Journalists Roundtable

March 27, 2009

Transcript:

Ted Simons:
Hello and welcome to "Horizon." I'm Ted Simons. Joining me, Matt Benson of "The Arizona Republic," Mike Sunnucks of "The Phoenix Business Journal," And Howard Fischer of Capitol Media Services. Arizona's cut of stimulus money comes with strings attached. Let's start with Medicaid. Even the payroll taxes have curious things going as far as the Obama's tax cut plan.

Howard Fischer:
The fed money?

Ted Simons:
What's at risk here with Medicaid and why?

Howard Fischer:
Arizona last year decided people who qualified for our Medicare have to requalify every six months. The idea being there are people who will probably fall off and why continue paying for them. The law voted on in June took effect in September. The federal stimulus law says you may not affect eligibility for Medicaid programs after July 1st. Because your law took effect in September, you affected eligibility and, therefore, you don't get federal stimulus money. The governor wrote back with two points. Number one, we're not talking eligibility. They're still eligible. We're just requalifying them. We did vote on this, but our constitution says things take effect 90 days after. I think she's got a good argument there.

Matt Benson:
When it comes to eligibility. Yes, they've not shrunk the window, the number of people who can qualify for this assistance, but by saying you have to requalify every six months, of course, there's going to be a certain number of people who don't fill out the paperwork. Don't get it. You're going to lose. That's common sense. So you're going to have a -- that certain number of people who don't qualify anymore for the assistance.

Howard Fischer:
Understood, but does that make the state have -- tighten up its eligibility standards? The fact that you don't fill out the paperwork, the fact that maybe you're no longer eligible because you have a job and making over federal poverty level.

Mike Sunnucks:
We're going to talk about the other areas for the foreseeable future. Hat in hand for money for the feds. If you want this money, it's a big pot of money, they're going to have to play the fed's game. The enrollments are up because of the economy. Especially in Maricopa County and I think the state is going to bow at some point, if the feds play hard ball.

Howard Fischer:
And it's a small change to make. This one, look, everyone has said, ok. We've got to go back 12 months' eligibility we'll do it. We need 1.7 billion.

Ted Simons:
It seems the feds want to go back doing what you were doing.

Howard Fischer:
Arizona's in line for $832 million of stimulus money specifically for higher education. We always knew there was what was called maintenance of effort. You couldn't go below what you were spending in 2006. We found out the rules by the U.S. department the education say you have to use any stimulus dollars to make you back-fill any cuts to keep you up to where you were spending before. K-12 is not a problem. Because we have 2% year-over-year increases. We're fine. Universities, we're about $160 million below where they say we should be. Now, it means that if we want to take that stimulus money, we have to use the $160 million to back-fill for FY '09. But we have to maintain that for FY10 and FY11. So that's $480 million of that money, which is basically half the money. The Republican lawmakers are unhappy. How can they do that to us? Unhappy as the Republicans are, the governor says this is a great opportunity to restore cuts to the universities.

Mike Sunnucks:
You'll see support. Not only from the governor, but moderates and a lot of folks that sees the benefits of the universities and are boosters. I think it has a centrist support behind it.

Matt Benson:
Of course, this comes out -- you're already in '09. The shortfall has grown to another three, four, maybe $500 million, we should know next week with the next projections. But the shortfall continues to grow for 2009. And that's a budget we've already fixed. We're talking about $4 billion, it's whittling away.

Ted Simons:
What are you hearing down there as far as --? We're not at FY '10 yet. How are they going to fix the fix?

Matt Benson:
If you talk to the governor's people, they say we can't. That's why they're talking about prop 105 reform and a tax increase. It's interesting the Republicans say they can do it and put forth a plan, but even their plan doesn't close the whole shortfall.

Howard Fischer:
One of the things they're looking at, perhaps short-term borrowing where they say we want to sell buildings off. We want to sell the state prison in Yuma. We can get $70 million for that. It will carry us forward. You can put it together, you can make it happen, but a lot of it is a one-time gimmick that the governor talked about not quite the state of the state, but modified state of the state.

