Journalists Roundtable

Local reporters discuss the week’s top stories.

Transcript:

Ted Simons:
Tonight on "Horizon" -- We'll look at the budget proposal state Democrats released this week. There's conflict of interest allegations surrounding tuition tax credit legislation. And some state lawmakers are trying to make sure Arizonans can opt out of a national healthcare plan. That's next, on "Horizon."

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Ted Simons:
Hello, and welcome to "Horizon." I'm Ted Simons. Joining me, Daniel Scarpinato of "The Arizona Daily Star," Mike Sunnucks of "The Business Journal," and Howard Fischer of the Capitol Media Services. Democrats have released their budget proposal. Daniel, this sounds like -- well, we'll get to the efficacy a little bit later. What are they saying?

Daniel Scarpinato:
What they're mostly doing is restoring some cuts from last year and trying to do as few cuts as possible this year. They get there through a series of tax -- tax increases, essentially. Basically, requiring schools to tax people locally more to save the state some money. Expanding the sales tax base statewide to include things that currently aren't taxed but lowering the rate, which they say in the long term will be a more stable tax structure, even in the short term it won't get us out of the hole. Another big one is that cities and towns would for about two years lose revenue they receive from the state which I suspect will be a controversial element.

Ted Simons:
I would say I would imagine they can't be happy.

Mike Sunnucks:
They've opposed this for years. Worried about this when the budget was not as bad. They'll come out hot and heavy. The anti-tax crowds are against this and I think you'll see the business folks against this from the businesses exempted now. Because those folks will have to set up accounting procedures and take into account all of this and the argument is they're going to pass that along to consumers.

Howard Fischer:
And the major taxpayers are having heartburn. I talked to someone who says the school tax that Dan talks about and restoring the property tax, it would cost $30 million. We're not sitting still for this. Now, of course, we'll talk later about why they like the governor's plan.

Ted Simons:
Yeah, we'll talk later about that. But the idea, the sales tax broadening, isn't it the idea you pay more for haircuts but less for cars and washing machines?

Daniel Scarpinato:
Yeah, basically there's things like haircuts and spa memberships and, you know, golf carts and things that people don't pay sales tax on. They're saying for middle class families this will actually be a help because if you buy a car, you're not going to be taxed as much, but they may not use some of these services that others do. The other thing, it will open the door potentially for cities and towns to do the same thing and people will end up paying some higher taxes there potentially as well. The figure of here's how much it's going to cost people may not be completely accurate because we don't know the domino effect.

Mike Sunnucks:
Kind of a robbing Peter to pay Paul. We've got a big deficit. We've got to fill it. Brewer's plan, raise it by a penny, and the Democrats are raising some different taxes and some gets put on the city and some on the K-12. They're trying to raise the same amount of money.

Daniel Scarpinato:
You have to give them credit, because Ken Cheuvront -- they were at a press conference and said we're being honest. Telling people it's going to cost you more and it's -- you're right, it's an issue of where are people going to pay more. What are they going to lose? The Democrats want to retain funding for other services and they're being frank and saying it's going to cost up.

Howard Fischer:
You have to remember that their governor, the one who left us in January, came out with a budget saying we're not going to raise taxes. Just do more accounting gimmicks. And it took the legislative Democrats to say, Janet is gone, we don't have to buy off on that. And it's true, when you've got a deficit on a $10 billion base, you can't do it all with cuts and with stimulus money and do it all with gimmicks.

Ted Simons:
It sounds like there's a lot of removing of exemptions from the sales tax in this as well. Food, included here?

Howard Fischer:
No, there are going to be several exemptions. I think that food is about $450 million in an exemption, but I think everyone recognized after the 1980 voter initiative which forced lawmakers to eventually repeal it, that would create such a firestorm. Medical supplies continue to be exempt and doctors, and wholesale purchases, because the fact is if you're buying something to resell, it's a double tax. But everything else -- lottery tickets, you know, perhaps certain -- even fines and penalties perhaps would be subject to this because the idea is if you buy it, you should pay a tax.

