State of the State

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Governor Doug Ducey will give his first State of the State address. Watch the entire speech and then hear analysis from political consultants Stan Barnes and John Loredo.

Ted Simons: Coming up next on Arizona Horizon. We will hear Governor Doug Ducey's state of the state address and then get analysis of the speech from political consultants. The State of the State next on Arizona Horizon.

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Ted Simons: Good evening and welcome to Arizona Horizon. I'm Ted Simons. Governor Doug Ducey gave his first State of the State address today. The Governor focused on education funding and solving the state's budget shortfall. We'll hear from two political consultants about this speech, but first, here is the Governor's State of the State address in its entirety.

Doug Ducey: It's been quite a day at this capitol, and the highlight was your swearing in. Elective office is an honor that rarely comes easy, and I congratulate and welcome each one of you. [Applause] Whether we have served before or we are new to this place, all of us have arrived here to find serious challenges waiting on us. The test is, whether we answer them in a serious way without trying to buy time or to side step obvious problems that need to be dealt with right away. Putting off problems is certainly not what I had in mind in seeking this office. I know that each of you would say the same about the positions of trust that you hold by right. These next few weeks, we could all use the fresh outlook of newcomers. Not trapped in the old ways of thinking, about state spending, taxes, public education, and the role of Government, in general. In Government, just as in business, settled assumptions are not always correct assumptions. Conventional wisdom is not always wisdom. And the political parties do not have to be hostile parties. Set against each other. In every case. This, at least, will be the spirit of my administration as I work with you in every way I know how. [Applause]

Doug Ducey: Naturally, I hope it will be returned in kind. I think we'll all find the best achievements are shared achievements. A week into this job, I won't press the case that the state of the state is any better off than it was last Monday. But I can tell you this for sure, if you and I can see our way clearer to those kind of shared achievements, the people of Arizona will do the rest, and the state of our state will be confident, strong, and on the rise. [Applause] But we can't do it without fiscal responsibility. In real life, when families or businesses take stock of how they are doing, the answer has a lot to do with the state of their finances. Well, it works the same in Government, and turning to our state's checkbook, we start with the number -- $1 billion, that would be the difference between spending and revenue if we were to do nothing about it these next two years. Now, maybe I'm of the old school of economics, but this strikes me as a problem. And I am just not persuaded by appeals to raise taxes so we can spend more. [Applause] I look at it this way, if the problem is spending more than we have, the solution cannot be even more spending. Instead of demanding more revenue from the people, I suggest we demand more fiscal responsibility from our Government. [Applause] So with all of the care and debate, the people expect of us, and what this little delay or complaint is possible, let's put this budget in balance, and let's keep it there. This Friday, just in time for some weekend reading, I will deliver my budget on flash drives to every member of this legislature. It's my best effort to deal with a tough situation. Just as I promised in last year's election, my team and I gave a thorough look to current state expenditures. In reviewing some items, we ask questions that hadn't been asked in a while. Questions like why does the State of Arizona need an office and a paid lobbyist in Washington. The answer is, we don't. [Applause] So that office and all its expenses will soon be gone, and there will be at least one less lobbyist in Washington. [Applause] But we didn't stop there. To balance the books, we're going to institute a state Government hiring freeze with protections, for vital areas like public safety and child safety. However when it comes to bureaucracy, we're cutting back. The Government can't take on any new expenses when we can't afford the ones we already have. [Applause]

Doug Ducey: Our budget does what budgets are supposed to do. It prioritizes vital commitments that Arizonans value the most, public safety, Justice, classrooms, and an aid to the needy and vulnerable. My budget doesn't just give the appearance of spending discipline, it offers the reality of spending discipline with the decisions that are timely, real, and permanent. [Applause] To that end, I want propose this -- our state needs an unbiased inspector general, mandated to find more areas of savings and where corruption exists, shine the light on it. This public advocate would be equipped with a badge and subpoena power to go in, ask the tough questions, and be a watchdog for the taxpayers. I want to work with you, the legislature, to make this happen, this session. [Applause] With a tight budget, we have all heard the calls these past few weeks to just go ahead and raise taxes now that we're all safely in office. In this case, as the argument goes, it would be relatively easy because all we would have to do is cancel all or some of the tax reforms that are currently taking effect. They were passed in a previous legislature, after all, and circumstances have changed. So, let's just renege on our commitment. Any way you look at it, canceling Arizona's tax reforms is the wrong way to go. [Applause] They were designed to put more life in our economy, and that need is stronger than ever. Business people, the ones we count on to create jobs, have been making plans around them, plans to build, expand, and make new hires. If we change our plans, they will change theirs. It's a high price to pay for going back on your word, and that is why I say, not on our watch. [Applause] Another essential of good Government, are tax rates that are predictable and reasonable. Every year, Arizona taxpayers are faced with the threat of a tax increase because we don't tie our income tax to inflation. The result is an automatic tax increase. Let's end this by permanently indexing our income tax to inflation. This is an issue of fairness, and we owe better to all Arizonans, so let's get it done this session. [Applause]