Mike Sunnucks:
A lot of these were the ones the Republicans eschewed when Napolitano was in there. She pushed these things and they scoffed. The real estate market isn't doing that great so I don't know how many buyers that are. And this is a one-time fix. One-time money. What happens next year when the budget isn't going to be much better? That's the governor's argument. We need a longer term.

Howard Fischer:
One of the things with the sale, not only do we get the one-time money, but we believe that private prisons can be operated below what we're spending for housing moderate security inmates.

Ted Simons:
Before we get to the minutiae, one last stimulus item involves taxes and the curious situation where the Barack Obama administration, President Obama's ideas of a tax cut for certain folks means less state revenue in Arizona. Explain, please.

Howard Fischer:
This is one of those wonderful laws of unintended consequences. The federal withholding is based on a schedule in federal law. Arizona, not wanting to be bothered for a schedule for state, we'll make your withholding a percentage of the federal. Guess what? The Obama's tax cuts will be reducing your federal withholding. Guess what? The state withholding goes down too. This doesn't change your state tax liability. But it means from a cash flow, getting back to the current year, we're losing another $70 million between now and June 30th in cash flow. Now, that $70 million will come back in FY '11 when people have to pay their taxes. But we're digging ourselves --

Mike Sunnucks:
Obama's tax credits are geared to middle and low income. I think if you make $200,000 as a couple, you don't get anything. Next year, going to have a tax bill hitting them. That's not going to help consumer spending if folks have to fork over to the department of revenue.

Ted Simons:
Is this something that lawmakers are saying -- is everything down there looked at being changed as federal money is riding over the sunset?

Matt Benson:
It seems like with every bit of the federal money, there's been strings and a hiccup with everything. And we conform every year. I would suspect ultimately they do decide to conform. But as you mention, it's another $70 million.

Mike Sunnucks:
It's interesting we come out with stubborn statements, posturing. There are some that don't want to take the AHCCCS money. It's 1.6-1.7 billion dollars but in the end the capitulate.

Ted Simons:
Let's talk about the idea of securitizing tobacco and lottery and the idea of selling off assets. I seem to remember those ideas coming from the previous governor.

Matt Benson:
Of course, and basically what it comes down to for most of these folks, they're saying a tax increase is their least favorite option. Everything else is better. They securitize tobacco and sell prisons and securitize lottery revenue and do god knows what else before they raise taxes and that's where a good number of these folks are today. Governor Brewer not included.

Ted Simons:
Is there a sizeable difference between the house and senate plans?

Matt Benson:
Within a couple hundred million dollars.

Ted Simons:
It sounds like K-12 gets hammered.

Howard Fischer:
They've got cuts on top of the is $133 million. Is that a large number? Sure, but basic state aid to education is approaching $4 billion. And you've got the question, as a percentage, is it a lot? Yeah. Is it more than most state agencies have taken? No. What they're going to try to do is sell it on the fact that we'll give schools other options to move around money that they get. How much of the millions get back-filled with the federal funds.

Mike Sunnucks:
I think you'll see they do what Michael Crow does did. You're going to have 50 kids in the classroom and we're going to fire teachers and get rid of arts and sports and all of these things and try to call the legislature's bluff on this.

Ted Simons:
Interesting. As far as the governor's idea for a tax increase. Again, supposed to be at the bottom of the list. But are more people at the capitol starting to get more open to this idea or is the door shut?

Matt Benson:
It's difficult to gauge. I'll tell you that the governor's office has had a lot of legislators coming up to her office talking about this, not making a big show of it. But working the crowd behind the scenes. After her folks remain convinced that this Republican plan that has come forward is going to fail, you're going to see people moving in bigger numbers to what the governor wants to do.