Mike Sunnucks:
We have a $3 billion deficit. We're going to have a bad deficit next year and maybe the next year. We may have to increase the existing tax by a penny and they're arguing about this year's budget but we've got two or three years of really bad budgets.

Howard Fischer:
You can't, that's --

Mike Sunnucks:
Why not? That's what they're paid to do.

Howard Fischer:
You cannot raise the tax rate and expand the number of things you're taxing. If you're going to raise the tax rate by about a penny, maybe raising a billion, depending on the economics, that's one thing. If you're going to expand the base and maybe not take the tax rate down so much, you can still raise a billion, but you cannot do both politically. If you're trying to fill the whole hole with higher taxes, they'll be out of office.

Daniel Scarpinato:
And politically, the Democrats are in power, where this goes, is anyone's guess. But the Republicans' proposals haven't gone anywhere either. So they say this has more support than anything the Republicans put forward.

Ted Simons:
Is this something that the governor will even look at? She's been considering what the Republicans are putting out there. And it doesn't sound like happy times there. Will there be things she can cherry pick?

Daniel Scarpinato:
She told us today that mid week we'd see something from her, next week, a detailed budget proposal of some kind. We'll see if she picks up on the ideas or if they fit in.

Howard Fischer:
I'll tell you what is or isn't going to happen. She wants the sales tax. The Dems hate it. They consider that regressive. They want to expand the base. It's too complex to do between now and putting it on the ballot. What she does like, at least temporarily, is the idea of allowing the suspended property tax to come back. You remember it was suspended in 2006 when we had money -- you do remember that, don't you? It comes back automatically in November unless the legislature acts. The house has passed a bill to say -- I think what the governor will suggest is if you allow it to come back temporarily and then with an automatic repeal, it gives us $250 million right up front and that's a big deal in this kind of deficit.

Daniel Scarpinato:
The Democrats' plan would not need the supermajority or to go to the ballot. There's some opportunities there to do stuff more immediately even if she were to adopt some of these.

Ted Simons:
That was by design, making it revenue neutral.

Mike Sunnucks:
The Republicans still want to pass a budget for this year without a tax increase. The chances of them keeping that together, who knows? And then they'll say to the governor, if you want to put a sales tax on the ballot, you can do it next budget. Go with the Democrats and do that, and we're going to stay with this. And that might be the scenario that works out. Whether they can keep the votes together is dubious.

Daniel Scarpinato:
And they've had several months to send her that and haven't.

Howard Fischer:
We found out this business group is going to be not trying to lobby legislators directly; they're going to have robo-calls and emails. You call your lawmaker and tell them to support the higher taxes and they think somehow that will bring the recalcitrant folks around.

Ted Simons:
The media blitz, who's behind it?

Howard Fischer:
Westmarc, the east valley partnership, is involved, the Phoenix chamber. Salt River project, Arizona public service, the contractors. All groups that have some interest in state spending in a lot of ways or don't like the other proposals. Like A.P.S. saying we don't want to go ahead and raise our own taxes. They figure -- the budget was like a quarter of a million dollars, we can build a lot of pressure. There's a potential problem here. You could end up with a lot of kickback. If you're going to let's say, the district of John McComish in central Phoenix. Why should I do this? In fact, one of the things that the lawmaker John Kavanagh told us, great, let them spend the money here. It will work for me.

Ted Simons:
Daniel, some of the districts targeted, we -- the districts, we've got the president and the speaker, some pretty big names there. Is this something that could work or the governor's office saying I'm here?

Daniel Scarpinato:
Well, I had one lawmaker told me this means war. I guess it depends on what the message is. We don't really know what the message is yet. And they say we are going to be telling people, tell your lawmaker to support a balanced budget. Well, ok. Great, what does that mean? And does this coincide with whatever she's releasing? So there's a lot of unknowns. I think we've got to see what rolls out next week when people start getting these calls.

