Journalists’ Roundtable

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Ted Simons: Good evening and welcome to Arizona Horizon's Journalists' Roundtable. I'm Ted Simons. Joining us tonight Mary Jo Pitzl of the Arizona Republic, Howard Fischer of capital media services, and Bob christie of the Associated Press. The recount has begun between apparent winner Martha McSally and incumbent Ron Barber. I guess we just wait this out, right?

Mary Jo Pitzl: Yes, there is a set time frame that the Secretary of State's office put out this week. December 16 is the end date, I suppose it's -- or the deadline, it's possible we might see something before then. But, any announcement will come not from the county elections offices, not from the Secretary of State, but from the courts overseeing the counts.

Howard Fischer: And what's going to be interesting is we're starting to see the seeds being planted for the next lawsuit, you know, questions of the loss says you are supposed to use a different computer program for a recount. Well, you know, the Secretary of State is deciding to change some lines of code, and you have got a different program now, and we already know that he tried to -- that Ron Barber try to go to the Supreme Court, and they said go back to the trial court and talk to them. So, we could be having the Congress convening in January, where we're not quite sure who is occupying that seat.

Ted Simons: Martha McSally has been back to Washington. She is preparing for, and I am sure --

Bob Christie: She's been back there, and she has been through freshmen orientation, and we have not had word if she has hired staff, one would suspect not because she hasn't formally been declared the winner. And she's 161 votes ahead. History says that probably won't change, I looked at the last eight recounts, and none of them moved by that margin. None of them. And so, there has been one that turned over, but there is only four or five, you know, it moved to a total of like 18 votes. The legislative race. For Barber, he's almost running -- if he does not win in the recount, then he's left with Hail Mary passes to the courts.

Ted Simons: Do we know what happened to those 133 contested ballots?

Bob Christie: We do. The 133 contested ballots, those are provisional ballots, which were not counted, for various reasons, primarily because they were voted in the improper precinct. Under the election rules, that are adopted by the Secretary of State, and have the force of law, they were not counted because they were voted in the wrong district or in the wrong precinct. His efforts to try to get them at three different levels, I believe.

Howard Fischer: And what's crazy, though, is that if you have an early ballot, you can drop it off at any precinct, and so our election laws are severely in need of updates to try to figure out how it works. There are a lot of counties that are doing the vote any place, it's all done by computer. You walk into any polling place and you can vote any time. And so, to the extent that if you want to enfranchise voters, you find ways to include their votes.

Ted Simons: Those 133 votes, they will not come back into play?

Bob Christie: Barring a -- some Federal Court has said no. We don't step into garden variety. Election disputes. There is nothing statewide that would, that would trigger, that I can see or that their lawyers see. They told me that they are not going to appeal the Federal judge's ruling from earlier this week, that this no. We are not going to count those. They are following the election code as it is adopted by the State of Arizona in those ballots are not legally cast so they won't be counted.

Ted Simons: So, but, this is just another lawsuit waiting to happen, is it not?

Mary Jo Pitzl: Probably. But you have got to think, you know, 133 votes, even if they were all for Barber, which is hard to believe, you know, he still trails by 161, so then you would have to hope that the recount was fine, you know, 30 odd, probably, 60 to 70, you know, votes that would flip in a recount.

Bob Christie: Which could happen. You have to -- you remember, he won by -- McSally won 60% to 40%, but they picked up their ballots and sent them to Graham. Greenway, Graham, one of those, and now, they are using their own machines again, so, you know, I suppose that there is a slight possibility.

Howard Fischer: And we all, you know, joke about, you know, hanging Chads and trying to figure out what the ballot means. But what's fascinating to me, every time I have seen a recount, the numbers come out different. Same machines, and so, which suggests.

Ted Simons: They come out considerably different.

Howard Fischer: Not considerably different but it suggests that if you ran the same things through five different types and came up with five different numbers, is there something problematic here, not enough to upset a lot of races, but it does suggest that, perhaps, these machines for all their talk, and I am not going to get into the conspiracy theories on how people, black boxes and engineers, but that all the idea of machine being more accurate, maybe not.