Howard Fischer:
She's taken the rhetoric up to another level. She spoke at the Phoenix rotary 100. People who are politically connected. And said, those who think we can do this without a tax increase, you don't understand. I didn't understand before I came on the 9th floor. You cannot do it. You'll harm Arizona for years to come if you do this all with cuts and sweeps and counting on one-time money. You'll hurt the state in ways you can't understand.

Mike Sunnucks:
You haven't seen the external groups get behind this. The business leaders, education folks. And I don't think she's leveraged them yet. A lot stayed on the sidelines. It's going it be a penny, that's the obvious fix. And we haven't seen them get behind it yet and I think she needs to get behind this and get external folks with this.

Ted Simons:
Is she starting to work more with Democrats?

Matt Benson:
Sort of. She did have some up this week so that's sort of starting. But she has to be real careful she's not overtly courting the Democrats because that's going to be perceived negatively by the people in her own caucus.

Ted Simons:
How is that caucus holding up?

Howard Fischer:
This gets them starting to develop. Some things we normally know. You take Carol Avallen what's left of the moderates and she says I'm just a no on this. Their problem is going to be putting together 16 solid votes in the senate for this. There are some people who are going to look at those cuts and say, I'm not cutting public education $400 million, as much as I believe we shouldn't have taxes. And at that point, if they reduce that and start talking taxes or other funding money, then the Ron Gould's of the world fall of the other end.

Mike Sunnucks:
There's tax issues out there. The equalization rate and solar tax credits and the increase. You've got -- she's got to figure out who does she need to horse trade with. Does she protect spending and bring in more moderates and Democrats?

Ted Simons:
The equalization rate, could that be a bargaining chip?

Matt Benson:
I would expect it to be. And it's still out there. The governor said flatly if you're going to do something with the property tax, you better be as part of the budget. I take that as a sign she wants that to be in the mix.

Howard Fischer:
That's interesting, because they would like to send that to her separately and get that behind them and she's said, I've got a little stamp here that Janet left me and if you send it separately without being part of the budget, I get to do my first veto.

Ted Simons:
How is the mood in the senate, considering not a whole heck of a lot is getting done?

Howard Fischer:
The old saying, the idle mind is the devil's playground. They come in and play and pledge and get $35 per diem. The Dems are there for window dressing and they thought by this point, there'd be a FY '10 budget. And thinking what point do they get their bills through. And the house is putting out bills and they're saying when does the senate hear our bills? And there's a frustration level.

Ted Simons:
The rank and file, getting frustrated?

Matt Benson:
I think there's frustration on all sides -- in the house and senate. These are folks you have to remember they were all elected or reelected this past year in November and they made promises to get reelected and they've got bills run for constituents and -- constituents, not just to balance the budget, which is equivalent to keep the lights on. They're expected to balance the budget and something else as well.

Mike Sunnucks:
Anti-abortion folks and anti-immigration folks that would have had a chance to get things through with Brewer up there. On the plus side, we don't have the guns in bars and those types of kooky bills that --

Howard Fischer:
It's coming. Let me assure you.

Ted Simons:
But the fact is we should stipulate the reason the senate isn't hearing anything because the president said nothing is going to get heard until the budget is finalized. That being said, there's a lot of stuff, will be somehow compromised.

Howard Fischer:
When you talk to Kirk Adams in the house, who also managed to come up with numbers, he said, in a slap to Bob Burns, we can walk and chew gum at the same time. Clearly, if there's a desire to get out by June 30th and if we're sitting here on the 27th of March and we're talking two to three more weeks before we get a budget for FY '10, leaving aside fixing the current year budget, you're going to have a horrible rush. Legislation rushed that way is always horrible. Either the stuff dies -- which isn't necessarily a bad idea. If they didn't do anything would be the best that happens.

Ted Simons:
You'll have a bunch of legislation that people will not know what they're looking at. The public input will be limited at best.

Howard Fischer:
Did you say A.I.G.?

Mike Sunnucks:
There's not a lot of transparency. In the end they hold dog and pony hearings. But in the end they hash it out in a smoke-filled room.