Mike Sunnucks:
These are the same groups that backed the penny increase to put to toward roads and these are the people who think we don't have enough right now in transportation and education and they're worried about devastating those programs. They have the mentality we need to invest more. They are the moderate wing of the business community and I think one merit they have is Brewer's plan is straightforward, like Howie said. It's simple. You don't need beauty parlors and stuff figure out how to take care of their taxes and you can bring in money right away. The big problem, they promise a billion dollars. We don't know. The revenue picture is so bad right now and consumer spending is down, I don't know that the projections that anyone is coming up with are going to come through.

Ted Simons:
Has she given up working with leadership?

Howard Fischer:
She told me that we've reached, quote, a stalemate. She said I'm going to continue to work with them. But part of the problem is her own fault. She wanted to -- she came up with the five-point plan. I won't call it a plan. It's sort of a generic here's some guideposts and the lawmakers say this is frustrating. The one thing we had with Janet Napolitano is we knew where we stood.

Ted Simons:
That's bizarre. The good old days.

Howard Fischer:
The good old days. Jan has been generic.

Mike Sunnucks:
The mentality is it's a one-month, two-week session. They're waiting for the end game. They wait to the end and try to push something through at the last session and the rest of it, we've been sitting here only working on the budget and there's no real big ideas out there.

Daniel Scarpinato:
I think that's a good point, number one, you have a governor who didn't know she was going to be governor until December. So she had to put this together and I think that people understand that. The other element is, you know, I think that her staff realized that this doesn't coalesce to the very end and you can do all of this, when everybody is saying fix the budget, but whether or not you have the political will in the legislature to do something until the threat of a government shutdown is another story.

Mike Sunnucks:
The big disconnect, Brewer is looking at three or five years of projected really bad deficits and the folks at the legislature are just trying to get through the year. They're moving money around and looking for places to take money from. And I think the governor is looking more long term and saying we need a lot of revenue.

Howard Fischer:
But the legislature to their credit is saying government has grown faster than inflation and population growth. It has. Janet Napolitano never met a spending problem she didn't like. Full-day kindergarten is nice. But government grew at twice the rate of inflation and population growth. The lawmakers are saying we need to bring this back down to normal and not count on the boom years to be our example.

Ted Simons:
If this does get on the ballot -- let's take a look and speculate here. What happened in California? Do you think that happens in Arizona?

Mike Sunnucks:
California's been a mess for a long time. They have all of these automatic increases and have no control over their spending. We're approaching that. There's a big anti-tax wing in our voter base here. You ask consumers to tax themselves while we've given tax breaks to businesses and manufacturers and movie studios? I think they'd have a hard time passing.

Ted Simons:
California impact on an Arizona vote?

Daniel Scarpinato:
Not necessarily. People realize we are a low-tax state. California has a large tax burden and less confidence there. Rather than here where people are not paying a lot in taxes. Businesses are, but individuals not as much as California.

Howard Fischer:
Where do -- wait until the Democrats come out. Let's assume it comes on the November ballot. The Democrats don't want to ruin the education system. And recognize this is the only game in town. Or take the position they have so far, which is to say, sales taxes affect poor people, we want something different and essentially blow the system up. And since democrats are a third of the registered population, that can be a difference.

Mike Sunnucks:
The temporary --

Howard Fischer:
Four, maybe.

Mike Sunnucks:
Gives a little more credibility. The in California, the tax increase is forever. In Arizona, from a Republican governor, probably be temporary. I don't see you'll see a push for that. Money is a big thing. Teacher's unions put a lot of money behind it. The anti-tax groups don't have a lot of cash, usually. And the other side would be mute.

Daniel Scarpinato:
A lot of tea parties, I would suspect.

Ted Simons:
Let's move on. We had a tax credit bill signed by the governor. Done deal. Two ways for corporations to help regarding -- they're not vouchers, Howie. Tax credits.

Howard Fischer:
Exactly and that's the point. We've had them since 1996. The idea is that we want to in the name of school choice; we want to help parents to help their children. It's not a deduction. I give a thousand to this organization and the government gives me thousand off my taxes. It doesn't cost me anything. It's a great little -- excuse me the term, scam, but that's what it is. The Supreme Court upheld it. The dollar never got in the treasury, it didn't count. We had a voucher established back in 1996 for special needs and children in foster care. The Supreme Court struck that down and said its direct aid. They're doing another tax credit, this time for corporations and insurance companies to get them to donate dollar for dollar to help the kids.

