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Former state legislators, Pete Rios and Stan Barnes discuss the politics and policy at stake as lawmakers rush to rush to pass a balanced budget before the end of the fiscal year.

Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. Another setback today as lawmakers try to pass a state budget before the end of the fiscal year. The senate rules committee voted against a bill calling for a public vote on a temporary sales tax increase. That's a key part of a budget agreement between legislative leaders and the governor. So lawmakers spent the day regrouping and bracing for the growing possibility of a new fiscal year without a new budget. Mike Sauceda reports.
Video: Like to speak to your amendment.
Video: Mr. chairman, thank you.
Mike Sauceda: A recent hearing of house appropriations committee, the committee that works on the budget. The budget isn't doing so well right now at the Capitol.
Kyrsten Sinema: Last night, the senate education committee passed all the trailer bills through their committee and stopped last night without continuing the budget process presumably because they didn't have the votes. This morning, they took those bills to the rules committee and the sales tax referendum failed in the rules committee. So right now, there's no -- in the rules committee.
John Kavanagh: The ball's in the senate and it's been fumbled. The budget couldn't get out of appropriations without a tax referral and sent it to another committee and it went to rules and 5-1 with only the senate president voting for it.
Mike Sauceda: Kavanagh says the increase may still live.
John Kavanagh: If a sufficient number of fiscally conservative measures were put on, it's possible to get the votes. But the problem is if you -- to get those fiscally conservative votes on, you risk losing people to the left. So it's a very complicated game we play here.
Mike Sauceda: A sales tax increase the governor wants is one thing lawmakers are stuck on.
Kyrsten Sinema: The second sticking point is the so-called flat tax which was dreamed up by speaker Adams and President Burns. It lowered taxes for the wealthy but it increases taxes for middle income wage earners and greatly increases the burden on small businesses and I think that was an unintended consequence. I don't think folks intended that to happen and there's really opposition to both of those points.
John Kavanagh: Flat tax is moving forward with some changes. There were major problems for small businesses because they couldn't count the money that they use for their health plans and retirements and there's been a last-minute change. They're going to use the federally adjusted gross for the basis of the tax and that resolved the issues.
Mike Sauceda: Sinema thinks that if Napolitano were still governor we would already have a budget.
Kyrsten Sinema: Of course we would already have a budget. One, Governor Brewer waited until the last minute to wade into this. We called upon her, bipartisan, called upon her for months to put forward a budget proposal and sit down and negotiate and she refused to do so. That left the House and Senate Republicans to move forward with their own budget. Once they had their own budget, they lost interest in negotiating with her. And she hasn't been willing to negotiate in a bipartisan manner which we know Napolitano was adept at doing. If Napolitano were here, we would have a budget last week at the latest and we would be gone by now.
Mike Sauceda: Lawmakers are prepared in case the budget fails today with a stopgap measure that would fund government for 30 days.
John Kavanagh: One has been prepared, but never underestimate the ability of something to be patched together. I would not write off the possibility that we'll have a budget around midnight with some last-minute concessions.
Ted Simons: Joining me is Pinal county supervisor Pete Rios, a former state lawmaker who was senate president in the early '90s when Arizona was facing a government shutdown. And political consultant Stan Barnes of Copper State Consulting, also a former state legislator. Thank you both for joining us on "Horizon."
Guests: Thank you for having me.
Ted Simons: Stan, start with you. I keep hearing, this is the strangest session ever. Do you agree?
Stan Barnes: Yeah, I laugh because all you can do is laugh. I've seen 20 sessions since I was elected 20 years ago when I was a young man and there's nothing like it. Everything is in a little range for 20 years and this session is way off. It's different for all kinds of reasons. It's hard to put your arms around it. But it's to the wire and we're so far apart on the spending appropriations and how important that is. So far between the governor and the legislature, and the surprise of the whole session is that a Republican governor and a Republican legislature could not get it done together, or at least at the moment of this show couldn't get it done. We still have a few hours left in the fiscal year. Why rush it?
Ted Simons: You've been around the block, Pete. Is this as unusual as you've seen?
Pete Rios: It is. If the consequences weren't as serious, I would find this laughable. It's for me, a little shop of horrors. When I open the newspaper in the morning or turn on the radio, I don't know what I'm going to hear about this particular legislative body is doing. Guns in bars, guns in schools, firecrackers in the forest. Being able to brandish a firearm at somebody. It's just totally out of control.
