State Budget: Impact on Counties and Cities

April 7, 2011

Transcript:

Ted Simons: Did state lawmakers pass a budget without raising taxes or did they simply pass the buck to local governments? Some Arizona counties fear they may have to raise taxes because the budget forces them to pay for a larger share of state services. Here to talk about the impact of the budget on counties and cities is Navajo County Supervisor David Tenney, who serves as president of the county of supervisor association and Jay Tibshraeny, the mayor of Chandler, and a former state legislator. Good to see you both here. Thanks for joining us.

Jay Tibshraeny: Thank you.

David Tenney: Glad to be here.

Ted Simons: Dave let's start with you. Some are seeing a trend here with funding state agencies with county funds. Is that what's going on here?

David Tenney: Yes. Actually, it is. The trend started a few years ago when the state started taking HURF money from cities and counties to fund DPS. And we've seen that grow and grow to where now we're funding DPS, we're funding now motor vehicle division, the state hospital, and the department of corrections is on the horizon as well. Absolutely, it's a growing trend.

Ted Simons: When you mentioned HURF, that stands for?

David Tenney: Highway user revenue fees.

Ted Simons: You were in the legislature not too long ago. This seems to be a growing trend as so David says, was that going on, was that discussed when you were down there?

Jay Tibshraeny: A little of it was, but it was supposed to be short-term, but this year we saw a tremendous expansion of what they take from cities and counties. We saw -- at least for the cities and towns across this state, they're taking now 40 million in HURF, versus maybe 12 or 13 million last year. And they're taking another 7 million for DWR, where we have to actually write checks. So we're seeing the cities and towns across the state, $47 million that the state is now taking to run their agencies.

Ted Simons: Is there an agreement, what is the deal on this? Can the state obviously the state thinks it can do this, it's doing this, but is there some sort of agreement that suggests this isn't the right thing to do?

Jay Tibshraeny: There is no agreement with the state. We and I especially coming from the last eight years, I understand the magnitude of the problem, but I don't think they're getting any closer to addressing it. If you continue to balance your state budget by taking city and county funds, you're not balancing the budget. You're just pushing that problem on to counties and to cities. And so we've liked to see agreement, because they have a fundamental problem down there. Their expenses exceed their revenues, and right now they're not using gimmicks in their opinion, but they are when they take our money to balance it. And that has to change, because that's not a balanced budget.

Ted Simons: When you hear lawmakers say no gimmicks here, this is a straight honest balanced budget, what do you think about that?

David Tenney: Actually, it makes me smile. I've testified as such in both the house and the senate appropriation hearings. I submit that there is no difference between a transfer and a gimmick, and that's what they've done. It's just a gimmick they've used to balance their budget, but they tout it as having balanced it, but not without taking $93 million this year from counties. In addition to the 40 some odd Jay says they took from cities.

Ted Simons: Your quote was mentioning the conservative nature of the legislature, there's nothing conservative about putting the state in black by shifting the red into counties. What kind of reaction did you get?

David Tenney: Well, oddly enough, people say they agree, but then they go ahead and do it anyway. And I'm speaking predominantly to a conservative group, I knew it would ring with them, yet they went ahead and pushed it through. That I don't understand. As the mayor said, there's no agreement on when they'll ever quit this. It's something that started a few years ago, we thought it would be temporary, but it hasn't. And it's gone from giving 13 million a year in HURF funds to now 93 million in total funds the counties are responsible for this year.

Ted Simons: When you express concern about this, what do you hear from lawmakers, if anything?

Jay Tibshraeny: I don't hear a lot, to be honest with you. We've had some talks with them, and it's just kind of a symptom of what we're seeing this whole year where we have all of this bad legislation going through against cities and towns. It's not just the budget, it's pretty much 15, 20, 30 pieces of legislation going through that are attacking cities in different ways, case in point, senate bill 1525 which would severely restrict the cities' abilities to implement impact fees. What that does -- like on transportation, we're build can roads with impact fees and with HURF money. What they're doing, they're taking our HURF money here, which is for road maintenance and construction, and they have senate bill 1525 sponsored by senator Russell Pearce, that would also severely impact our impact fees on transportation. That's how we build our community. That's how we attack -- attract companies like Intel, is building the proper infrastructure. And now they're going at the direct heart of services we're providing to our citizens and companies and our cities.