Ted Simons:
There was controversy regarding conflict of interest. Possibly two lawmakers but the idea of changing the law thereafter.

Daniel Scarpinato:
There was a whole debate. The lawmaker who's been the champion, Steve Yarbrough, runs an organization that administers this and he receives a salary through and there's other things that are going on in terms of he has a processing group and is getting paid through that and he owns a building and they pay rent. So Democrats made an issue out of this. And then Republicans came back and said some of the Democrats making an issue are advocating for state funding that is going to non-profits that they collect salaries from and in some cases run. So the Republicans charge that this was hypocrisy and what made it more interesting, one of those Democrats sponsored an amendment to try to stop Steve Yarbrough from collecting his salary and the Republicans said you opened the door for this criticism by doing the same thing yourself.

Mike Sunnucks:
I think the Democrats would be much better served to focus on -- we have all of these cuts to K-12. That's a lot of people you're impacting and we hold this special session for a few tax credits for these things. And this school choice, which is more of a conservative cause. We've got all of these problems with our K-12 and universities and this is whether the Republicans choose to --

Howard Fischer:
There's a real issue going on here. We had the "citizen legislature." You would come down to the capital and leave your plow at home and --

Mike Sunnucks:
They still do that.

Howard Fischer:
And go back to your work. Well, ok, it's 2009. They're in session for six months, maybe longer this year. They have special sessions the rest of the year. You're going to have conflict, so you have to make a decision. Are lawyers going to be able to vote on lawyer bills and doctors and doctor's wives and all of that stuff?

Daniel Scarpinato:
And teachers on teacher's salaries.

Howard Fischer:
If you're a city employee, you can't be a legislator. If you're a teacher, you can. You can serve on the -- be on the school board and serve on the legislature.

Mike Sunnucks:
They seem to get off track and have these ideological and because it's Republicans they tend to be on the right, the causes they focus on, while we're having a financial meltdown.

Daniel Scarpinato:
This debate got very intense. You actually had lawmakers on the verge of tears debating over this issue because I think it was very difficult politically for the Democrats to argue against it when you have people with handicapped children coming to committee hearings and telling them they have to go back to a school that they didn't feel served their children. The emotions got high and personal and not sure there was an easy way to argue against it. Even on the issue of gutting K-12. In some ways, it may be neutral. It's not clear.

Ted Simons:
If there were a legal challenge to this, it would open the door for all sorts of other tax credits we thought -- these ideas were already decided by the courts.

Howard Fischer:
I'm sure there will be a legal challenge, but it's been decided. Our state Supreme Court has upheld this kind of credit. The fact this goes to a specific group of kids.

Ted Simons:
They keep saying it's a donation, but it's not really a donation.

Howard Fischer:
Of course, it's not. But neither was the one formed in 1996 which the state Supreme Court upheld. The Supreme Court recognizes they recognized that this is -- this is a voucher without calling it a voucher. But they tortured their little logic and decided because that dollar never went through the treasury, it's still a donation. Obviously, you're torturing it, sure.

Ted Simons:
It's interesting to see that -- I don't know, I just think it would be interesting to see that handled again and if it were and something different came out, how much the other tax degrees --

Howard Fischer:
Our tax courts have upheld this. This is -- there's an active case in federal court over issues of aid to schools and it's been upheld the ability to challenge existing --

Mike Sunnucks:
It's another two decades of education-related lawsuits. That's the way we do things here.

Ted Simons:
We didn't get a chance to talk about Jim Peterson and -- running for governor. And the guy in Tucson.

Daniel Scarpinato:
David Bradley.

Ted Simons:
Wants to run for -- maybe we'll hit that up next week. Thanks, guys.

Howard Fischer:
I thought you were going to run for governor.

Ted Simons:
"Horizon" takes a break as I consider my gubernatorial campaign. We'll be back Friday with another edition of The Journalists' Roundtable. That's it for now. I'm Ted Simons. You have a great weekend.

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