Stan Barnes: We're having a very important debate, that is in a contraction of epic proportions in our lifetime, the state's revenues have gone down dramatically. What are we going to do? Governor Brewer has said a combination of cuts and a new billion dollar tax increase. That was a brave thing to say for a brand new governor. The Republican legislature, almost to the person says everything but the tax increase. And that's where we're hung up. It's -- it's people acting in their sincere belief that either government needs to shrink while the economy is shrinking or needs more revenue to staff the demand that the shrinking economy places on state government.
Ted Simons: With that in mind, what happened to the art of the deal? The concept of compromising, working, you lose a little, gain a little, move on.
Stan Barnes: This is where it hurts the most for me as a Republican partisan. I think the party is shooting itself in the foot. It doesn't matter who you blame. Everyone has someone to blame but I think the voters are going to say that when Democrats rightly say the Republicans can't manage the government, it's a hard refrain to defeat. It's a bad time for Republicans right now, that's for sure.
Ted Simons: And Pete, as far as Democrats are concerned, where have they been? Why are they not more a part of this process?
Pete Rios: It's unfortunate that they've been totally locked out. I've asked the governor personally to please engage the Democrats. Bring them to the table early on. Make them part of the process. You're going to need their votes at the end. And what typically happens is you don't bring the other party to the table at the end, you come up with a package, a deal, then you want the minority party to support it, well, they're not going to come on board if they were not part of the process. And I checked with three or four legislators today and asked if they were going to support the governor's penny increase on the retail tax and all indicated no. Especially if it's linked now to a flat tax. That they find, you know, horrendous.
Ted Simons: Would we have gotten to that level if Democrats have been a little cosier with the governor when she originally talked to them? I know she didn't negotiate with them, but there were talks. Should they have been a little more receptive, accept a quick no and loud no?
Pete Rios: From what I understand from democratic leadership in both the house and senate, they initiated the first contacts with the governor to go up to the ninth floor and meet with Governor Jan Brewer, let her know they were available to help. That there were things they were looking for. And the governor told them, yes, I'll keep that in mind and we hope we can work together but that never materialized. I think the Democrats did make themselves available to the governor.
Ted Simons: As far as this interparty fighting with Republicans, does that -- is that almost more contentious than what we saw in recent years with legislature, Republican led, and a governor, a democrat? Those were rough years but this seems especially contentious.
Stan Barnes: It is akin to some kind of family betrayal. No one knows who is betraying who. But because the governor and the legislative majority are the same party, it makes it more difficult. And there's all of the normal pressures on this thing. It's important for the viewers to understand that the government is about, oh, a third down on its revenue. The revenues have fallen through the floor. And a great many of the Republican majority don't want to raise taxes in that environment. Yet they're spreading fewer dollars around a bigger state problem and trying to do it at their level sincere best but you can't spin straw into gold. There have to be tough decisions made. The Republicans in the majority, in the legislature did pass a budget. It famously was not transmitted to the governor. She went to the court and said send it to me so she could veto it. That act has played itself out. As we do the show tonight, it's the only thing that's real and ready to be signed by the governor to keep the government open tomorrow and into July and the next fiscal year.
Ted Simons: That strategy of passing the budget and holding on to it, your thoughts?
Pete Rios: Well, it typically -- you can play games. When I was president of the senate, Jane Hull was speaker of the house and I would third read some of their bills and depends on how you read the message and typically, the secretary will record the action and transmit the bill to the house. What I did with about 20 or 30 of the bills, said the secretary will record the action and, period. So the bills were never transmitted so people that thought their bills had gotten through the senate, took them about another six weeks before they found out.
Pete Rios: There's a lot of parliament procedure games you can play. In respect to what's happening now and the Republicans not transmitting the bill, clearly their strategy is to corner the governor, send her this bill at the 11th hour and force her to sign it. I don't think she will sign it.

Stan Barnes: I don't agree that was their strategy upfront. I think they wanted to get into the proper negotiating strategy or position with the governor. When they passed it originally, I don't think it was to hold it to the end. In due respect to them. But I do think until they did something, the governor said this is the way I want it and they couldn't refrain back and when they finally put up a budget, it ended up being so late in the game, then it became prudent to hold it and see if they could negotiate a new deal. Now it's the only thing alive and it may rescue the state. That is the point I'm trying to make.
Pete Rios: It went from bad to worse. [Laughter] The initial strategy.
