Journalists Roundtable

Nov. 2, 2007

Transcript:

>> Ted Simons:
It's Friday, November 2nd, 2007. In the headlines this week, it looks like a projected budget shortfall is going to be a lot worse than at first thought. We'll look at state of downtown Phoenix as outlined by Mayor Phil Gordon this week. Drop out factories. Arizona has 35 high schools that are being called just that. That's next on horizon.

>> Announcer:
Horizon is made possible through the contributions of Friends of Eight, members of your Arizona PBS station. Thank you.

>> Ted Simons:
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, Amanda Crawford of the Arizona Republic, and Howard Fischer of Capitol Media Services.

>> Ted Simons:
Well, a security scare at Palo Verde today. A pipe bomb found at the country's largest nuclear power plant. Mike, who brought the bomb in here? Give us the story here. What's going on?

>> Mike Sunnucks:
There was a contractor that showed up at Palo Verde which is the largest plant in the nation it's about 50-miles west of town here. They go through a security checkpoint to get in there. They found what appears to be a pipe bomb in the back of this pickup truck. Not a lot of details about who this guy is. He's from South Carolina. They don't say what company he works for. A.P.S. runs the plant, provides energy to people here in Arizona and throughout the southwest including California, they locked down the plant. The FBI, A.T.F., Sheriff's office were out there and deactivated the device. Still some questions about who this guy is and what this was. The Nuclear Regulatory Commission classified this as a low level threat. The thing about the plant out there is it's been threatened by folks various times before. A couple of years ago the governor sent National Guard troops out there after terrorist threats. So it's a target. So there's this heightened security out there.

>> Howard Fischer:
Well, this issue of what it is, I mean, you know, we've been talking to people all afternoon, people who work out there. There's one guy who said, look, first of all it wasn't even his truck it was a company truck. Somebody else used it. What appeared to be a pipe bomb was a pipe, capped off at one end, used to shoot off bottle rockets. It had residue in there. So I have a feeling -- I mean, I'm glad that they find something unusual that they take precautions. Because nuclear plants are, as Mike says, a target. But this may all turn out that we maybe wake up Saturday morning and look and see, well, this turned out to be a lot less than it seemed to be.

>> Ted Simons:
In other words, if you're going to take a pipe bomb to a nuclear power facility don't leave it in the back of your pickup truck where everybody can see it.

>> Mike Sunnucks:
That's kind of the best case scenario is one of these cases when some unwise choice like showing up at an airport with something like that. You would think somebody who's been working there, gone through a background check would probably think there were a lot of security measures in place.

>> Howard Fischer:
The issue is, supposedly he said he didn't know it was there. Normally I guess this guy rides a motorcycle out there and he used the company truck because it was cooler this morning. Well, if you're using the company truck, you should probably check what's in back. Did he do that?

>> Mike Sunnucks:
There's been a lot of questions about the last few years about security at nuclear plants, chemical plants, those kind of things because they can be targets. They have a lot of security but a lot of people going in and out. They're not like a military base.

>> Ted Simons:
Safety precautions at Palo Verde. They've had the once over, twice. Numerous times.

>> Howard Fischer:
Clearly and they've been disciplined before. These folks, they have armed security guards with rifles and glocks so this isn't like a chemistry plant. Because the fact is, there are other plants around Phoenix if you want to stir up something you go in there and blow something up. Because any fool can drive in. And that's what's really scary. Palo Verde being a target doesn't scare me as much as the rest of the chemistry plants here in the valley and here in the state.

>> Ted Simons:
Big story this week, state budget legislative committee comes out. The shortfall that was really bad is now really really bad. Crunch some numbers Howie, what's going on?

>>Howard Fischer:
Part of the problem with prognostication is there are lies, damn lies, and statistics. I think we see that all the time when we are dealing with the Joint Legislative Budget Committee. After three months into the fiscal year we are 148 million below where we should have been in terms of revenues. Now, they say, well, out of a $10.6 million budget that's not much. The problem, is this budget is put together right down to the last dollar. And if we end the year at this rate we'll be 600 million or more in the hole. Now, the problem they're going to have cutting is, it's not a $10.6 billion budget to cut from. 4.4 billion of that is state education. Can't be touched. Another 1 billion plus is the healthcare program, also legally can't be touched. The governor has declared universities and higher ed off-limits. That's about 1.2 billion. Nobody's going to get rid of the Department of Corrections and cut them and let prisoners out. That's 910 million. You got about $2.7 billion budget to cut from.

