Prop 302 – First Things First

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At the general election in November, Prop 302 will ask voters if they want to continue using tobacco taxes to fund early childhood development and health programs through the voter-approved program known as First Things First. Debating the proposition are Nadine Mathis Basha, a board member for First Things First; and Kevin McCarthy, President of the Arizona Tax Research Association.

Ted Simons: In 2006, voters approved First Things First, which set up an 80-cent a pack tobacco tax to fund health and education programs for preschool children. Last year, that tax raised $135 million . The money is protected from tampering by the lawmakers because it was approved by voters. So lawmakers placed proposition 302 on the ballot, which would scrap programs financed through First Things First, but keep the tobacco tax. Lawmakers would then use the funds for health and human services for children. Here to discuss the pros and cons of prop 302 are Nadine Mathis Basha of the First Things First board, and Kevin McCarthy, president of the Arizona tax research association. Thanks for being here.

Kevin McCarthy : Good to be here.

Ted Simons: Why take this money and move it some place else?

Kevin McCarthy : Ted, if you took a poll at the capitol two years ago, whether or not any policymakers thought this was top of things to do, it wouldn't have been. When this was approved in 2006, Arizona was experienced double-digit growth in revenues and spending was following that. And in 2010 as we sit today, we've experienced almost 40% reductions in general fund revenue at the state level, the worst economic climate since the great depression. So the choices are tough. We've increased taxes $1.2 billion. Cut spending well over a billion and a half and eliminated full-day kindergarten, sold the state capitol. So lawmaker, one of the things they want to do, what are the new programs that have been established that we lived without before we had the runup in spending. This is one of those. Again, it's not a wildly popular idea but it's a program not in existence prior to those, the good days in the middle of the decade.

Ted Simons: Times change? Is it time for this to change?

Mathis Basha: Absolutely not. I think Kevin said, two years ago, if you polled the legislature, none of them would have supported it, a tax increase, but the citizens of Arizona did and for a specific effort and that's helping young children and families and we see this pattern with Arizona voters. 2006, we want to support our children coming to school and be successful. This past May, they supported prop 100 that said schools are important and we need to continue to support that and I believe they have a different set of values then our legislature has. I know we're in a crisis, I couldn't agree more with that, but this isn't about just making raids on this program or another program, which has been the strategy of the legislature. I think they need to be more responsible and looking at this holistically. I'm a just a mom, a grandmother, when I look at my own family budget, what we put our money into is what we value and I see a legislature not focusing, desperately cutting things without doing this, greater holistic look at what we need to do in terms of the tax structure.

Kevin McCarthy : It's overly simplistic standard, to knock state policymakers, whether it's the legislature or the governor. We've had a historic loss in revenue. We can't keep selling the capitol back to ourselves. This initiative, in addition to providing new funding for early childhood programs some which don't stack up on terms of the things being cut, the governor proposed eliminating healthcare for some 300,000 Arizonans, 47,000 children. There's difficult choices being made. Those -- the expenditures in that area, I think, eclipse making grants to county library. But this has decreased the general fund revenues are for the health programs in the general fund. I said it was sloppily done. When you increase tobacco tax by 80% You raid existing tobacco funds so over the last three years, it's decreased receipts and in addition to being a new program, it undermined some of the existing programs funded for healthcare.

Mathis Basha: I don't think that's accurate, actually, and the last month, our revenues went back up. Surprisingly, even in this economy and they did go back up and I don't think that is necessarily accurate and we fund many more things besides a library program which a lot of families and communities really do value. The legislature may not value it. They may not in their hierarchy of need value it. But families do. And again, we acknowledge this is a crisis, we stepped up and said to the legislature, we will make you a $300 million interest-free loan over eight years. It was rejected. The governor liked it and put it in the state of the state budget but the legislature would not even consider it.

Ted Simons: Back to the basics here, though, the voters approved this money to be used for a specific purpose. Why mess with it?

Kevin McCarthy : Well, I think one of the things that I think Nadine would consider is that -- or concede, we're an initiative state and doing ballot box budgeting, it's poor policy and we've been proven right, the handcuffs it puts on policymakers. This is fair game. Making these decisions at a general election ballot has become common place. Special interest group, the people that pedal First Things First, get it in. It's not a unfair argument to say that's not a permanent decision. It's what the legislature simply doing, saying, we'd like for voters of the state to revisit how they think the priorities ought to stack up. Should we continue to fund the things that are being funded in First Things First and eliminate healthcare for 47,000 children in kids care and voters have to make that decision.

Mathis Basha: That's denigrating to the voter. That's saying the voter does not have a clue what they're doing and it's also saying that the people who are so-called pedaling this serve to gain something in a personal way, which is not the case. And I think it's -- this particular initiative was a citizens' lead initiative. It wasn't out of state money in terms of ballot initiatives. That's the thing you commonly hear the legislature say. No, it was a strong bipartisan support effort. For many people in this state and citizen-lead board and citizen-implemented effort if every part of this state. It isn't a top down, one size fits all, the legislature determining what we need as citizens.

Ted Simons: But why not the idea in a in tough time, voters approved this, voters said we want this, why not allow voters to reconsider if it sounds as if -- the voters will, says maybe we should look at this again.

Mathis Basha: We certainly have this mechanism, that's what this is about, isn't it? We're going to the ballot and the voters will rethink this. But we've offered $300 million to the legislature and as I said, the governor liked that idea, put it in her budget and we think that would have been a better way to go, then to completely destroy First Things First, every program, every Ted Simons: outreach we've made, to take the balance and to end it for forever -- forever.

Ted Simons: The idea it's better for lawmakers to have control of money that so far seemed pretty stable and taken care of responsibly, at least from a distance, looks like the reserve fund is in good shape. Why is that a good idea?

Kevin McCarthy : First, Ted, it's not stable at all and earlier comment about it's negatively impacted the general fund, we're talking about actual revenues through fiscal '09. We're not making this up. The other healthcare funds have seen a reduction of $59 million, that's a fact. The legislature has a choice. We still have after prop 100 passed, we have a $1.77 billion structural deficit. We can cut spending another $177 billion or in addition to the 1.2 billion taxes we've increased, we can increase taxes another $1.7 billion. It's a legitimate arm to make at -- that voters ought to consider, do you want it rethink the distribution of the taxes and some of the decisions you've made? The tobacco tax increase you passed in '06, things have changed a lot. It's a different world in 2010 than in 2006 and I think voter, if we think they were smart enough to vote for it and put it, it's legitimate to ask if they think things have changed.

Ted Simons: Last question. If this means saving programs, other programs out of the purview I guess of figure First Things First, the idea being if the 340-some million goes into the general fund, that means saving things, all-day kindergarten and other things?

Mathis Basha: The reason First Things First was created if the first place, the legislatures and legislatures in the past have never supported programs for early childhood health and education. The citizens said we're tired of being 37th in how we rate in education and if we help children, early on, and early screenings and early opportunities to have high-quality early childhood experiences, we can change the outcome for kids. Voters supported that. We don't know where the money will actually good and be used, because they're not -- the legislature is not held to the same standard as we are at First Things First.

Ted Simons: Ok. We have to stop it right there. Thank you both for joining us on "Horizon."

Kevin McCarthy : Appreciate it.

Mathis Basha: Thank you, Ted.

Nadine Mathis Basha:Board member, First Things First;Kevin McCarthy:President, Arizona Tax Research Association;

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