Matt Benson:
And the rationale, oh, it's last-minute. It's June 22nd, we don't have time. This year, we've started with the budget and done nothing but budget early from the very beginning of the session, and the process, tell me, is it any more transparent?

Howard Fischer:
It's worse. It used to be -- the appropriations committees would come in and have the department of corrections and build the budget. And the department of commerce and build the budget. And now they say we've had the appropriations hearings, where's the building of the budget? It's all in the office of the president of the senate and the speaker of the house.

Ted Simons:
I want to talk about the voucher system and we're getting short of time here. Will it spur some legislation that could break that particular moratorium in the senate?

Howard Fischer:
The only way to fix that, my belief -- I'm not an attorney, I play one on TV. Constitutional amendment. Which means taking it to the ballot. Here's where it gets interesting. The tax plan that the governor -- she wants to do it as a constitutional amendment. Which is the way you do it mid-election. We're going to the ballot with a constitutional amendment on taxes and maybe or maybe not to fix the prop 105 things, maybe the way to sweeten it is to say, here before the new school year and all of the kids are kicked out of school, we can put this on the ballot.

Mike Sunnucks:
You have the teachers' union backing the -- fighting the vouchers at the same time.

Ted Simons:
Was it a surprise, the court decision?

Mike Sunnucks:
No, I don't think so. I think the state law is pretty clear there. The tax credits are ok, but the vouchers are direct money.

Ted Simons:
Does that mean we see an extra doubled effort on tax credits for private schools?

Mike Sunnucks:
I think they'll try doing that and there's support for that. Both within the conservative base and I think in the business community.

Howard Fischer:
Now we get back to the budget. You make it easier for corporations to divert money from the state treasury into voucher programs. The argument is vouchers cost less -- we're not paying for schools, in the public schools, but you're still diverting money from the treasury.

Ted Simons:
The photo radar got a thumbs up -- was it yesterday or the day before yesterday? Quickly, a little testy down there?

Howard Fischer:
A little testy because you have them saying this is a valuable tool. Whether or not you believe it reduces speeders, we think it reduces accidents. We can go out and catch drunk drivers and human smugglers, and Andy Biggs and Sam crump, the leading foes, are saying it's a private issue. And put through to raise money. The contract we have says they have to pay certain damages for the costs. This bill would abolish it on September 30th, 2010. Two years and 40 days after the contract started.

Ted Simons:
Would it wind up on the governor's desk?

Matt Benson:
It got out of committee. But getting off the house floor and out of the senate, I -- I'm still not sure.

Mike Sunnucks:
You talk to people in the real world, there's a lot of buyer's remorse. At first, people were it makes sense in Scottsdale. But as they see them pop up and getting the tickets, I think people will re-think them.

Matt Benson:
Public polling shows that people are supporting it. The polling I've seen has shown for all of the angry letters and vocal movements to kill it, people in general seem to like it.

Howard Fischer:
And people recognize it has slowed traffic up. Even if it's right around those signs. And that makes a difference.

Mike Sunnucks:
Like Matt said, the key is on those polls, is how you word it. Do you want big government spying on you? Everybody is against that.

Ted Simons:
It was a concern that D.P.S., why would they not want the cameras? If they think they're a good idea, I would think a lot of law and order folks would say ok. It makes an interesting dynamic.

Howard Fischer:
That's the problem. The same people who support the cops also tend to be -- if you want to call them the civil libertarians off the side of the equation there. The Andy Biggs of the world. The buyer's remorse. Not only to raise money but then we found out in January, they have 24/7 video. Wait a second. Where did the video come from?

Ted Simons:
It's not going anywhere. The -- I don't care if Charles Manson escapes and is caught on cameras, they can't use it.

Howard Fischer:
But they can request it as a public records request.

Ted Simons:
It looks like we don't have time for the story up in Cottonwood. Maybe we'll touch on that at a future date if he decides to make a return call.