Ted Simons: And the question would be if you're not going to send it over, and you're using it as a negotiating tactic or ploy, why pass it in the first place?
Stan Barnes: Well, because it was possible to be done and that's -- in political parlance, that's everything. If it weren't for that budget, then we would have nothing today and nothing is the abyss. The fiscal year threat is -- has been the gun that's prevented us from doing what California does -- spin around in limbo and issue I.O.U.'s. It's the great unknown, the fiscal year, and it still paralyzes us. I'm hoping we don't cross it. Once we do, we'll end California style and that's bad.
Ted Simons: The concept is that something is better than nothing. Do you think this particular something has enough to get out of the house and senate?
Pete Rios: The governor has an option, I mean, if they pass this current existing bill they voted on June 4th, the governor can line item veto all of that stuff she doesn't like, approve the budget and then call them back in special session. That's one way to get out of it. The second one, of course, is a continuing resolution. Whether it be week by week, month by month, that buys you time. And then the third option available is you prepare for shutting down state government, only allow essential services, public safety, prisons, and I think if that happens, you're going to see a major turnover in the legislature in the next election.
Stan Barnes: We're in an unknown space. Assuming for a moment that the legislature tonight cannot do anything else, the only thing that's alive is the June 4th budget. If that is put up to Governor Brewer, it's all on her plate and it -- it's going to -- it's going to prove the mettle. It takes a lot of courage to be governor. You're going to make a lot of people mad, you have to make a lot of tough decisions. She could decide to veto the whole thing and close down government because she thinks that's the right thing to do and you have to break eggs before you make an omelet, or she's going to sign it, or ignore it and let it become law without her signature and rail against it and point the finger at the legislature for getting it wrong and immediately call them back in. But the hammer is gone at that point. There's no hammer, no abyss, no ledge to go into the unknown. What happens then? Then you can speculate it takes a coalition to make things happen and that's complicated, difficult, even under the best of circumstances.
Ted Simons: Are we hearing that she's starting to work now with Democrats?
Stan Barnes: It's a good point. As of late today, in fact, 2:30 this afternoon, the governor went to the state house and sat in speaker Adams' office and the democratic lawmakers, they opened the door and there's the governor of the state of Arizona saying welcome. And they've had discussions, but gone nowhere. However, that's not surprising to me. Although I give everyone points for trying to see what's possible. But Democrats are being asked to do a lot and they want a lot for that, because the budget as crafted, the deal as crafted does not reflect their values and they'd like to reopen it and do a lot and there's not a lot of time left.
Pete Rios: Ted, I wouldn't use the word that the governor is working with the Democrats. The governor is talking to Democrats to see if she can get them to support her tax on the resale tax and that's what I mentioned earlier. If you didn't bring them into the process early enough and now you say here's the package but I need your vote on this, it's not going to happen. Especially when you're now counterbalancing the penny tax on the resale against a flat tax. That doesn't work. The flat tax is devastating to the elderly and to many lower income people. They're not going to go for it.
Stan Barnes: In the midst of this, doesn't surprise your viewers that there's politics involved and the democratic party to their credit believe they're making strides with the electorate that's paying attention. And in the small bubble of the capitol there is a total system dailure. In the senate rules committee, which is governed by the leadership of the senate, the most stalwart couldn't find the votes to forward the package to the floor, there was in political terms kind of a chaos that broke out. It's the worst kind of Republican infighting, the worst kind of insurrection and so it's an interesting phenomenon to see. It doesn't happen in Arizona politics.
Ted Simons: Quote from Ron Gould - "This is open rebellion in the GOP,x it's a fight for the heart and soul of the party." Have the speaker and the president, have they lost control?
Stan Barnes: Well, in a manner of speaking, yes, but it's not their fault. You can say it this way. You can say it this way. You can take a horse to water but can't make it drink. You can call the house to order but can't make it think. Is the way the joke's played. There's no functioning majority. How's that? No functioning majority and no rallying point. The speaker and president have done fantastic work and they've done it with style and with a certain amount of grace, but members are independent contractors and they can do what they want to do. And Ron Gould is right. Senator Gould from Mohave county is right. What it's going to mean to electorate. And happens to be playing out using the state budget and fiscal year end and all of that danger as the football to kick around.
Ted Simons: As a former senate president, switch around. We'll do the inverse. Let's say the Democrats were in control and had a democratic governor and this whole thing was playing out on that side of the aisle. What do you do? How do you get your troops in is line when the rank and file is starting to spread all over the place?