>> Mike Sunnucks:
Plus you don't see a lot of support for rolling back tax cuts, the republicans won't go for that and businesses won't go for that and I doubt the governor will go for that. I have a question with not touching education. Why shouldn't we look at that for cost savings and waste? Obviously she's doing it for political reasons. It's popular. Teachers unions are a big constituency of course.

>> Amanda Crawford:
Arizona schools have historically not had a very good reputation. We're constantly at the bottom of the list. I think we're going to touch on that later. If you start touching education budgets, I'm sure that's the governor's argument that this is the time to improve education.

>> Mike Sunnucks:
If you're going to look at everything. She should look at everything. Tax cuts and schools.

>> Howard Fischer:
Mike, you're confused again as usual. State ed education, k-12 is constitutionally untouchable. Once voters passed that .6 sales tax hike back in 2000 they put in a formula, lawmakers can't touch that. The thing the governor took off the table was universities. You could make an argument universities are perhaps touchable. You have a couple of problems. Most of the money is faculty salaries. They'll get paid no matter what. The other thing becomes, if you want to bring the state out of this doldrums you need an educated work force. There are reasons you don't want to touch it.

>> Mike Sunnucks:
Spending doesn't always equal good schools or good universities. There's a lot of cases out there where we've thrown money at problems and it doesn't always work. I just think it's not wise to take -- we already have enough off the table. All the ballot initiatives, voter-mandated things are off the table. Tax cuts are off the table by republicans and should be on the table. So should spending.

>> Howard Fischer:
That true. Here's the problems we have in terms of fixing it this year. We have a rainy day fund with 700 million. As long as that money is there and they can use gimmicks like in the past, paying June bills in July there isn't the impetus to cut. I think we'll cut around $200 million because you can find the nickels in the coach like deferring things like hiring deferring buying supplies. I think we'll take $300 million or more out of the rainy day fund.

>> Ted Simons:
How angry will this get between the governor and legislature? House republicans have already come out with a plan with no taxes. They don't like this idea of debt financing as far as school construction is concerned. So is it going to get pretty tough?

>> Amanda Crawford:
Maybe the economy will get better and we won't have to worry about it. But I think if that doesn't happen it is going to be angry, it's going to be a lot of debate and really come down to the core principles that party and the politicians kind of -- that they're elected on. The republicans like Mike said are going to really fight not to lose tax cuts. And the governor is going to fight for schools. And you know, we'll probably in the end see some kind of mix as Howie was saying, some kind of combination between where the two sides are. But a lot of the pressures aren't going to go away. One of the big pressures of this shortfall is the rising number of people in access and on state healthcare. And all trends show that's something that's only going to get worse and probably not something that can be solved at the state level.

>> Mike Sunnucks:
I don't think anybody is willing to make any tough decision yet. I think if we have two years of budget problems. Because you're right. They'll go rainy day fund, switch the money around, do the rollover, but you won't see the governor or the legislature really make any tough decisions-- or the voters. The voters keep saying, we want tax cuts but we want more spending.

>> Howard Fischer:
Back to the problem with the voters. You talk about the expansion of the Arizona Healthcare Cost Containment System. More people reaching federal poverty level, $20,600 per year. They're automatically entitled to go on. The legislature may not take that back. That's part of the problem that we've got here. Between that and state aid education that 4.4 billion I was talking about, you've taken half the budget off the table.

>> Mike Sunnucks:
We'll see how it affects the governor's healthcare initiatives. I know there are some folks in her office who want to do a lot of aggressive stuff on that. She wanted to expand kids care last time. The budget will probably kind of mute that I would think.

>> Amanda Crawford:
We're not one of the states that have the most generous program when it comes to helping people with health insurance. We help people up to the poverty line by initiative. Kids care helps double that. So you're looking at still people who are working poor, who are allowed to get on these programs to begin with. So -- and the governor did want to expand that even further and lots of other states have. But yeah, that's something that will be a really tough issue to address.

>> Ted Simons:
Amanda, you mentioned maybe the economy will turn around. Right now the economy ain't doing so well in terms of housings especially. One out of three homes for sale is empty. It's affecting neighborhoods, foreclosures, etc. Howie, is there light at the end of the tunnel?

>> Howard Fischer:
The problem becomes when the housing market in Phoenix was booming, when the feeling was, throw money in a house. It will always go up. You had a lot of out-of-state investors who went, in bought them, don't live here. They walk away. They're upside down on the house. They owe more on the house than it's now worth. The other problem became you had a lot of mortgage bankers and brokers who said I can make a lot of money. Sort of fudging the figures on what this person can afford. We'll get them in on a low rate on the adjustable. The adjustable went up, these people didn't have the income to deal with it, they walk away. Does it effect neighborhoods? You bet. I don't know how you get around it unless you say you have to own a house and live in it you always will have these situations. But we're seeing what's been back eat for years as steel mills close and things like that.