Bob Christie: Here's the interesting thing about the recount. This is how it works. They run all the ballots through the machine again. Counting only the second congressional district ballots. Then, they choose 5% of the precincts, and they do a hand count. And they choose that 5% of the precincts. They count it by hand with observers just like you saw in Florida. Everybody agrees this is for Barber, McSally, and if those -- if that 5% is within a variance, which is very small, 10 votes or five, of what the machine said, we're good to go, if it's not, another 5%, if it's not, you choose another 5%, and you could theoretically end up hand counting the entire 219,700 odd votes.

Mary Jo Pitzl: It makes an argument for the term to be longer than two years.

Ted Simons: No kidding, it also makes the argument that redistricting inside case, worked pretty well. You had a good race down there.

Bob Christie: You did, and here's the deal, there was no Libertarian. And Democrats didn't turn out, and this time, the Republican won.

Ted Simons: All right, let's keep it moving.

Ted Simons: There looks to be a new chief of staff in town, and he looks to be like the ole speaker of the house. Kirk Adams is going to join the Ducey administration?

Mary Jo Pitzl: This is the first major announcement that the Governor-elect Ducey has made, and he tapped former house speaker Kirk Adams to be his chief of staff, which is very interesting. Adams is no stranger to the capitol. He served 5.5 years in the legislature. Most importantly, I think, he was speaker during the last big budget crisis and budget deficits, had to deal with that. In fact, presided over -- in 2009, a year when there was -- the legislature was in session every month except November. Adams is the one that reminded me of that. He had to live through all of that. They might be back, in that same situation again, and also, since he's only somewhat departed, he knows a lot of these lawmakers. He served with them.

Howard Fischer: He does bring his own history with them. Remember, Kirk was one of the architects of the tax cuts kicking in now to 2017, so we know where he stands on the issues of tax cuts and that we're going to keep stimulating the economy until we get the rate down to zero and are infinitely wealthy. The other bit of baggage, if you will, that comes with them is his association with the coat brothers finance campaigns, and given that he got himself in a bit of a P.R. with the videotape of him as one of the beauty pageants saying, I love you guys. And I'm glad that we're here, it makes a lot of people wonder, you know, exactly what influence the Coke brothers are going to have on the ninth floor.

Ted Simons: Wasn't there this fine in California regarding campaign --

Bob Christie: This goes back four years, I believe, to a proposition in California, and the group, the Kirk Adams is running, was funneling money from the Coke brothers through a couple of things and spending it on that initiative. It failed but they came back and said we think it's election fraud, and we think it's, did we think you are churning money, and he ended up paying a million fine.

Howard Fischer: What is another piece of it back to Arizona, the same groups were funneling money into the anti-prop 204 campaign. This is the one to extend and make permanent the 1 cent sales tax. Because our laws are not as good as California we could not find out where the money was coming from, but a lot of it from funneled through some of the things that Kirk was do.

Mary Jo Pitzl: And that shows you that Adams and Ducey are aligned in how they viewed that issue of education finance because prop 204 was to make permanent a one cent sales tax increase to help education, and Adams branded the committee that brought the big bucks that helped to beat that, and Ducey was the chairman of it. And they are also behind on tax cuts.

Ted Simons: That's what I was going to ask. What does this signal as far as business tax cuts, which Adams shepherded in, what does this mean as far as education is concerned? A sales tax? It does not sound like either one of us has any chance.

Bob Christie: Here's the deal. The Governor-elect campaigned -- we all know, I built a company and now I want to shrink a Government. Here we have Kirk Adams who shrunk a Government. But, what I'm struggling with is, I don't think that Governor Brewer has left a lot of fat on the table. They cut $3 billion out of the budget in 2009 and 2010, and it's grown since then. But, you know, and Governor-elect Ducey said I will go through all of the departments that report directly to the Governor, and I am not going to replace -- this will be 27% of the state workforce is due to retire. But I don't see any of that happening quickly enough to --

Howard Fischer: Let's come back to that 27%. I have to assume that some percentage of the people are doing something, whether they are, you know, screening people for eligibilities for something, and you could, you know, look, you can do a lot by computer but there is certain things that you need warm bodies for. But, we're suffering from the same thing, but we went through there, with Fred Duval, everyone has this idea that there must be waste in there, procurement reform, was Fred's big issue. There is not that much there, you know. Look, Brewer did, actually, on that $3 million was interesting. She's a pragmatist. She borrowed a billion, we are out of borrowing options, and we did the 1% sales tax to try to get us through it. That's gone.

