Legislative Update

April 1, 2009

Transcript:

Ted Simons:
Good evening and welcome to "Horizon." I'm Ted Simons. This week, state lawmakers were updated on the state's financial situation. And Democrats released their proposal for the 2010 state budget. Here to tell us more is Jim Small, a reporter for the Arizona Capitol Times. Good to see you again. Thanks for joining us.

Jim Small:
Thanks for having me, Ted.

Ted Simons:
All right -- state of the budget, latest numbers. What are they hearing? What's getting crunched down there?

Jim Small:
Well, let's go ahead and start with the state of the Arizona economy right now. Lawmakers were given an update by the finance advisory committee, which is a group of economists employed by both the legislature and outside firms who do work for them. And the news is not good. Arizona's economy is continuing to slip. Revenues are down. Tax collections are down big time. Sales tax, income tax, corporate taxes, all of them are down. There really isn't a whole lot of light at the end of the tunnel right now. Everyone is looking at where the bottom of the housing market will be. When that turns around, it's going to pick up the tax collections and it's a waiting game to see when that's going to be.

Ted Simons:
It sounds like the numbers aren't just falling but are accelerating as they fall, correct?

Jim Small:
I think the numbers did show that. Sales taxes were down a lot more than people expected, and these are down from the revised figures they made in January when they passed a budget fix. So things are significantly worse than was expected.

Ted Simons:
Reactions from lawmakers, what are you hearing down there?

Jim Small:
At this point, you grin and bear it. Hearing bad economic news is not anything new for lawmakers now. It's been over a year, well over a year, since revenues exceeded projections so at this point you're hunkering down and looking at the budget and what needs to be done and trying to make sure the state is in a better fiscal situation down the road.

Ted Simons:
I want to get to the Democrat's budget plan in a second here, but before we do; with these numbers, with this information, and the governor coming out and saying a tax is needed, is that idea starting to permeate more through the House and Senate?

Jim Small:
We've been hearing more lawmakers who have been warming up to the idea. I talked to a couple of Republicans, even, who said these numbers are so bad and things are not getting better. We need to generate extra revenue. We're not going to be able to do this through cutting. We saw a Republican plan released last week that was $600 million short and that was all of the cuts and funds sweep that the Republican leaderships were comfortable with doing. That's not to say that rank and file supports all of them. There's a number of cuts, you can throw a dart at the book and hit a cut that some Republican has a problem with for one reason or the other. You're trying to get blood from a stone here and there's not a lot of fat left to cut.

Ted Simons:
Let's talk about the Democrats' plan. First of all, were there any surprises involved at all?

Jim Small:
Well, I think seeing how much tax revenue, new tax revenue they were looking to generate was a bit of a surprise. Up to this point, they'd been largely silent on the issue of taxes. They weren't in favor of a sales tax increase and said they wanted to do tax reform but didn't know what that was. All said, they're looking at a billion dollars of new revenue, a lot of it through taxes, and either rolling back income tax cuts from a few years ago for the most wealthy Arizonans to adding a tax onto utilities for any energy generated using natural gas or coal or fossil fuel, adding a tenth of a cent tax onto that and trying to use that money to balance the budget.

Ted Simons:
So we had an increase in taxes, the idea was there. Suspending tax credits, that idea obviously there. Compare and contrast what the Democrats offered with what the Republicans offered last week and what we're hearing out of the governor's office.

Jim Small:
The Republican plan last week, totaled cuts and sweeps, was about $1.1 billion, $1.2 billion. They didn't have any tax component to it. And there was some minimal revenue generation, but it was basically cutting and federal stimulus. The Democrat plan was federal stimulus, a little bit of cutting, probably half of what the Republicans proposed and raising a significant amount of money through taxes. If you look at what Governor Brewer told lawmakers last month when she addressed a joint session of the legislature, she said she wanted a billion dollars in tax revenue, a billion dollars in cuts, and the rest of it taken care of with the stimulus package. Well, the billion dollars in tax revenue is certainly what the Democrats did, and the Democrats also, with their $440 million in cuts they were proposing, you add that to what was done in January, that $600 million, you're looking at a little more than a billion dollars there and some look at that and say, they seem to be a lot closer to what the governor is proposing than the Republicans and at the same time, the devil is in the details and there's no guarantee that the Republicans are going to vote for a number of tax things in the Democrats' plan, including suspending tax credits for private schools.

Ted Simons:
It's interesting, just the idea that the governor would be closer to the Democrats' plan as opposed to the Republicans' plan. What does that do to the dynamic down there? Is the governor working better or more with Democrats these days?

Jim Small:
Well, that's tough to say. She is definitely -- her staff is meeting with Democrat leaders on a weekly basis. They plan on meeting on a weekly basis from here on out. Republican legislative leaders are also meeting with Democrats in the House. They just started doing that this week and anticipate more meetings and getting people to the table and I think that's the -- the important thing here is now all of the people involved are meeting together and talk together and the Republicans are talking with the governor's office and the Democrats and everyone is going to have a chance to get their ideas out there. When you're trying to solve a situation like this, I don't think there's many at the capitol who would disagree that you need as many ideas as possible.

Ted Simons:
It was interesting, we had a hall of fame quarterback down at the capitol talking about cuts to newborn testing for diseases that could be treatable but need to be diagnosed early. That particular program on the chopping block. Is it a daily occurrence down there now where a group or someone of renown shows up and says don't do it?

Jim Small:
There's been a never-ending parade of advocacy groups saying these cuts, they're going to be devastating to X, Y, Z program for whatever reason and that's the world we have to live in down there at the capitol. They are talking about making serious cuts. They've already made serious cuts to a lot of programs and until the budget situation is resolved, that's in the cards from here on out.

Ted Simons:
Thanks Jim, we appreciate it.

Jim Small:
Thanks, Ted.