>> Amanda Crawford:
We're seeing an industry where the rest of the country is suffering over the mortgage problems, our state is so built around construction and housing and real estate. So I think that amplifies the problems. It certainly led to what we were talking about, budget shortfall.

>> Mike Sunnucks:
I think most of the economists are saying it will go through next year, 2008 and we'll still have weakness in the markets. If you look at the foreclosure numbers and other real estate indicators it's Nevada, Arizona, California, and Florida are kind of the magnification of it. I think its going to hit us for another year.

>> Howard Fischer:
That's partly because we're overbuilt. They're still building some spec homes out there. I'll tell you the good news, I'm looking to buy a condo that I can retire in. I'm figuring that market will bottom and I'll have a great deal.

>> Ted Simons:
The idea is that eventually buyers are going to start buying, that it's going to bottom out and people waiting on the fence and looking at signs and wondering. But it seems as though a lot of sellers aren't getting the message. Those prices aren't coming down as you would expect and the buyers are still sitting there.

>> Howard Fischer:
Well, they believe -- it depends. There are people who have to sell. They move. They don't have the money. They're trying to avoid foreclosure so they don't want that on their records. They're willing to do a short sale. But we still have the growth rate in Arizona of above 3% a year just by virtue of people moving here, some of that is going to get absorbed. The tricky part for the developers is don't keep building. I know you want to keep your work force busy and all that stuff. But if you keep building you're only undermining the whole supply and demand equation there.

>> Mike Sunnucks:
I think another question is whether this spreads to the rest of the economy. Banks and financial institutions are getting hit hard. We had decent job numbers this time, I think 166,000 were created nationally. It doesn't seem to be spreading too far out but it could.

>> Ted Simons:
Mayor's State of the Downtown address, Mayor Gordon wants to see the A.S.U. law school in downtown Phoenix.

>> Mike Sunnucks:
I think he wants to see everything downtown.

>> Ted Simons:
I think he wants to see Tempe in downtown Phoenix.

>> Howard Fischer:
That's exactly the point that Mike is making. I don't blame him. He's the mayor of Phoenix. Downtown has taken a long time to get back from the vacant parking lots that still exist right down there on Central Avenue. But what's happening is a lot of this is being done with taxpayer funds.

>> Mike Sunnucks:
All of it's being done with taxpayer funds. Every building down there, every office tower, every stadium, Arizona Center, every museum and hotel has gotten some kind of tax break or subsidy. There's nothing down there, commercial or public building, that's done anything on its own yet. And they keep telling us, this will be it. This will be the critical mass. Cityscape will be the critical mass.

>> Howard Fischer:
Exactly. That's the problem. At what point do you decide, okay, we built it up and it should happen by itself? I understand seed money. I appreciate we need a third hotel because now that we've built the convention center we need a place for the people to stay. I appreciate we need downtown shopping to get people to live there. Then we need to of course subsidize the places where people live so it gave them tax breaks. But at some point, this is becoming socialism here. It's a government-run economy.

>> Amanda Crawford:
Tax breaks happen with developments all over the valley. I mean, every major development in every city is looking at some kind of tax break. But in this case, the mayor is making the argument that you need a vital urban core. And Phoenix doesn't have it. The valley doesn't have a vital urban core. And his argument, is that's good for the entire valley.

>> Howard Fischer:
Oh, come on.

>> Amanda Crawford:
And economists do see that.

>> Mike Sunnucks:
I think the problem people have with is all these subsidies that go to developers. They don't go to small business, people creating most of the jobs. And there's a stink around it of corporate welfare when you see it constantly going to sports owners, professional sports teams and big hotel chains and developers. If it was spread around evenly and you saw small businesses who are struggling downtown because of light rail -- if some of that went to them I think people would be more open to it.

>> Howard Fischer:
The larger problem, the legislature dealt with this a little bit last year in terms of the subsidy, the sales tax breaks for retailers. Locating the car dealership on this side of the street versus that side of the street. Phoenix has to offer because Glendale offered, Tempe offered, Mesa, that whole marketplace out there in the swamp land on 202, we had to have that. So everybody is playing this game. And so everyone else has to offer. Somebody has to say stop.