Doug Ducey: In all that we do, this year at this capitol, let's think big and let's remember this -- the business at hand is not to expand Arizona's Government. It is to expand Arizona's economy. [Applause] By some measures our economy has been growing, but not nearly at levels we know we can reach, and it's not just overall performance, either. We want the kind of growth and opportunity that reaches everyone. Last week, I signed an order placing a moratorium on new regulations in the executive branch. It was a good beginning, but only a beginning. There is also the matter of many state regulations already in place, often for reasons that nobody even remembers. Our small businesses have to deal with all these little rules all the time. Just because they are on the books and nobody has bothered to change them. I am instructing the directors of every agency to conduct a top to bottom review on regulations, and then send me a list of all the ones we can do without. It's likely to be a long list, and wherever we find any regulation that is outdated, irrational, unfair, or destructive to free and honest enterprise in Arizona, that regulation will be gone. [Applause]

Doug Ducey: While they are at it, agency directors will also be reducing time frames for permits and licenses. Our Government needs to operate at the speed of business, and we have a regulatory review council that is stacked with lobbyists? Who is advocating for the small business person, the start-up, the entrepreneur who can't afford an attorney to navigate the endless maze of bureaucracy. I ask that you pass a bill requiring a small business owner on that council, and I will sign it. [Applause] You will have my full attention when you send me any bill that has the purpose of advancing free enterprise and spreading opportunity. When that's the aim, there is always more to do. I am, frankly, not impressed when I read that Arizona is still the tenth or the 15th or whatever best place in America to finding work or doing business. In the competition among states, our goal is not to be lost in the pack somewhere between California and Texas. Our goal in Arizona is to be the best place in America to work and do business. [Applause] That same thinking should apply to education. In Arizona, public schools, we can do better. A snapshot of Arizona public education came in a survey a few years ago. It measured some basic knowledge among students on matters where knowledge should be assumed. It was an elementary civic's test, along the lines of the test required of every new citizen, and when 96% of our kids could not pass, you know something is missing. Justice Sandra day O'Connor has called this the quiet crisis in education. President Reagan told us if we forget what we did, we won't know who we are. John Adams had it right, too. Remarking that every child in this country should be instructed in the principles of freedom. [Applause] To appreciate this wisdom, however, it helps to know who Justice O'Connor, President Reagan, and John Adams are. But for too many of our kids, those names sadly don't ring a bell. This is an issue that can and should unite us. These are our children, and not long from now, it will be for them to vote on who sits in your chairs and who stands at this podium. How can we expect them to protect the principles often on this country if we were not preparing them for this task right now. It's time to make this right, and there is a bipartisan bill called the American civics bill, send it to my desk. I will sign it immediately. [Applause] It's also time to take charge of our public schools and take responsibility for their results. For too long, the Federal Government has forced a one-size fits all model on our education system. Politicians and bureaucrats on the other side of the country with no understanding of our state or the needs of our teachers and students have sawing to impose their standards and their when on our youth. In Arizona, educational excellence is the priority. For the next four years, I intend to lead under a classrooms' first initiative. Our goal is simple, to improve outcomes in the classrooms for all our children. That is why I propose to spend not less in the classroom than last year, but more. [Applause] Right now, we spent far too much on administrative costs, on overhead, and that's got to change. [Applause] So this morning, I signed an executive order assembling a team of education and finance professionals charged with scrubbing every dollar in every formula and statute in order to identify ways to get maximum dollars into the classroom where it can do the most good for our children. [Applause] We know where education happens, between a teacher and a student. In my administration, we will honor teachers and the good work that they do. [Applause] Many teachers will agree with me on this, the quality of a child's education should not be determined by what neighborhood their parents can afford to live in. [Applause] Our state has some great public schools. Among the best in America, but unfortunately, because of yesterday's policies, many families are shut out. They sit and wait as their sons and daughters get another year older, and their dreams of providing them with the best public education possible slipped farther and farther away. This has gone on too long. I will not accept this inequality. How many Arizona children should have access to our best public schools. My answer is, all of them. Here's what makes the situation even more troubling. Right now, there are nearly 400,000 empty seats in our public school system. In fact, some public schools are completely vacant. These are educational assets, funded by the taxpayer, meant to benefit our children, and they are going to waste. It's