Ted Simons: You had mentioned I believe in a forum with the "Arizona Republic" that inexperience at the legislature is a factor down there, and it seems as though lawmakers are more ideal call than practical.

Jay Tibshraeny: Clearly in my party, I was a good Republican down there, I worked hashed, conservative, but they're more ideologically driven, there's a lot more freshmen that may be following a little bit more. And the numbers are such, when you have 21 people in the senate; the Republicans have never had 21 people out of 30 in the senate. The house has a huge number, 40. So for a group to break up a train that's going down the track down there, they're a bad bill or a bad budget, it takes more of them. So it's difficult for a few reasonable voices, and there are some reasonable voices within the Republican caucus. It's just they're few and far in between now.

Ted Simons: Some specifics regarding the budget and at the effect on counties, local municipalities. There's a $38 million local contribution from the five largest counties in Arizona. What's that all about?

David Tenney: Well, quite Frankly, it's the state saying you're going to write us a check, and in years past they've had Maricopa County for contributions, generally they've been bringing the counties in and say, what can you do to help, and kind of for the most part they've agreed. This time it was just, here's what you're going to do and three more counties were at it to -- added to the mix and told you're going to write a check. And so that's what they've got to do.

Ted Simons: Does this arbitrary nature of this cut-off of five largest counties, reasoning behind there? So far as you can tell, just adding more to the mix?

David Tenney: I think so. I think their only reason it's five instead of 15 is that we had some very strong rural legislators who were saying, wait a minute, you're not going to do this to the smaller counties. Quite frankly, none of the counties should have that done to them. Counties have been for the most part fiscally responsible; have balanced their budgets every year through this crisis. And because they have an operating balance or some fund balances, the state look state it and says there's money we can access, so we're going to access it.

Ted Simons: The idea of cities as well, keeping their house in order, and all of the sudden here comes the state saying, we need some help. The state does need some help. How do you work that dynamic?

Jay Tibshraeny: We have worked that dynamic, and that's what concerns us more about the takes this year more than any year in the past, even years I was there. When the governor proposed her one-cent sales tax, the cities forgave their state shared revenues on that. That's about $200 million a year starting last budget year that the cities are giving. They would normally get that money. In my community that would be $8 million a year. Over the next three budget years, including the one we're just about finished with, $600 million is given by the cities to the state to help offset their budget problems. To me, that's a pretty good show of faith, and it begs the question then, why do you need to take all this other money when they're already giving you that state shared revenue they would normally get from that sales tax that was approved?

Ted Simons: And we should mention the idea behind this, the grand idea behind this is, so that cities and counties don't have to add taxes, don't do income taxes and such. Correct?

David Tenney: Correct.

Ted Simons: OK. You're going to have to start raising taxes?

David Tenney: Quite possibly. There's a real dilemma with counties. All counties are having to look real closely at whether or not they can get by without raising taxes. The problem is, even if you raise taxes to the -- I can give you our county for example; we were impacted by the budget 1.3 million dollars this year in Navajo county. If we raise taxes to our maximum level, we would raise approximately another $500,000. SO even if we raised our property tax to the maximum, we couldn't touch the impact that we've felt from the state's budget. And every county has a similar story. So will some have to raise taxes, I think there's a very likely scenario where you'll see counties raising taxes, or property taxes on residents to be able to make up for this money they've lost to the state.

Ted Simons: What about cities? What are the options here?

Jay Tibshraeny: Well, the DWR thing is a direct increase to people's water bills. That will directly affect the enterprise funds we have for water. It's our intention to show that did come from the legislature if in fact that increases the water bill, we'll put a line item on there showing, this is what the legislature did to you. They increased this part of your water bill. As far as the HURF money, we're not going to raise taxes in Chandler, that's not what we are going to do. But it is going to keep us from maintaining some of our roads and building new roads, and we have a tremendous demand in Chandler to build our roads and our citizens want their roads built. When 2 million is taken this year from us to build roads, it puts a real crimp on our city.