>> Ted Simons:
Well, and someone also has to say, who is going to live in downtown Phoenix? And the mayor mentioned financing for affordable housing. How is that going to fly?

>> Howard Fischer:
That's the other part of the problem. Some of the stuff that's going up, there is a 5-story condo project. I mean, 28 units, each of them with 5 stories with their own elevators, somewhere north of $1 million a piece. So if you've got money, yeah, you can live in downtown Phoenix. If you don't have money you can't. But we're seeing here what they see in places like Flagstaff and Sedona where the people who work there can't afford to live there. So how do you create affordable housing? Now we're down to the question, do you subsidize the development of it or the mortgages on this and do you by putting in "affordable housing" then undervalue everything else being built up next to it. Rich people don't want poor people living next to them. It's a constant problem.

>> Mike Sunnucks:
I think their best hope is A.S.U. That's why he wants the law school down there. That will bring kids down there, more shopping, more people will go to bars and restaurants and try to get some retail down there. Because right now you just don't have the core of people living down there. If there's a sporting event people drive down there and leave. The kids will be down there for class. They hope some will live down there and see more activity.

>> Amanda Crawford:
That's obviously already started. And there you're talking about not taxpayer dollars to developers you're talk about moving around taxpayer dollars and taxpayer-funded institutions. So maybe that flies a little bit better.

>> Ted Simons:
And Amanda, you mentioned the urban core beings so important to a region. "Arizona Republic," A.S.U. in cooperation with the Arizona Indicators Project. What exactly -- it sounds like a database for everyone to go to and say here's what's we need to fix? Or what is this all about?

>> Amanda Crawford:
We partnered with the university to look at some of the economic challenges facing the state. In the three-part series they found that one of the challenges is the type of economy we have. We talked about it being built around housing and construction and building and growth. And if growth doesn't continue or if the housing slump continues your economy falters. I think the piece that ran in Wednesday's paper talked about the talent that you need to make it a vital city, a vital region. And that being a knowledge economy. So the package really shows a lot of comparisons with other cities that may be doing better economically in some ways and where we fell short.

>> Howard Fischer:
But now we're down to -- the same thing we're talking about, how much of this can the government take care of? How much of this just happens because people come to Arizona because they like being here as opposed to how many people we can get here by providing the tax breaks, by managing the economy? It's a real slippery slope between incentivizing certain things and that sort of Eastern European, government-run economy. And we know how well that worked out.

>> Mike Sunnucks:
Folks have problems with us picking winners and losers in the economy. Small businesses still are our engine here along with real estate. Small business never gets any of these things. It's always the developers, always big names, Intel, big sexy sectors like Biotech or the Googles of the world that seem to attract these things because it looks good for elected officials to attract these things. Small businesses still are our engine. So I think people have a problem when you start picking one sector as a winner and ignoring another one.

>> Amanda Crawford:
One of the things they talked about in the package, other small cities have tried are incentives for people who are artists to come and live here and get tax breaks and that kind of thing. I think an artist is probably a type of person different from a Google.

>> Mike Sunnucks:
We've had a hard time with those creative type industries, we have a hard time keeping an entrepreneur here. Somebody may develop something here at A.S.U. or U of A. But they may go to Boston or San Francisco to commercialize it.

>> Howard Fischer:
But we are back to the very thing you were talking about we have an entire downtown developed with tax breaks and when do we reach the point. Okay, here you are saying maybe we ought to give money to help artists move down downtown.

>> Mike Sunnucks:
I didn't say that. She said that.

>> Amanda Crawford:
No, I didn't say that. It was in the report. It's an idea.

>> Howard Fischer:
I love the plausibility deniability here.

>> Howard Fischer:
We're down to the same problem. At what point can government -- to use your term -- pick winners and losers to shape the economy? There are things you can do. You can certainly set a tax policy. We have a horrible property tax system in the state that penalizes manufacturers because of the way we tax business equipment. You can do things to change that, to bring in more manufacturing. But once you start micromanaging this and saying we need more artists here and more journalists here or whatever it is, now we're down a real slippery slope.

>> Mike Sunnucks:
I think a lot of people want to see a level playing field, a business friendly environment where businesses can thrive, small and big alike. When you start earmarking money towards biotech or something -- it puts a bad taste in people's mouth.

>> Amanda Crawford:
We're not living in a vacuum. Other cities are doing these things. We're not alone. We're competing against Austin and Denver and San Diego for all these businesses, for artists, for scientists, for engineers, for people who want to live here and provide and help the economy. So you can't just look at it like Arizona doesn't like this and Arizona shouldn't do this. You got to look at what other cities are doing.

