
That's the key. The fact that they couldn't even get anybody with some credible background or maybe an existing council member to run. So you got a guy who's running who -- what was his claim? Phil Gordon is allowing illegals to stay in the city. People look on that and say, I should get rid of Phil Gordon because we have illegals here? When did you wake up and notice there were illegals in phoenix?

Ted Simmons:
Howie, the quality of the opposition suggests he's doing something right.

Mary Jo Pitzl:
Having $1 million in your campaign kitty has a lot to do with keeping --

Mike Sunnucks:
He's very popular with police and fire unions. He's kind of found that kind of middle ground that appeals to folks at local politics

Ted Simmons:
On the national scene, john McCain another guy, who seems like he was doing pretty well, then he hit the side of the road. Picking up steam again.

Mike Sunnucks:
He's gained a little bit in some of the national polls. He's got a little bit more money in the bank. He was running really low there. Despite howie's protests, McCain isn't totally dead yet. I think the one thing --

Howard Fischer:
Wait. Is "yet" the operative term?

Mike Sunnucks:
I think one thing here is, he's been definitive on the war. It's an unpopular position. But you see what the antiwar folks offer, the democrats mostly offer. Not a lot of specifics about what to do next.

Ted Simmons:
It seems that with McCain, as goes Iraq, so goes the McCain campaign. Hearing suggestions that troop surge is working.

Mike Sunnucks:
I think Petraeus did pretty well with his testimony and the democrats took a hit with the moveon.org ad. I think that ship rises as petraeus's ship rises. The other thing is, the other republican candidates haven't caught fire. People are questioning rue ditch. Romney does good in the battle ground states but not nationally. Thompson just got in. Question how much energy he has.

Mary Jo Pitzl:
This perceived uptick hinges on the debate in New Hampshire. Now maybe some of these viewers have watched it. These states don't get watched by many folks. Political operatives and spin meisters watch them. It is not the u.s.a. Watching and tuning into those debates.

Mike Sunnucks:
I think the blowback from the immigration that hurt him a lot has dissipated him a little.

Ted Simmons:
Like a sporting event. Stay close toward the end like our beloved cardinals and maybe you can pull it out or completely throw it down.

Howard Fischer:
is this the old saying, close only counts in horse shoes and hand grenades?

Ted Simmons:
Stay close and give yourself an opportunity to win, in other words.

Howard Fischer:
Understood. That gives the issue you have to decide. He now has qualified if he wants it for federal matching money. But the problem is, if he takes that he has to agree to limit his spending for the rest of the primary. Should he survive in the general when a person like Hillary Clinton can raise many millions dollars.

Mike Sunnucks
He has to get some of that money back.

Howard Fischer:
The issue for McCain becomes, if the money doesn't start rolling in a little faster. You need a certain amount of money even if you're not on the air. He's got to look at taking that federal money.

Mike Sunnucks:
I think he's got to take the federal money because of the position he's in. He's not the frontrunner anymore, he doesn't have the staff. And he has enough name I. d. he's in the national media and local media enough to where he can get his ideas out there. Every time there's something on the war he's out there, on Larry king, on fox news.

Ted Simmons:
Before we go, I want to bring up the commuting story. census data showing that Arizonans along with just about every other state and every other major metropolitan area, people are getting up earlier, coming home later, driving longer. Are you seeing this in your lives and with friends, family?

Howard Fischer:
Well, I've got all those idiots who moved out farther than I did who are clogging up my road. We'll leave that aside. This comes back to what we talked about earlier, the housing prices. If you have to go to Maricopa on the other side of the Indian reservation to get an affordable house you do that. Tradeoff you don't get to spend time with your families. The other part has to do with congestion. You have idiots who have moved up to anthem and say, how come we can't get out? How come the road are crowded? Well, did you notice the highway when they move here if now they're complaining about the commute times. If you live there, if you want to move there, don't complain about the commute times.

Mike Sunnucks:
I think the local governments, buckeye and these cities are proof pretty much whatever the homeowners and builders want.

Ted Simmons:
At what point does the person sitting in traffic, Mary Jo, say I've had it. I can't take it anymore?

Mary Jo Pitzl:
I don't know. When they can't get to work on time umpteen days in the row. What are their options? What are the options? Can they afford to move closer, in find a home that they want to live in or maybe renovate? Schools that they feel comfortable enrolling their children in? Or do they just say, the tradeoff is that I'm never there and I live in my car?

Mike Sunnucks:
I think we've let developers and home builders and real estate sector set our land use policies for decade.

Howard Fischer:
Wait a second. Those are all the advertisers for your paper.

Mary Jo Pitzl:
It does make the point that there is nobody that sort of has the big picture on how we grow around here. You know, buckeye approves a subdivision and adot does the roads and somebody else does another set of road. And there's no coordination.

Ted Simmons:
Gang, thank you very much.

Larry Lemmons:
We begin a three part series leading up to the premiere of ken burns' new documentary "the war" with Arizonan profiles from World War II, including a look at the waves. Also a conversation with conservative political pundit and writer Mark Steyn on the presidential race Monday night at 7:00 on channel 8's Horizon.

Ted Simmons:
Coming up, a discussion on reducing greenhouse gas emissions. That's next on now. I'm Ted Simons. Have a good weekend.