Governor’s 2014 State of the State Address

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Jaime Molera, a partner with Molera Alvarez and John Loredo, political consultant and former Arizona lawmaker give their analysis of Governor Brewer’s 2014 State of the State address and the upcoming legislative session.

José Cárdenas: Thank you for joining us. Governor Jan Brewer delivered what may have been her final State of the State address on Monday. Brewer recalled how Arizona came back from a $3 billion deficit, expanded health care for the poor, and passed business friendly legislation to make the state more competitive, and focused on changing Arizona's troubled child welfare system and making sure abused and neglected children are not ignored. We will have analysis in a moment, but first here are some issues the Governor talked about.

Governor Brewer: We addressed the issues around uncompensated care and the hidden health care tax. By again, listening to the business community and honoring the will of the people. This morning I signed an executive order that abolishes CPS as we know it and -- [Applause] -- and establishes a new division of child safety and family services with its own cabinet level director who reports to me. Today I ask you to strengthen Arizona's law to give prosecutors and law enforcement more tools to combat this evil and help better protect victims. We will also launch an awareness campaign so Arizonans will know what to look for and how to report it and victims will know how to seek help. Further, I will create a Human Trafficking Council to coordinate efforts statewide to address this crime. This year I'm calling on the Legislature to approve a package to further boost Arizona's business competitiveness, particularly in technology and manufacturing sectors, which brings high-paying jobs. I am asking our Arizona Board of Regents to develop a plan and adopt a policy that guarantees stable, in-state tuition levels for the four years it should take a student to graduate. [Applause] This year I am calling on the Legislature to renew support for the military installation fund. That money will be used specifically to mitigate property encroachment and preserve military land use projects, without throwing that financial burden on private property owners.

José Cárdenas: Thank you for joining us. With me tonight is Jaime Molera, a partner with Molera Alvarez, and John Loredo, political consultant and former Arizona lawmaker. Gentlemen, good to have you back on "Horizonte." I want to talk about some of the specifics, including things that were highlighted in the video piece we introduced this segment with. Before we do that,just general impressions. John?

John Loredo: You know, I think it was a much more civil State of the State than years past. She kind of came out of the gate swinging and attacking in some of the previous years, attacking those on the left for various things. This time I think was much more civil. And I think probably reflective of the fact that she knows if she's going to pass some of her priorities she will have to have Democratic support, just like Medicaid.

José Cárdenas: Jaime, your general impressions.

Jaime Molera: I thought it was good. I think giving the speech over the years; she's learned to give a speech within her parameters. It was not too long, not too detailed, and policy wankish and that's not who she is, she's been criticized in the past when she tried to do those speeches. She hit the high points and talked about her accomplishments. I think in a lot of ways it was the setting of her final year, and saying look, we've accomplished all these things, and she's teamed it up with a final couple of big pieces that will help cap her years as an Arizona governor.

José Cárdenas: We did introduce this as what may be her final address, and you commented on it, too. I take it nobody really believes she thinks she's going to be running again.

Jaime Molera: I think there are a very, very few people that believe it. An attorney might think he could get it past the Supreme Court. When you look at the Constitution it seems very, very clear. I think most political pundits would say this is indeed her last term.

José Cárdenas: If we have time at the end I do want to come back to the Governor's race. But you mentioned Medicaid. She seemed to make a very brief allusion to what happened last year at the very beginning.

John Loredo: She acknowledged it was a big victory for her.

José Cárdenas: She specifically thanked the business community.

John Loredo: She did. It's a ton of money coming in to health care providers here in the state of Arizona, and a big boost to the economy. I think Democrats were more concerned about the people that the program would help. But there was enough to go around for everybody there to support. It was what was a big priority that got passed.

José Cárdenas: Speaking of the business community, she made a point to say Arizona was back in terms of its fiscal house being in order. In the commentary after her speech, a lot of people disagreed, we're not quite there yet.