>> Mike Sunnucks:
I think we need to look at what we give incentives for versus others. People down south give incentives for auto plants which give lots of jobs and supply chains. We give developers, shopping center developers and biotech our incentives. Those aren't big job creators.

>> Ted Simons:
There's an increasing concern on education. Knowledge workers, that was mentioned. We have this Johns Hopkins report. I know, Howie, you're really putting a lot of emphasis on this Johns Hopkins University report. Dropout factories in Arizona. Go for it, Howie.

>> Howard Fischer:
This comes back to my lies, damn lies and statistics statement. And remembering we all went into journalism because we all flunked math. The idea is to figure out which states, which schools were dropout factories. Which schools did kids enter in the 9th grade and didn't get out in the 12th grade? That's one way of measuring it. We have a very active mobile population here. Kids move, kids go to different schools. We have more charter schools than any other states, public schools. Kids go in and out of charter schools. So if your measurement is you started 9th grade here and didn't graduate here therefore you're a dropout, that's a problem. It's a case that people will ask, if you're 18, not in school and didn't graduate you must be a dropout. Not considering a lot of these people came here as teenagers from another country and are not dropout from Arizona schools.

>> Mike Sunnucks:
Yeah, but every indicating of graduation rates, high school dropout rates we always rank poorly. We're down at the bottom in the last five. They all can't be wrong. We aren't Connecticut. We don't have the number of people going to college and graduating like other states do.

>> Amanda Crawford:
There is some study that is show it's gotten better. But it's difficult to measure.

>> Ted Simons:
Consolidating school districts is obviously a major topic of conversation right now. Does anyone see that as being a factor in some of the studies?

>> Howard Fischer: I think, well let me put it this way: consolidation makes sense in a lot of circumstances. You have a situation here in the valley. Laveen has a school district, Roosevelt has a school district, Madison, Creighton, all of which are feeding into Phoenix Union. It isn't necessarily the continuity. Is it the be all and end all? You might save money on administrators. Certainly that's a good idea. Certainly you can articulate the curriculum so you're sure what's taught at 7th and 8th grade -- but it is not this golden answer. Marty Schultz from A.P.S. has been ringing the bell, we're going to consolidate. It isn't the golden answer number one.

>> Mike Sunnucks:
And all these big city districts throughout the country, New York City, Chicago, Los Angeles have horrible schools in some of their districts. I don't think it matters. I think it matters about where you're at, the type of funding you get. You can do it well in a small district or large district.

>> Amanda Crawford:
It only marts if you can move the dollars around being able to consolidate. Being from back east I'm shocked at the number of schools we have. I think if you move the dollars around you could potentially see changes in curriculum and education quality.

>> Howard Fischer:
I'll make a year end prediction. We always do one. I don't think there'll be a single school district when this goes to the ballot that will actually do that. You need the permission of people in all the districts involved to do the consolidation. I think no most cases they like that local control. Again, I live in Laveen. We've got a couple of elementary schools and a middle school out there. I think the people there are going to say, you want to combine us with Roosevelt? We don't want that.

>> Mike Sunnucks:
I think most parents like local control.

>> All right.
We have like 40 seconds left. Howie, Arizona civil rights initiative. Go for it.

>> Howard Fischer:
This is the proposal by Ward Connally who shoved something through like this in California. The idea it says in the constitution you may not discriminate as a government on race, sex, national origin in hiring, in contracts, or in education. He says we've got too many programs out here. I don't think we've got a lot. What happened today is they were scheduled to file their initiative. They actually let that slip until Monday. A group of civil rights activists formed to say we need to fight it. The funny thing, is these same people kept saying we don't want preferences but they don't want the initiative that would ban preferences. So we have a very ugly race ahead of us.

>> Ted Simons:
Real quickly chances of passing?

>> Howard Fischer:
I think if this gets on the ballot people look at it and headed by Andy Thomas, a lightning rod, anyway. I think if it gets on the ballot people are looking at the wording and saying, gee, discrimination illegal? Works for me.

>> Ted Simons:
All right. Thank you so much.

>> Larry Lemmons:
State republican leaders have a plan to deal with the budget shortfall that's different from the governor's plan. A conversation with the man who created the special investigative unit also known as the plumbers during the Nixon presidency and a nonpartisan group that supports state politicians who help conserve the environment Monday night on Horizon.

>> Ted Simons:
Wednesday Arizona town hall on land use planning and Friday another edition of the Journalist's Roundtable. I'm Ted Simons. Have a great evening.