Governor’s Budget Proposal

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House Appropriations Committee Chairman Rep. John Kavanagh (R-Fountain Hills) and Senator Kyrsten Sinema (D-Phoenix) discuss Governor Jan Brewer’s budget proposal.

Ted Simons: The governor's budget calls for big cuts to the AHCCCS program and to higher education. The plan calls for an increase in corrections spending. And it uses a variety of accounting maneuvers, like another education rollover. Here to talk about the governor's budget proposal is Republican representative John Kavanagh and democratic senator Kyrsten Sinema. Good to have you both here. Thanks for joining us.

Kyrsten Sinema: Good to be here.

Ted Simons: Alright, It's out. We know that the governor has had mind. Your thoughts?

Kyrsten Sinema: Well I think the first things to recognize is this budget is based on an unconstitutional premise. The governor plans to cut $540 million from our AHCCCS program and she's going to ask the federal government for a waiver, but she's not planning to ask the voters for a waiver and that's a problem because they're the one's who passed this law in the first place. It's constitutionally protected and in 2000 when they passed 204, they said we have to provide this care. The bottom line, this is a fake budget with fake numbers.

Ted Simons: Let's get to the waiver in a second, but first of all, your official thoughts.

John Kavanagh: I'm very pleased with the governor's budget. It's fiscally sound budget that takes the cuts necessary to get Arizona through these tough fiscal times and yet protects K-12 education as the governor promised and public safety.

Ted Simons: Governor's budget guide, John Arnold, on last night on this program said there were no contingency cuts if the federal government does not provide the waiver or if the courts say you can't mess with this as the governor and lawmakers want to do. What happens if this thing doesn't go through?

John Kavanagh: Well we're pretty confident we will get the waiver. The Obama administration has been fairly reasonable in the insurance area. A number of private insurance companies and private companies have requested waivers for their insurance programs like McDonald's, and they had them. And they were given the waivers. In addition, we're not the only state seeking relief in these tough times. So I think they're going to give us the flexibility

Kyrsten Sinema: Well, even if the government were to give the waiver, which I don't think will happen because Arizona is no different than the other 49 states in tour country that are dealing with similar budget crisis. But even if we get the waiver, the governor still has to the ask the voters for permission and this is important. Last year, when the governor passed her budget, she had no contingency plan, if the voters fail to give her the money from first things first and growing smarter. Sure enough in November, the voters rejected her request to take the money. She had no contingency plan and we have a deeper budget hole now. The same scenario is happening again.

John Kavanagh: That's absolutely false with respect to going back to the voters. We're going to fully follow prop 204. Prop 204 stated that this money should be spent to expand our Medicaid beyond the additional people who got it. Beyond what 43 states give to people but also said if the tobacco settlement money, which was suppose to provide these funds wasn't enough, then other available funds could be used. The word "available" was in there and there are no funds available.

Kyrsten Sinema: Well and legislative counsel, which is a body made up of legislators just like us, actually published this in 2000 along with the ballot initiative that clearly said in the future, the legislature would not be able to reduce coverage for anyone in Arizona. They knew that we had to keep providing this coverage.

Ted Simons: Is it best for Arizona to fight these eligibility reductions knowing that, if it doesn't go through, it sounds like more cuts are on the way.

Kyrsten Sinema: Well, I think what's important to notice, we have to have a real budget.

Kyrsten Sinema: The problem with Governor Brewer's budget is the same problem we had last year. She bases her total budget on things that are not yet real and may never be real. So the bottom line is this. That $541 million is just a figment of hurt imagination right now. What we need to do is think about how to really solve the budget crisis and come up with commonsense compromises to fill the budget hole.

Ted Simons: Compromises possible here?

John Kavanagh: A common sense compromise from the democrat side of the aisle, with all due respect, is raising taxes here there and everywhere.

Kyrsten Sinema: Not true at all.

Ted Simons: Well, please.

Kyrsten Sinema: Well in fact, I've never supported a tax increase in my now seventh year in the legislature. In fact, I'm opposed one of the tax increases Republicans are offering that would increase homeowner property taxes. Instead, what I've offered and what many Democrats have offered is a plan to close some corporate tax loopholes that allow big corporations and the rich to get away without paying their fair share.