time to put these assets back to work. [Applause] So here's the plan. Let's make open enrollment and parental choice a reality and not just a talking point. Let's open the doors and make those empty seats available to our best public schools. By creating what I call the Arizona public school achievement district, we can give our states best public schools quality schools that are at capacity or have waiting lists, new and innovative options. These public schools would have the ability to apply for use of the empty schools and empty classrooms, so we can put those kids where they belong in the public school of their parent's choice. [Applause] We also need to make capital available to our public schools that are ready to expand. My budget will reserve resources that are best public schools can borrow against to bring down their debt service cost. And half the projects funded will be in low income communities. [Applause] Every dollar not spent on debt service can go to more classrooms, more teachers, more students, getting the education they deserve, regardless of where they live. For consistently underperforming schools, it's time for a change in management. First rate public school superintendents, principals, teachers, and operators make the difference. They are the ones who give our kids a shot at a real education, so when local control intended to benefit children turns into organized chaos, to protect bureaucrats, expect a united legislature and a chief executive to make a change. [Applause] Looming over all of our discussions about education is a court order demanding payment of money we don't have. Here's the short of it. Elected leaders acting in good faith during the great recession to keep statutory commitments, to education while also keeping this state a float. Now, the courts have given us a choice between a fiscal crisis or a constitutional crisis. So, I say to you, the legislature, settle this lawsuit! To the education community, be reasonable. Put this behind us. It's time to stop paying lawyers and start paying teachers. [Applause] Attorney general person Brnovich. And means and, or means or, dust off your dictionary. Improving the lives of Arizona children won't end when they leave the classroom. Too many of our kids find themselves in difficult family situations because their dads are being dads. So guys, I have got a message for all of you out there am when the authorities know of a dead beat dad in Arizona, find him and hold him. To his responsibilities with the full force of law. [Applause] If you are old enough to father a child in Arizona, you are old enough to assume financial responsibility for that child. For single moms, being stiffed by dead beat dads, you need to know, we're on your side, and help is on the way. With all this renewed focus on opportunity in Arizona, it's worth remembering that the best of these can be opportunities to serve. In November, I launched an effort during the holiday season called serving Arizona, to highlight volunteer and charitable efforts throughout our state. Visit these food banks and shelters, and you will see first hand those who are struggling the most in our communities. You will also see the best of our state, people taking a little bit of time out of their busy days to help those most in need. Maybe it's serving lunches. Maybe it's packing food baskets. Maybe it's reading to a child. Whatever it is, these selfless Arizonans are an example for all of us elected to represent them. Christmas season has come and gob. But serving Arizona has not. Giving more to charities close to our heart is always a good thing. There is nothing like giving your time. I hope with this effort to encourage that spirit. [Applause] Our state is not without its challenges. But we have the leadership to reach our full potential, and I am not just talking about here in this capitol. I am talking about the leadership of all Arizonans, the mom who is doing everything that she can to make sure her children have the opportunities that she didn't. The entrepreneur, who is risking everything that she has got to chase her dreams. The teacher who will stay late tonight to help tutor one of his students. It's about all of us. All Arizonans have a stake in making this state the best place in America. In less than a month, our state will host the Super Bowl for its third time. As a sports fan, I am pretty excited. I know you are, too. It's a prime opportunity to showcase Arizona to the rest of the country. It's a chance for everyone in the world to know what we know, that Arizona is the place to be. [Applause] Members of the legislature, I am grateful for this chance that we have to do good for our state. This is why the people sent us here. So, let politics stand down for a while. Let future elections wait their turn. Let's give our best for Arizona. It's time to get to work. Thank you and God bless. [Applause]

Ted Simons: Shortly after the Governor's speech, democratic legislative leaders gave their reaction.

Eric Meyer: Well, I appreciate the governor's optimism, the truth is that our state is facing some serious challenges. Nothing the Governor said indicates he's pushing for reform. Instead he seems to be championing the same failed policies that have stunted our state's economic recovery. Arizona's unemployment rate is higher than the national average. While most states have regained the jobs lost during the recession, we are still missing almost 100,000 of them. I support putting more dollars in the classroom. It just depends how we get there. We have said all along that we would rather put dollars in the classroom than spend money on lawsuits. We are in total agreement on that. So, it just depends when we see his budget and where he's going to go.