John Loredo: She painted a pretty rosy picture. In terms of the State budget there is a surplus, but a lot of outstanding debt, as well. They sold the building she was talking in, those still have to be paid off. But there are other issues, the funding of the inflation factor for public education. The prop 301, many of that has to happen, that is a big cost. There's going to be a big cost associated with CPS. There are outstanding deficits that need to be funded and filled. So that surplus going forward diminishes very, very quickly. If she's going to layer on a brand new corporate tax cut on top of that, she's going to blow a hole in the fiscal deficit pretty quickly.

José Cárdenas: Jaime, did she overstate our fiscal situation? Was it a mistake to do so, if so?

Jaime Molera: I don't think so. Granted, every Governor engages in a little bit of hyperbole, that's what a governor does. But looking at the mountain she had to overcome to get Arizona back to where we were in relatively short order, there are a lot of folks five years ago that had absolutely no thought whatsoever we'd be in this situation.

José Cárdenas: So it's something worth talking about.

Jaime Molera: Yeah. She's in a good position. She might have embellished a little bit, but let's face it, Arizona is in a good position. Almost every economist in this state has said Arizona is in a position over the next two years to become one of the big growth states again, in terms of population increase and in terms of jobs. When she leaves I guarantee you I think the accolades she will get, she really did bring Arizona back from the brink.

José Cárdenas: John talked about blowing a hole in the budget and we'll talk about that a little later. She very clearly did blow up CPS. That was the big news and the headline.

Jaime Molera: I think she had to. If you look at what transpired and look at the major administrative failings that occurred, I think she had to come out fairly decisively. The criticism was mounting that nothing had happened. There were a lot of internal investigations, a committee was formed to look at what needed to be done for the 6,000 cases that were lost and then found again. Her saying enough's enough, we're going to blow up this entity, take it out of this dysfunctional DES, the Department of Economic Security. I'm going create its own agency, hand pick a new director named Charles Flanagan, by all accounts most people like and respect on both sides of the aisle. I think it was a very, very smart move. The funding they are going to need to make it work, it's going to be a big battle for her in the legislature. It was a very smart move politically to lay the groundwork for the reform that needed to happen.

José Cárdenas: John, you talked about funding, it was clearly a very well received statement. The commentary, it was thin on details and how this is going to work. She needs the legislature really to do something.

John Loredo: She didn't do a whole lot. She didn't really blow it up, she changed the name and put a different person in charge.

José Cárdenas: Who reports directly to her, though.

John Loredo: But what does that mean? Does it mean it becomes even more political than it already is? The bottom line with CPS, we've been through this year after year after year for decades with CPS. The bottom line is that you have to properly fund it in order it for to work. You've got extremely high turnover with caseworkers, over 30%. You've got caseworkers who have an unrealistic number of cases that they have to investigate and they cannot possibly humanly get to. The only way to improve CPS is to reduce the caseload to a manageable level so those investigators can go out there and actually protect a child. That costs money. As long as you have a legislature that has continuously cut funding to DES, the direct result is a backlog in cases of children who need help but don't get help. They can retitle it and reshuffle the deck, whatever. The bottom line, they are going to take it seriously and fund it and fix it, or they are not. They are just going to hang a different name on it. It needs more money and needs to be properly funded. That is the bottom line. That's the only conclusion we've ever come to, year after year after year.

José Cárdenas: Can they do that and create more business for the environment, but you indicated that means a tax cut.

John Loredo: She mentioned she's going back in to raising the spectrum of pushing another corporate tax cut. Bottom line, that's money out of the budget. It is -- there is, you know, when you do that, you permanently take money out of the base moving forward. So you know, we've come out of the deficit, we've got a little bit of a surplus but we've got a lot of bills to pay here. The bottom line that is when you're trying to pay those bills when you've got priorities like CPS, you don't on the other hand propose a big tax cut and take money off the table you can't use to fund things like public education and CPS.

