Arizona Budget

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State Representative Justin Olson, who is vice-chair of the House Appropriations Committee, discusses the latest State revenue forecast and its impact on budget negotiations.

Ted Simons: Good evening, and welcome to "Arizona Horizon." I'm Ted Simons.

Ted Simons: A mixed decision today from a full panel of the U.S. ninth circuit court of appeals on a 2004 Arizona voter identification law. The 11-judge en banc panel ruled that the state can require proof of I.D. at the voting booth. But the judges also ruled that voters don't have to show proof of citizenship when registering to vote if they use a federal vote-by-mail form. Secretary of State Ken Bennett has vowed to go to the U.S. Supreme Court to fully protect the Arizona law.

Ted Simons: Last night on "Arizona Horizon," we heard a state budget update from the governor's budget director. Tonight we hear how the legislature sees the differences between the competing budget plans. Joining us is Representative Justin Olson, vice-chair of the House Appropriations Committee. Good to see you again. What is your assessment now of the state's economy and how that plays into the budget?

Rep. Justin Olson: We had the report of the financial advisory council last week, and they had some good news, that we're going to continue to grow and see increases in revenues. But the bad news is the rate of that increase is declining.

Ted Simons: They say -- original estimate was like 5.6 or something down to 3.4. Governor's office still sees five plus. Where's the disconnect?

Rep. Justin Olson: That's right. The problem is, and this highlights the difficulty of projecting revenues for the future and establishing a budget based on those projections. We're talking about the future, there's a lot of uncertainty. So what the legislature does is we have a four sector analysis. We have two separate estimates that come in from economists, we have JLBC and a fourth sector that comes together and we take the average of those estimates. That's what produced the 3.4% estimated growth in revenues for the current fiscal year.

Ted Simons: I got the impression from the budget office, governor's budget office that average also takes out or includes something somewhat radical and so they had a little problem with the average. They not the numbers were skewed low. What do you think about that?

Rep. Justin Olson: I think that's by design. The two estimates we get out of U of A include a high estimate and a low estimate. The idea is that we are projecting about the future, there are a lot of contingencies we can't account for. We might see a double dip recession and that's what that low estimate is for. To have an element of that projection that accounts for the fact that there's a substantial amount of uncertainty. And then on the other side, the highest, and then have you the averaging to produce the 3.4.

Ted Simons: Even with the numbers, governor's office says the governor's budget is, quote, right on track. You agree?

Rep. Justin Olson: I think there's still work to be done. I think the governor's proposed a good budget, and the legislature has passed a budget that I supported, that I voted for out of the Appropriations Committee out of the House. And there are some differences between those two budgets. Some substantial differences. Our budget spans about -- spends about $8.3 billion, hers 8.9. We're probably going see a final agreement in the middle.

Ted Simons: Let's talk about the particulars. The governor's office says the needs of the state must be addressed. They talk about books, education needs, University funding, community college funding, because of accelerated growth there. They're saying nothing is coming out of the legislature. Those have to be addressed.

Rep. Justin Olson: Absolutely. And we are going to address those needs. And that's what these ongoing negotiations are for, is to determine what are the priorities. And we will address those needs, but I think in addition to those needs that you've described are also the needs of the future. We have contingencies such as court cases that are pending before the state that affect the state budget. We have Obamacare that can be implemented and at a cost of nearly $400 million in 2015. We have the expiration of the sales tax, and that is an evaporation of a billion dollars of revenue that comes into the state currently. So we need to prepare for that future so we don't end up in the same situation that we were in just a few years ago.

Ted Simons: Does preparing for that future, though, mean keeping department of corrections personnel levels where they are? Governor wants to see more. Does it mean maximum security beds, keeping them where they are? Governor needs to see more there. State workers haven't had a pay raise in years. If the economy improves, the idea is they're going to bolt because of better offers in the private sector which means fewer services. So many things are happening now, it sounds like the governor's office is saying, yeah, we know the future could be tough, but we got tough situation right now.

Rep. Justin Olson: That's right. And a rule of thumb we stick to in the legislature, we don't negotiate the budget in the media. So these are important points you're bringing up that the governor has included in her proposal and we're addressing them. We're analyzing the $50 million she had in her proposal for the new beds, and high security, maximum security prisons. We analyze an alternative idea. We have a surplus in beds of medium security, which is between the low security and that maximum security that we need. So we've analyzed, can we afford a lower cost, move some of those medium security beds to high-security beds. Those are the different things we're hammering out in the budget negotiations.

Ted Simons: You mentioned you don't negotiate through the media. But it sounds as though not a whole lot of folks, media or otherwise, even a lot of your compatriots at the legislature, know what's going on. Should there be a little more transparency in the idea that are being bounced back and forth?

Rep. Justin Olson: I think that's a good question. I think it is important that we do have transparency. And we have had it. That's why we do have these discussions, these open discussions. We pass a budget out of the Appropriations Committee that set the baseline of where the legislature wants to be. And the governor's proposed her budget in the public. It's out there for anyone to analyze, and now we're hammering out the details.

Ted Simons: I've asked this question of leadership, I want to ask it of you. The public voted for that one cent sales tax and it will be going away, and that's the clip that everyone is concerned about. With that in mind, the legislature wants a $430 million rainy day fund, in case the economy does take a dip as you mentioned earlier. Do you think voters approve that one cent sales tax for the legislature to sit on?

Rep. Justin Olson: That's an excellent question. I'm glad you framed it that way. That is exactly the concern the legislature has. Voters made a choice. And they were told this is going to be a temporary sales tax. They understood that we had an unprecedented budget crisis. And they made a difficult decision to give a little bit more of their hard-earned money in a difficult recessionary time and they're told it would be temporary. So we need to maintain that trust that we have with our constituents. When we said that was going to be a temporary sales tax, we need to deliver on that and make that a temporary sales tax. We also told them we can trust them, so they can trust us. If they make these hard decisions passing a sales tax increase, passing budget reductions to balance our budget, we would not have to go through these similar budget cutting processes in the near future. We need to make sure we can deliver on that and provide that trust and merit that trust.

Ted Simons: So I think that sitting on that $430 million is what folks had in mind when they approved that sales tax?

Rep. Justin Olson: I think our constituents expect fiscal responsibility. Fiscal responsibility includes preparing for the future. Too long we had budgeted on a year by year basis looking -- putting the silos up, ignoring what the future looked like. That's how we got into a 3.6 billion dollar fiscal deficit. The voters want us to be prepared for the future. That's why when we have over $3 billion of debt that we accumulate of unpaid bills, of salaries and benefits of just a few fiscal year ago, are already gone and paid, those bills have not been paid and we need to pay down our debt, we need to fill our savings account so we can prepare for the uncertainties in the economic cycle.

Ted Simons: Good to have you here.

Rep. Justin Olson: Pleasure to be here. Thank you.

Justin Olson: State Representative, Vice Chair, House Appropriations Committee;

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