Ted Simons: And here now to discuss the Governor's state of the state address and what it signals for the new legislative session, Stan Barnes of Copper State Consulting and John Loredo, political analyst. Good to have you here. Thanks so much for joining us. Thoughts on the speech in general?

Stan Barnes: I am really happy with it. I am a Republican, and a Doug Ducey supporter. On a couple things, he did a great job. He spoke well. He was confident. Didn't make any mistakes, was smooth, hit his applause lines, connected with his audience. I thought he did a great job, proud to see him as my Governor. And that's instinctual response. We'll get to the breakdown analysis in a moment, but sitting there watching it, I thought yep, there is Arizona's Governor. He's going to be an impact player for four years.

Ted Simons: In general, your thoughts on the speech?

John Loredo: Well, I think in terms of the delivery, it was a pretty good speech compared to, I think, what we're used to. He's a very good communicator. He was clear and concise. In terms of the substance, not a lot there. The devil is in the details, and he's got some big issues that he's going to have to get into the game on, and there are very little, any type of substance behind it.

Stan Barnes: On the substance part, we were looking for that, and I found some substance worthy of discussion. I mean, from the top line, he came out about budges and talked mostly about education, and then he talked about selling Arizona. And being a cheerleader for what a great place this is. I think that that's the one, two, three of that speech. He answered one of the big questions right up front, is he going to promote stopping the tax cuts that were previously passed from taking place in order to help out balancing the budget, and he said no. That's one of the coming out items was he's going to balance this without that.

Ted Simons: And did we see a bit of rubber hitting the road here?

John Loredo: You know, very little. It was more of a values type of a speech than it was making the numbers, you know, the balance. The bottom line here is that you can say you are going to take things like the corporate tax cuts off the table, but the reality is, he still has a massive budget deficit he's facing, and he has not proposed how he's going to make those numbers balance.

Ted Simons: He calls on the legislature to balance this budget. How are they going to do that?

Stan Barnes: Well, the first clue will be the Governor's budget delivery. As he said, on flash drive, which is 2015 when that's happening. This coming Friday. And that will be the first, all four wheels on the road to use your analogy because that document is going to be voluminous and explain how he, the Governor, would balance the budget. I think the Governor and the two people sitting behind him in the shot there, President Biggs and speaker Gowan are closer to philosophical alignment than the speaker Gowan and Andy Biggs were with Governor Brewer. So, as an analyst and as a consultant watching this, I am thinking those three guys could get in a room and settle this, and I am optimistic that it's going to get done a lot simpler and easier than I thought it was going to be.

Ted Simons: And yet to settle this, you have got to balance the numbers. You have got to apparently cut no new taxes, not on his watch, and the corporate tax cuts, they are coming in. So, again, what do you do?

John Loredo: He hasn't said what he's going to do. I think what you are going to see when he delivers his budget proposal, you are going to see the Doug Ducey value speech conflicted with the Doug Ducey's value budget. They are simply not going to match, and he's not going to be able to hide once you put the proposal out there, because he has to cut and he has to cut big. State Government has been cut. It's been cut back drastically. Every gimmick, every accounting gimmick in the legislative book is built into this massive budget deficit already. There is nothing there for him to use. So, for him, you know, he's either going to -- the two biggest -- the budgets in state Government are education and prisons. We have not heard him say one thing about private prisons or anything else. So, I am assuming that there is not going to be anything there for him to cut. So, he's going to have to deal with public education, and when you take off the table these escalated corporate tax cuts, that were made at a time when they knew that the effect would be to cause a massive deficit later on to date, they went ahead and did that anyway. So, they would have that money available if they would not have cut it.

Stan Barnes: Friday is going to be a big substance day in terms of the news-making. We're going to learn what the Governor wants to do, and the numbers are going to add up or not, and I suppose that they are going to add up and we'll find out where he's going to find money to plug the holes we're all familiar with. But on today's speech, I think it's noteworthy that he addressed some of that up front, and then spent most of the speech in the education world. We're all getting to know Doug Ducey. He's relatively new on the scene, and he's coming -- having his coming out presentation to the people of Arizona. So, you have to step back and look at the painting and say, what does this thing look like? It is education, going to be very important to this Governor. The whole opportunity, everybody gets a shot, a good thing was said by the columnist in the paper this week, very Jack Kemp-like and Jack Kemp, for a lot of people like myself, was a visionary Republican who talked about inclusive things. Doug Ducey is going to do that.