José Cárdenas: She mentioned the business community, Jaime, several times. Is this a reward for the support she's gotten? And do you think it's actually feasible for her to do this tax cut?

Jaime Molera: Absolutely, A couple years ago they did a fairly significant tax cut on business accounts that has been shown to be very effective. One of the things you cannot do is, not recognizing what Arizona has to do competitively in order to make sure we don't get the kinds of jobs, so we don't get into this process where we always dependent just on growth, when we went into this major great recession, a lot of the reason was because of the real estate industry fell, the jobs left and we were left with a very small manufacturing base that certainly needs to be grown. Other industries need to be grown. With this particular, it's not a big corporate tax giveaway. It's focused specifically on manufacturers to do what other states have done. They can good and the credit based on the energy used to manufacture goods in Arizona. It's a small thing I think will pay big dividends. When you have a company a -- when you're trying to attract companies, it gives Arizona that kind of credibility. Governor Brewer is trying to say, look, we can tackle education all these other big issues down the pike, including CPS. But let's recognize we need to be competitive. I think it's going to be successful, it's proven to be in the past.

José Cárdenas: Speaking of education, she talked about a student success fund and about more predictability in terms of higher education tuition.

Jaime Molera: The higher education tuition is significant. You have Andy Tobin that for years has been talking about tuition rates. What she's saying, from an Arizonan standpoint, as tuition is increased, we just want to make sure that the Universities have a structure that makes it more predictable for families. Now, I think the good news is that her long-time chief of staff, now the President of the Arizona Board of Regents, I don't think this was an issue that caught them off guard. This is something the regents have been working on, I think there's a plan they are going to put forth. It is a high degree of success. The regents have opportunities to make sure this thing is going to shine for her.

José Cárdenas: She also talked about human trafficking and spent a reasonably long time on that. What's behind that?

John Loredo: Hard to say. That could be -- I mean, it could be more red meat for -- you look back at every State of the State she's had, there's been some type of tied to immigration, where it's 1070. This is more of a softer, gentler issue. The devils are in the details. How they go about doing this is important. And like it's been stated before, there weren't a whole lot of details given in this. It was more big picture stuff. We'll see how that shakes out.

José Cárdenas: Let's talk a little about atmosphere in the legislature she's going to have to work with. As partisan as it has been in the past or different this time?

John Loredo: Probably just as partisan. The reality is that the math is what the math is. You've got people who are either very hard right, or they are more moderate, then you've got the Democrats on the other side. And the bottom line is that there's no one gigantic block the votes that can ram whatever they want through. There are factions on top of factions that come into play for every bill. You've got to build those votes one way or another. The longer the session goes the more personal it gets, and feelings get hurt and it just blows up. You have to do due diligence in building votes and moving that agenda. It has not been easier for her, it's been tough for her. At the end of the day you've got to be willing to get the votes from both sides of the aisle, you've got to be willing to negotiate and compromise and do what's best for the greatest number of people. If she replicates what she did with Medicare, then I think you will see pretty big things moving through for the better. If she does, it's going to go right back into kind of crash and burn time, where not a whole lot of good happens and you wind up with wacky bills that just really don't do a whole lot of good.

José Cárdenas: Jaime, we're pretty much out of time. Just one last question It's an election year. Is it going to make all of this harder, the stuff John was talking about?

Jaime Molera: I disagree a little bit. You have a governor that, except for one or two attorneys, I think everyone realizes this is the last year. I think she wants to leave a legacy that on her watch we did fix the state budget. We made Arizona more competitive. We laid the groundwork for education. It's going to be an opportunity to say, look, we brought people together, we will show what people can do. We worked together to get things done, it's not like Washington, D.C., we work together to get things done. It's going to be partisan, no doubt, but at the same time the rhetoric will be toned down significantly.

José Cárdenas: We'll find out soon enough. Thank you both for joining us on "Horizonte."

Both: Thank you.

Jaime Molera:Partner, Molera Alvarez; John Loredo:Political Consultant and Ex-lawmaker;

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