Mary Jo Pitzl: I think to answer your question, I don't think that we're going to see any appetite from Governor Ducey, or Governor Ducey to roll back these tax cuts or to delay these tax cuts that are yet to phase in. Those things, there is an argument that these need to happen because it gives predictability to the business community as the economy is rebounding. You want to keep that signal out there. You might argue that it does not make any sense but I think that that's -- I don't think that you are going to -- they are not going to --

Bob Christie: I agree philosophically. They are going to have a hard time doing that. And I just -- I am waiting for the 12th of January when we see a budget because I don't know how they are going to do it.

Howard Fischer: But now we get into the other shoe dropping, which has to do with the billion dollars that we may still owe schools.

Ted Simons: Before you go there, am I the only one who wonders, when I keep hearing of the Arizona comeback and how we balanced the budget and how we were so responsible with this and x, y, z, were we that responsible when it finds out that we were not paying the bills as far as education was concerned?

Howard Fischer: There is a couple of answers to that. As Mary Jo said, we paid some bills but we borrowed a lot of money, but --

Ted Simons: But you did not pay the proper bill, and now that bill has come.

Mary Jo Pitzl: The budget, you know, was not structurally balanced. What it took to get out of the deficits and the great recession, a lot of gimmicks, and a lot of the borrowing and all the things, the tax increase, and those things got Arizona through, and sort of back through somewhat of a level place, and it all was counting on an economy that would take off at a much faster clip than what we have seen, and the -- the most recently forecast is saying, this is going to be grossed, but it's going to keep inching along.

Bob Christie: Our budget is based on a 5% growth, which historically for Arizona, in a big -- in a good economic situation, is pretty good, much better than any other states. We're going to grow at 2%, so that revenue growth that the whole budget is built on is not there, and the other issue is, really, I lost my train of thought.

Howard Fischer: But, you know, this is -- again, talking to Doug right after the election, he says if we can boost the 2.5 to 3%, we can get a million dollars right there. This is all nice on paper. Go back to the Arizona comeback. Governor Brewer is saying well I did not know the recession was going to last as long as it did, so therefore, that's why I didn't end my term with a truly balanced budget, which ignores the fact that most of the other states have, in fact, recovered. The jobs have recovered, we're still, only at 55, 56% of the jobs recovered.

Bob Christie: You know, the economists, there was an economic forecast luncheon put on by the ASU business school this week, and here's the issue, construction has not come back. We have only gained 8% of the construction jobs back. We're still 70,000 jobs below what we were in 2008, when the recession hit. That, and people are moving here, for various reasons, some of which has to do with 1070. You know, we made ourselves, to a lot of extent, unpopular.

Mary Jo Pitzl: I think that it shows that, you know, it's not just taxes that attract business here. There are other factors, tangible, intangible, things that can be affected by your governing bodies, and maybe some things that you cannot. Some people don't like the summers, transportation corridors, access to a port.

Howard Fischer: Exactly.

Bob Christie: And the business community is really hammering on the schools, you know. Duval, some of Duval's backing was from folks who said look, we have got to fix the schools. The businesses are going to come here, and I think that the chamber agrees, too.

Ted Simons: As far as the budget is concerned, and this is, basically, what we're talking about here, I mean, is Medicaid expansion in jeopardy? Is behavioral health in jeopardy? Is the new child -- what is not in jeopardy?

Howard Fischer: You know, everything, as they say, is on the table. The problem with dealing with Medicaid expansion is, if you scrap Medicaid expansion you are scrapping the couple of 100 million a year that comes in from the tax on the hospitals, which, actually, pays for it. Now, the courts may end up doing that.

Bob Christie: It not only pays for it but brings in more money than it spends out. They are balancing the budget with some of that hospital assessment. So, unless the courts throw that out, which we will expect the Supreme Court to deal with the Medicaid expansion shortly, I don't think that they are going to touch the expansion for a couple of years.

Howard Fischer: No. But, as you pointed out, behavioral health, cps or the department of children services, things like that, look, there are going to be a lot of folks after having gone through the pain to get to where we are, it will be over McGee's cold, dead body that they start cutting back even as they are just staffing up.

Mary Jo Pitzl: On child welfare.

Howard Fischer: Yes.

Ted Simons: Something is going to have to get cut.

Mary Jo Pitzl: Yes. Many things will have to be cut and be cut in a big way. If you have -- if you rule out revenue, tax increases, unless there is some magical new revenue source that appears. If Congress passes the marketplace fairness act, and all of a sudden, we can tax the internet purchases, but even if that happens.