Ted Simons: But when the Governor said the legislature acted in good faith, balancing these budgets, with the idea of an and means and or means or. It sounds like you don't think that was good faith.

John Loredo: It was absolutely not good faith. It was good faith in satisfying their financial, statutory obligations to fund public education. That is not what they did. They have not funded their statutory obligations to the tune of over a billion dollars a year in education funding cuts. They have ignored the law. They have ignored the statute that says that they have to fund public education. They have ignored it. That's why they are now up against a court order to fund $300 million, at least, in education funding that they illegally took from schools.

Ted Simons: And the Governor, basically, told education leaders, be reasonable.

Stan Barnes: Yeah, I like the way the Governor played this. I like the way that he told -- emphatically told the legislature to settle and he looked at the education world and said, be reasonable. Let's get this behind this. I thought that was a good way to do it for the state of the state speech. But I want to make this point, to what John is saying, the Republicans, when they had to balance the budget in 2009, the majority party, you remember they sold the State Capitol building for a one-time, $700 million cash infusion just to avoid cutting education. We lost one-third of state revenue in a two-year period. One-third. And since we don't really borrow money in this state, legally, we have to get around it constitutionally , we mortgaged a lot of assets to avoid the cuts. It was a historic, falling out of the bottom, and I think that the Republicans did act in good faith in the way of trying to fund state Government. The best that they could in that awful financial news.

Ted Simons: But they went ahead and they cut public education anyway. And at the same time, phased in these escalated corporate tax cuts that leaves you less money to pay for education to begin with. So, they have, you know, he can throw rocks at this fiscal deficit all he wants. But this is a legislative, creative fiscal deficit. The expiration of the education sales tax, the phased-in taxes happening, as well. They have created this deficit. They created this situation in which they are not going to have money to pay for their obligations that they need to pay. And they are acting like they are victims here. They created this.

Stan Barnes: It goes to a point that the Governor made about, in the first quarter of his speech, that he wants Arizona to be a good place to do business. The Republicans, leadership, member of the body, and the Governor, want this to be a favorable business climate, and tax levy on corporations is part of the variable there that they are trying to address.

Ted Simons: Is it not a good place now or for the past four or eight years, go back as far as you want? Has it not been a good place to do business?

Stan Barnes: It depends on who you ask. And I think on many scales, it's a very good place because we have other things, other than the financials. But, and I am no big-time CEO. But, I know that tax levies are meaningful, and people are -- companies are fleeing high tax states like New York and California, so we have got to keep it real with the rest of the state.

John Loredo: Arizona also has some of the lowest corporate taxes in the entire country. So, it's not like we're, you know, it's overly burdensome. We are on the lower end of corporate taxes.

Ted Simons: But what he says now is we have got this plan in place, in place for the next few years or so, businesses, corporations, they are planning for this, to mess around with it now means you are messing around with business.

John Loredo: You know who else is counting on the money? The public schools that look at state law and say, you have to fund us at x level and the legislature and Doug Ducey are saying, sorry, we're just not going to do it. Schools and kids are counting on those obligations, as well. He's going to have to make a decision. He's going to have to either really value public education and fund public education properly and legally, or he's going to have to help out his friends in the corporate world.

Ted Simons: You mentioned numerous times you consider Arizona a center-right state. Center-right as opposed to any far --

Stan Barnes: That's right.

Ted Simons: Do center-right people -- how do they see this dynamic between corporate tax cuts, bringing in business, and an education system that most folks think is not quite up to snuff any way you want to look at it. How do you think the average person feels about this in Arizona?

Stan Barnes: Yeah. I don't know. Your guess is as good as mine about the average person, but what you are doing with that question is putting your finger on the very issue that will dominate this Governor's four years. Indeed, he knows it, too, because it was the one-two of his state of the state address. How to balance the needs of job creators in a favorable climate with the revenue the state needs to provide the kinds of things we all want. You find that the Chamber of Commerce crowd in Arizona, I think, which have Governor Ducey's ear, I believe, telling the Governor he's got to do something along the lines of making sure K-12 and University funding is addressed properly. He's not going to be a bad education Governor. He's going to be a realistic Governor who believes in key education components, but I don't think that he will let himself get stuck in the dynamic of, if you don't fund it, at somebody else's opinion, some non elected person's opinion, some how, you are against it.