Pete Rios: And it's difficult to control rank-and-file members these days and it's different from what it was 20 years ago. Back then, you had leadership that was very well respected. You had the Stan Turleys of the world and the art Hamiltons and those leaderships that could work with people and they knew how to wheel and deal and how to cut deals. You really don't have that expertise anymore because of term limits and I think what we're going through today is a result of a loss of institutional memory and experience on how to work the process. So if it was the Democrats in control, yeah, we might be going through the same problem. When Governor Napolitano was here, we weren't in control in either chamber, but in reality, we were. Because of the Democrats with the few moderate Republicans decided with the governor decided what the budget was going to look like.
Ted Simons: You mentioned the term moderate Republicans. I know they're out there and they exist, but from what I hear, becoming a diminishing breed. How do they play in this and the political future of folks? We're talking about a referendum, not even a tax vote. Allowing the voters to vote and that's become a contentious issue. What happens to moderate Republicans?
Stan Barnes: That's part of the drama that's happening to my party. They're trying to find a voice and place. The party needs a moderate wing to be a majority party yet the conservative wing of the party hasn't figured that out. It seems that's what the Republican party goes through. Like a constant fight. But the conservative wing has so dominated the game, that in the legislature today, there's few what you call moderate legislators. Those same legislators you could call swing voters, swing legislators and so they're in the house -- for instance, there's 60 members and there's 35 Republicans. And I don't know how many moderates there are, but far and away, most of the 35 want no new tax to solve the problem. Far and away, most of our democratic friends would like to see more revenue raised and there's a sliver in the middle that are trying to make the right pragmatic decision and can't figure out how to play the cards given the variables and that's the way self-government plays itself out.
Ted Simons: And from the democratic side, is there a middle area that just seems a bit of a wasteland right now?
Pete Rios: Right now, I think it's a free for all and people are trying to push through legislation they haven't been able to get through in a long time and we're looking at legislation that basically drains or cuts the revenue stream to the general fund. We're looking at the school equalization tax. They're going to do away with it completely. $250 million. We're looking at the flat tax they want to impose. There's been projections if that comes into being, we will lose as the state of Arizona, $1.5 billion. There's a lot of issues, we're looking at reclassifying property for big businesses, from 22% on a gradual slope down to 10%, same as residential. We'll lose all kinds of resources and that tax burden will be shifted to the homeowner. So I think Democrats are trying to address those issues that we can't be given -- giving away the store when we're in the middle of a tornado right now.
Ted Simons: By way of the electorate. People voted into office, these folks have made it to office. You know, ostensibly, representational, the people they represent like the idea. Lower taxes, help business, get the economy going. You -- everything you mentioned, the other side will say, hey, that has to be done because we've got to pick the economy up off the mat.
Pete Rios: But on the flip side of the coin, those are the same people saying, hey, we need more highways, better services, we need more law enforcement and better healthcare and better quality education. So you can't reduce as much as the Republicans are reducing and keep the quality of service that people in the state of Arizona are used to.
Ted Simons: Stan, and I've heard this argument as well from Democrats, that not being able to be a part of the process, no negotiations, barely a talk, that there's disenfranchisement of an untold number of people who voted for democrats to represent them. They're not being represented. Is that a valid argument?
Stan Barnes: It's a fun political argument but not a valid argument. When my friend senator Rios was the Senate President, the Republican minority was certainly disenfranchised and he put them in the corner and told them to be quiet, honestly. That's the way it felt, anyway. [Laughter] When the majority party is the majority party, that's the way it is. The people elected one party as the majority. That's not perfect but it's served us well in the past. So its not a valid argument. However, to senator Rios' point. When all of a sudden those votes are needed to make a majority. The tables have turned and relationships are important and these relationships have been strained so badly, there's a lot of scar tissue at the capitol.
Ted Simons: We have to stop it right there. Great discussion. That you for joining us on "Horizon." Tomorrow on "Horizon" -- Plans for a low-cost college education. The latest on the state budget, and the start of a new fiscal year. And how federal stimulus dollars are creating jobs and making Arizona homes more energy efficient. That's Wednesday at 7:00 on "Horizon." That's it for now. I'm Ted Simons. Thanks so much for joining us. You have a great evening.

Pete Rios: Former state legislator;Stan Barnes:Former state legislator;

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