Ted Simons: We had the speaker of the house on the program earlier this week, and I brought up this subject to him, the idea of shifting costs to counties, specifically regarding the motor vehicle department, which we can get to in a second. I want to take a look back at what the speaker said. Earlier this week on "Horizon" regarding shifting MVD monies to counties.

Kirk Adams: There's been a great exaggeration of the impact on local towns and cities and counties by some of the rhetoric we've heard. Less than 1% of this spending plan has any impact at all on cities and counties and towns. As a matter of fact, within that 1%, you see some long-term reform items. Let me give you a quick example. We are now asking cities and counties to pay a portion of the motor vehicle department costs. Why is that? The reason why is because they share in the vehicle license tax that is collected by the MVD offices. When we're now saying is, since you're sharing in the collection of that revenue, we're going to ask you to share in the cost of the -- of collecting that revenue through the motor vehicle department.

Ted Simons: OK. What do you make of that David? It sounds as though less than 1% impact as far as the shifting is concerned. And why not go ahead and share some of the efforts here in terms of collection?

David Tenney: Well, the question is, first of all, I would ask, who put us in the situation that we're in? Do the counties and cities and towns get some of the revenue that comes out of MVD? Absolutely. But that's all been determined by the state legislature. They're the ones that determined where that money went. Not local governments. Local government didn't force any of that upon the state legislature. So now for them to come back and say because you're getting a certain share you've got to pay that certain share, the question is, what were the tradeoffs back when they originally made the agreement that they made that got us to that point.

Ted Simons: What kind of response do you have to what the speaker said?

Jay Tibshraeny: I consider the speaker a friend. It's just problematic. It's not just a one-year change they're doing. They're shifting how they're paying for state government. They're shifting it to where it's our burden, and we already have a burden. But my response -- I'd go back to him and say, we gave that -- our portion of that state sales tax that's going on right now, over the three years, to the tune of $200 million a year. That should be more than enough for them to get their house in order. And I'm so -- I'm more concerned over the long run, that was when that expires, and they're going to need another billion dollars a year? Then are they going to come in on our MVD, or our -- and take more of that money from us, and fund DPS and MVD to even a higher tune? That's probably where they're heading and that's not going to work.

David Tenney: That's absolutely the bigger point. It's just a continuation of shifting can state responsibilities to the counties and cities and towns to be funded. It's a trend that's been growing at an incredible rate the last five years, and at some point it's got to stop because it's unsustainable from a county perspective.

Ted Simons: One lawmaker quoted as saying, they're not trying to just arbitrarily shift money, but when you're out of money, you're out of money, and they feel like they're out of money. So they've got to do something. And this is something that apparently, according to what we just saw from the speaker, less than 1% impact shouldn't be at that much. Again, what would you say to that?

David Tenney: I would say speaking again for Navajo county, in the last three years we've seen our spending go from 38 million on the general fund down to 30 million. We've been cutting, we've laying people off, we've been not renewing positions. When people retire or leave to go somewhere else, certainly the impact that counties have felt over the last five years is much more than 1%. And at some point in time it's going to be unsustainable for us just like the state feels like it's unsustainable for them.

Ted Simons: And Jay we'll have lawmakers on the program, a speaker included, who will say that the public voted for Republicans to go to office and balance the budget, and if it hurts, it hurts. Apparently this is hurting, but they're saying this is what the public wants. This is what the public said at the polling places.

Jay Tibshraeny: They do want them to balance the budget. I don't think they want them to balance it on the cities' backs because if we end up raising taxes, raising water rates, raising sewer rates, having to do more bonding to do streets that raises taxes to citizens, all that is, is an indirect tax. And they didn't send them there to do that.

Ted Simons: Last question, very quickly, you didn't mention this jail transfer situation. 55 some odd million dollars. Is that now, is that later?

David Tenney: The 55 million is the number that the senate attached to that when it came -- the budget originally came out of there. They say they're going to do that next year. We're expecting a number somewhere around 55 million coming into counties to pay for that portion of the department of corrections.

Ted Simons: That's what prisoners in their last year of their sentence will be transferred to counties, prisoners sentenced to one year or less, which one?

David Tenney: Our understanding is, it will now be prisoners that are sentenced to a year or less would stay in the county facility rather than transfer to a state prison.

Ted Simons: All right. Very good. Gentlemen, great discussion. Thank you for joining us.