Ted Simons: Can you be a business-friendly person and also understand, as many business people, come on the show all the time, say we cannot find qualified people to work. They are not educated well enough or in areas. Can you do both?

John Loredo: I think that you have to. Look, you have got to create an educated workforce, right. You have to do that am and in our public schools, they have been cut a billion dollars a year going back to last, you know is, four or five years, at least. You get what you pay for. That's something that Doug Ducey should understand. Listening to his education policy, you know, proposals, he's dancing around the edges. He's talking about well, maybe capital needs for charter schools, you know, the vouchers for private schools, what he's not addressing is the core biggest way you can effect public education, and that's by providing enough funding to put enough teachers in the school, to reduce classroom sizes, to restore funding for soft capital, which is pens and paper and computers in the classroom. That money has been slashed. Any parent with a kid in public school, they get a letter from the teacher every -- at the beginning of every year begging for donations. Can you buy paper for us? Can you buy pencils? That's because the legislature has cut the funding for in classroom supplies, so Doug Ducey's rhetoric is fine for his speech, but he's going to have to pay for good public schools at some point.

Ted Simons: What do you think?

Stan Barnes: Yeah. Well, I mean, I don't want to sound like I agree with what John is saying, but the main thrust is that the state has to support public schools. I believe that the Governor, also, believes. So, the difference is in, your opinion, about how much is necessary to make it all go. And the Republicans are running the state. Doug Ducey is going to be a center right Chamber of Commerce Republican, and that kind of Republican, in the executive branch, is going to show that he values public schools.

Ted Simons: With that in mind, he called for the legislature to settle the K-12 funding. For educators to be reasonable. Let's go back to the legislature. Are they willing to go ahead and work a deal? You mentioned the Chamber of Commerce Governor, what about his right flank? What are they thinking?

Stan Barnes: This is going to be a tough issue for the President and the speaker. They have got to corral their members and keep them in the majority on this. I think they will - there is appealing of the certain constituencies with your rhetoric. There is campaigning, and then there is governing, and I think when they govern, they will find a way to settle this difference. Take as Governor Ducey wisely pointed out, take the financial crisis route, not the constitutional crisis route. There is some Republicans that want to take that route, give the finger to the courts and say, you cannot make us do this, but they are in the minority.

Ted Simons: If that gets settled and the numbers, the $500 million and the $1 billion settle down a bit, is it now a better, easier, more possible to get that budge balanced?

John Loredo: Sure, if they can come up with a way to do that, a reasonable way without slashing and burning schools and other priorities like that. Yes. But, this budget battle, I mean, we've been there before during budget crisis. It is ugly. It is not a happy place to be. And how they produced the budget is going to be a big deal, whether they bring back the subcommittees, whether it's done in the light of day, whether it's done in the basement with a couple of people, and keep everybody in line. All those things matter, but at the end of the day, Doug Ducey has to build the votes, and you traditionally see the Senate take kind of one approach, the house take another, and you have got to be able to whip up those votes. There is going to be people on both sides of the aisle that are falling off on both sides, and one thing that he has to keep on the table is that he may wind up in a situation where he has to build democrat and Republican votes together in order to pass a budget. If he does that, if he wants to do that, he's got to be able to negotiate.

Ted Simons: It's an interesting point. Regarding the budget process. Are we going to see something different or keep hearing about all the mushrooms down there at the capitol as opposed to the people getting things done?

Stan Barnes: I think we are going to see something that's different. Justin olson is the new appropriations chairman. He's one of the intellectuals of the Republican caucus. He knows numbers, and that's what he does for a living. I think that he's going to have to play a big role in it, and I think that there is going to be more sunlight on the process than there has in the past. The reason I think that's true because I think the Governor and leadership are more in line on this than the previous Governor and the leadership. That alignment will allow for a more transparency as they work through the process.

Ted Simons: With that dynamic in place, where do Democrats sit? How much influence do they have? Their numbers are not there, anything else there?

John Loredo: Well, the numbers are not that far off. They are two down in the Senate, for sure. That's going to be a place where there is going to have to be wheeling and dealing. But, also you have a good number of moderate Republicans that value public schools. Everyone down there, at the capitol, is a member. You have your own list of priorities that you want to take care of. At the end of the day, you have got to be in a position to wheel and deal in order to get what you want. How these caucuses stick together is going to be key. I think that you have got great leadership on the democratic side, with Senator Katie Hobbs in the Senate and Eric Meyer in the house. They are both very smart. They are very reasonable. They have got a solid caucuses behind them. So I think that they are more than willing to sit down and work out the details, the give and take during the budget process. At the end of the day, if you bring, you know, the best and the brightest of both caucuses together to work on a budget, you wind up with a good budget that represents the needs of most Arizonans, and we have heard that type of talk from Doug Ducey, representing everyone. I hope that the process will reflect his commitment to representing everyone.