Ted Simons: That's not the kind of thing that these lawmakers would be celebrating.

Mary Jo Pitzl: No. It would take a while. Everything is going to -- anything that would be significant would take a while.

Bob Christie: Governor Ducey said, you know what, some good economic news changes a lot of things.

Mary Jo Pitzl: It's like praying for rain.

Ted Simons: But where is that good economic news?

Bob Christie: We have not seen it yet, and as Howie mentioned, a lot of states who went through the same thing that Arizona went through over the last seven or eight years, now have surpluses. California has a surplus. Many other states have these surpluses, and in fact, some of the questions that the legislatures are dealing with is well, you know, what do we do with the surplus? And one of the problems is, Arizona, as we have come back, they have cut the legs out from under the revenue stream, so every year when we get a bit of a boost in revenue from the normal growth, there is a tax cut that goes in effect every year. It's a permanent shrinkage of government. It is not by accident.

Howard Fischer: And that was the idea. We get a chance to shrink Government with corporate income taxes, going to drop by 30%. Individual income taxes are going up, and business property taxes are going down, and there is this whole litany of things that are kicking in, and what we have got and, you know, forgive me for saying it this way, I think that we have a lot of optimistic whistling here, you have got Doug Ducey saying, we're going to have the Super Bowl here. Okay that gets us some nice P.R. Does it translate into more than one shot on tax, and in fact the Super Bowl, the NFL negotiated some tax breaks so they don't pay taxes on the stuff so what are we getting other than pictures of sunshine?

Ted Simons: Answer me this, who is coming up with the next budget? I'm a little confused on this.

Mary Jo Pitzl: Governor Brewer, and her staff, are working on a budget. They will present that to Governor-elect Ducey, and he will use that as a draft, and then a platform on which to build, add, subtract his preferences, and the common link there is that John Arnold, who has been the budget director, is also working on his transition team, on budget matters. They brought back, Eileen Klein to oversee the transition committee, who was Brewer's, before Arnold, Brewer's budget chief, so there is some commonality there, and there is also two key people with Klein and Arnold who know a lot about the budget. The budget we will see will be a Doug Ducey budget. What will be the Jan Brewer imprint? I think she gave us a couple ideas this week on what she wants to protect in that budget, but even though it is protected items, she acknowledges they will have to be cut. That's education. That's child welfare, and behavior health.

Howard Fischer: That's the thing, if we have a $9.3 billion spending plan and you have got to cut half a billion of that, for the next six months, we have the rainy day fund, and that may get passed that, you are looking at a billion dollars next year, one ninth of the budget, and that's a pretty big cut, and if you are unwilling to consider revenue enhancements, and that's not even counting our school funding.

Ted Simons: Real quickly, the funding, the courts, where are we standing with that?

Howard Fischer: The last year, the Supreme Court said to the legislature, you know that part where the voters approve something in 2000, said there is the inflation adjustment, you ignored it. So, we sent it back to the trial court, and the judge Cooper has already ruled that you have got to rebase the funding to where it would have been had the lawmakers complied with the law all along. It's about $336 million this year. It's the same amount and on and on, and now we're fighting about the billion dollars that they did not get during that time period. Now, what's fascinating is that the attorneys for the state, the legislature is saying, it's impossible for us to do this. To which don Peters, the attorney for the school, said no, it's not impossible. You could cut or you could raise revenues. You may not like it, but not wanting to do it is not a legal defense.

Bob Christie: Correct. And this is all in Judge Cooper's lap. It's going to be -- there is no middle ground for the judge in this, and she is going to let the state off the hook in repaying this million dollars, or it's going to throw a huge monkey wrench into what, as we have all been discussing, is a big budget hole.

Mary Jo Pitzl: But it does not have to be -- if she rules the latter way, the state doesn't necessarily have to pay it all at once. There could be a payment plan just like any --

Bob Christie: It's over five years, so instead of 330 million it's 500 million a year over five years.

Ted Simons: That's a deal. Good to have you all here. Thanks for joining us. And that is it for now. I'm Ted Simons. Thank you for joining us on Arizona Horizon. You have a great weekend.

Mary Jo Pitzl:Journalist, Arizona Republic; Howard Fischer:Journalist, Capitol Media Services; Bob Christie:Journalist, Associated Press;

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