Ted Simons: Is that enough to bridge what will be a $1.15 and counting billion deficit?

Kyrsten Sinema: Absolutely. We have over $10 billion of tax exemptions in our code right now. My suggestion is that we close just a very small minority of those. Like for instance, on liposuctions and spa treatments. But just doing those kind of things can help reduce our deficit.

John Kavanagh: That is a myth. The so-called $10 billion in tax loopholes are not tax loopholes. A loophole is an omission in the law or poor wording that lets someone evade the spirit of the law. The $10 billion that the Democrats have been putting forward for the last two years are intentional omissions from sales tax. It's not taxing manufactured goods parts because when they're sold they're taxed. It's not taxing wholesale transactions because at retail they're taxed. They've literally have taken purposeful tax exemptions and claim they're loopholes and now want to tax them.

Kyrsten Sinema: Well and some of those examples I agree with. We should never tax business-to-business transactions or wholesale goods. But I think most Arizonians would agree that if someone is going to get elective liposuction because they think their thighs are too big, that they probably should pay the same tax I pay when I get a backpack for my niece or nephew to go to school.

Ted Simons: Ok I got to keep it moving here. We got this one-day, this one-time, one-day loan from first things first, 300 and some odd million dollars. Good idea?

Kyrsten Sinema: Well no it's not a good idea. Unfortunately, these kinds of gimmicks that the legislature has been using for some years, really just pushes us down the road and that means our debt is continuing to pile up.

Ted Simons: That, first things first, one-day loan, which is interesting. Also another education rollover in debt to the schools now for a billion dollars--something along these lines -- again, good ideas?

John Kavanagh: Necessary idea. I mean, had we made the cuts two years ago that conservative Republicans wanted to make, we wouldn't be this far in the hole. Now that we're here, now that we're half way through the current year and the federal maintenance of efforts requirements prevent us from going close to educational healthcare, where most of the money is, we have no choice but to get through the last half of this year with these short-term loans.

Kyrsten Sinema: I think the real challenge that we'll face in the future is is legislatures and future legislatures will have to deal with this-- is what happens when we get to 2014 or 2015. When we start our economic recovery, either us or other legislatures will be saddled with more than $2 billion of annual debt and we'll have to figure out how to pay that off.

Ted Simons: Well there also looks to be the idea of reducing corporate income tax and other economic development ideas, what do you see there? Anything that looks vital? Anything that looks good?

Kyrsten Sinema: Well absolutely. I've been a proponent for a long time of reducing corporate property taxes and increasing the exemption on business property tax which is personal property tax, like equipment. The challenge we face, really is how do we do that while also making sure we have enough money to fund the things important to Arizonans. Like education and healthcare. So I think we have to talk about where is that balance? We want to make Arizona more competitive for business; we also want to make sure we have a strong public education system.

John Kavanagh: We raised sales tax by roughly a billion dollars last year, we let an equalization property tax of a quarter of a billion come back. It's time to cut government, not continuing to tax and spend.

Ted Simons: The governor wants line item veto power? What do you think?

John Kavanagh: At this point, I will support it. I probably would have opposed it when I first came to legislature, but seeing how even in good times, even Republicans have difficulty controlling their spending urges, I think we must be restrained and I will support it.

Ted Simons: Who also wants to be able to alter a spending legislation aswell along with the line item veto. What do you think giving the governor that much power?

Kyrsten Sinema: Well the governor has line item veto power. What she's asking for is the ability to do it line item veto later after the budget is done and I would say, respectfully, that's our job and if she wants that to happen, she need to call us back in special session, retain the integrity of separation of powers and work together to make that happen .

Ted Simons: Alright, very good. We will stop it right there. Good discussion. Thanks for joining us, we appreciate it.

Kyrsten Sinema: Thank you.

John Kavanagh:State Representative(R-Fountain Hills);Kyrsten Sinema:State Senator (D-Phoenix);

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