Stan Barnes: I doubt, highly doubt this is going to be a bipartisan budget. The Republicans, to my theme, Republicans are in line with this particular Governor, I believe, and one of the ways that they are in line is to attack the education issue with something other than money, this idea of empowering charter schools to use public facilities is just one example of the way that Republicans want to come out, come at the public education trouble. It's not Republicans cannot bring themselves, and I agree, with just -- we're just giving money to it. They want to reform it, make it better. The charter school movement, which was practically birthed in Arizona in this nation, has been a very positive thing, and I think you are going to see that injected into this answer.

John Loredo: But that does not balance the budget. At the end of the day, you have got to balance the budget. Those things, again, maybe good to talk about, but it does very little in terms of the balancing of your state budget.

Stan Barnes: Stay on this pointed, one of the Governor's major themes that are developing, even as he's brand new, is this idea of opportunity for all in education. He did it during the campaign and now repeating it in the State of the State address. It's -- the budget is going to find a way to be balanced. There is going to be horse trading and logrolling, and they are going to have to because they just have no other choice to do it, constitutionally and fiscally. But, how the K-12 system has improved is where the real action is, and Republicans are going to want to empower charter schools to do more. That's part of the answer.

Ted Simons: Is that what he was talking about regarding empty building, of the classrooms, whatever the reference was, that they are out there to use the opportunities for these facilities. It's almost a capital improvement plan for charter schools, is it not?

John Loredo: Well, I think that that's what he intends it to be, but at the end of the day, that does not put any money in the classroom. You can talk about improving public schools, but the number one thing that he can do is properly fund public education. The legislature illegally didn't fund public schools over a billion dollars. They could make good on that financial obligation. They could stop cutting soft capital in the classroom. They could do -- they could, actually, pass a budget that shows that public education is a real value to them. Anything short of that paying, what they owe public schools, is nothing but rhetoric.

Ted Simons: The -- out there on the horizon way out there with a nice storm cloud that's waiting to hit is the Medicaid expansion situation. What happens if the legislature wins?

Stan Barnes: Well, there is a lot of things that hit the fan that are not pleasant to think about. There are people that immediately go off the system. There are dollars that stop coming into Arizona. There is a lot of chaos if the legislature wins that particular point. And, you know, it may be worth it, to prove the point. You cannot do things unconstitutional around here, and that's, actually, where it turns, right, that's the question about how the tax or the money revenue stream was created. That is going to be a big bomb if it hits. For now, it did not make the state of the state address, which I think is an important point. I think the Governor is trying to talk about things we all agree on for the moment because he's still in the coming out phase with the legislature. He wants to get along with them, and that's an issue of a lot of contention.

Ted Simons: And again, one of the points in this suit is that let's say, you cannot just say something is not a tax because we decided we're not going to call it a tax, and that's at the root of this. This is a major case, and it's just sitting out there waiting to do it on everyone.

John Loredo: Sure. And what's at stake here, all of the matching funds, I mean, we're talking about a lot of matching funds from the Feds. A lot more than the State of Arizona is putting in. If that goes away, you have only got two options, either funds it with general fund and keep all those people on, or get rid of them. And so, you know, campaign rhetoric is one thing. When you are sitting there and you have got to vote, and your vote directly impacts the life of another person, that puts you in a slightly different position. When you actually have got to pull the trigger on it. Impacting that many people in a negative way, I think, is going to be a little more difficult than they think it is.

Stan Barnes: I think that issue is going to end up being a little down the road. It's more than a little cloud on the horizon to go back to your analogy. It's a huge cloud, but I think the court system has to take a few years to work out that question first, and in the meantime, we're going to have a budget that we need by July 1st of this year, so that's where the real action is.

John Loredo: And the budget will be counting on that is being there.

Ted Simons: And I think the Governor's budget will count on the legislative -- And the lawsuit being settled.

Stan Barnes: I think you are right, count on the state of the law as it sits.

Ted Simons: Are there plan bs in those situations? Or did they not go that way?

Stan Barnes: I don't think so. No one is really in charge. Everybody is in charge. The legislature, the Governor, all doing their best in real-time to deal with this problem, and the plan bs are not worthy of looking at until you get through some of these really important points at the beginning.

When I say plan b, I mean, if the legislature doesn't -- if the K-12 funding suit doesn't go -- there is no settlement. There is no deal, and the judge says, I meant what I said, and let's start paying up. Shouldn't there be someone somewhere on a computer saying this is what's going to happen?

John Loredo: Yeah, I think the judge has said that several times. You need to pay this bill. Is there a plan b? No, there are no more plan bs, you know. You either do it or x happens. And you have got to choose. So, and it's cuts.

Ted Simons: Were you surprised common core was not mentioned at all during this speech?

John Loredo: Not really. Many of the supporters of Doug Ducey and the chamber, those folks are supportive of common core. I would not expect that to be in Doug Ducey's speech. It was not part of the campaign.

Stan Barnes: Right. He touched it in a subtle side doorway, but, talking about the Federal Government not telling Arizona how to do things. That was -- for those of us with the dog whistle, I heard that being, you know, kind of arouond the common core area. We're not going to let the Feds tell us what to do.

Ted Simons: We talked a lot about, obviously, the state of the state address. Let's talk about the session now getting started. Just a couple of minutes on this. Are we going to see the wild and crazy bills? Or is there a sense that everything from 1062 to, you know, Arizona takes over all public lands, those things, are we going to see more of that thing? Will it get the play that it usually does? What do you think?

Stan Barnes: I think we're going to see the same amount that we have seen in practically every legislature since I've been there 26 years ago. There is good and bad with it. The bad is obvious because there is -- there are impacts from ramifications, but the good is this is the purpose of the legislature, itself. It is the venting of the 6.5 million people opinions through their elected officials, and yeah, there is somebody that wants to talk about that issue, but I believe the legislative leadership is adult enough and in charge enough that we're not going to be damaged by any of that. Will we see some? Yeah. Will it go up, be signed no.

Ted Simons: Do you think any 1062s are in the future?

John Loredo: I think they will be dropped for sure and probably get some hearings. I don't know that they get through the process, but I think the budget has a big effect on that. If the legislators are involved in the budget process, if they are, actually, engaged and involved the entire way through, they have got less time to play around with crazy bills. Now, if the budget is drawn in the basement with a handful of people, and everyone else is sitting around wasting time, that's when you see the crazy stuff start moving through because they are bored and they don't have anything else to do.

Ted Simons: Is there a sense of optimism? A new Governor, a new face, a new idea, and I think that he talked about fresh faces and fresh ideas down here. Are you feeling that down there? Or is that just a honeymoon waiting to end?

John Loredo: I think it's the honeymoon. You know. There are a lot of new faces down there. That's both good and bad. When you are talking about public policy, that means they are way behind the curve, and they have got to really do their best to catch up. From that perspective, I think, it will be interesting to see what people start doing, but once session starts going, the bills start flowing through the committee and people get busy.

Stan Barnes: I think that there is, among Republicans, I think that there is a real optimism. I think Ducey seems like a competent, analytical businessman is now the CEO of the State of Arizona, and that's -- that leads, I think, President Biggs and speaker Gowan to be optimistic about someone in the ninth floor that they can hit the tennis ball back, and as I say, return serve. Have that debate and be substantive about it and deep into the weeds about it and make a deal and move forward the way that politics in the positive sense can happen. So, the Republicans, I know that are down there, they are glad to have a new Governor, and they are glad that he is the Governor.

Ted Simons: Democrats feeling glad that, at least the landscape has changed?

John Loredo: I think that they are a little more realistic, realistic about the numbers, realistic about the budget deficit. They have got -- that they are heading into. This is not going to be pretty, you know, today was all about, you know, flowers on the lapels and floor speeches and this and that. Tomorrow, guess what, the real work starts. It's ugly. We're in a really bad situation here and these people are going to have to work their way through it.

Ted Simons: Gentlemen, great discussion, good to have you here.

John Loredo: Thank you.

Ted Simons: Tuesday on Arizona Horizon, we are preempted at 5:30 for a special 30-minute investigative report on the increasing abuse of heroin and opioids in Arizona. Then at 10 p.m. join us for a special Artbeat edition of Arizona Horizon. That is it for now. I'm Ted Simons. Thank you very much for joining us. You have a great evening.

Video: Arizona Horizon is made possible by contributions from the friends of eight, members of your Arizona PBS station. Thank you.

Stan Barnes:Political Consultant; John Loredo:Political Consultant;

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