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January 6, 2009

Host: Ted Simons

Arizona Corporation Commission

  |   Video
  • Perhaps best known for setting utility rates, the five-member Arizona Corporation Commission gained three new members as a result of the November general election. Outgoing Commissioner, Bill Mundell, talks about the political makeup of the new commission and some of the challenges it faces.
Category: Business/Economy

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Ted Simons: Hello and welcome to "horizon." I’m Ted Simons. Three new members of the Arizona corporation commission were sworn into office Monday. New to the five-member commission, perhaps best known for setting utility rates are former state representative bob stump, former state representative Sandra Kennedy, the first African American elected to the commission, and former state representative and Cochise county supervisor, Paul Newman. Today, the commissioners elected their new chairman. They selected Kris Mayes, who has served on the commission since 2003.

Kris Mayes: The next couple of years are going to be absolutely stunning in the degree of the work that we have to do here at the commission. The scope of the issues that we will deal with, and the accomplishments and achievements that I think we can make together. I'm a major proponent, like some of my colleagues, of increasing the amount of renewable energy that we do in the state of Arizona, in the energy efficiency around water conservation. I do believe that Arizona over the next couple of years can become the solar area capital of America.

Ted Simons: Joining me now is outgoing corporation commissioner, Bill Mundell. A former state lawmaker, he was appointed to the commission by Governor Jane Hull in 1999.

Ted Simons: Good to have you on "horizon."

Bill Mundell: Thanks for having me.

Ted Simons: Are you going to miss it?

Bill Mundell: It's been nine years and the only way I can really put that in perspective, my daughter was four when I got appointed and now she's 13.

Ted Simons: Yeah.

Bill Mundell: It's a great public policy position.

Ted Simons: The commission now changes. What do you see as far as the dynamics?

Bill Mundell: They're going to have three new commissioners and two democrats being elected and that will be an interesting mix to see how they proceed going forward. But the commission should not be Partisan in nature. The reason they're called commissioners is because we're like judges. We listen to the evidence and make decisions, and there shouldn't be a lot of partisan.

Ted Simons: Shouldn’t be a lot of partisanship but does it sneak in?

Bill Mundell: I don’t know I haven’t had that experience but you can disagree on issues in a respectful manner and I assume that that is what the commission will do.

Ted Simons: Alternative energy, are we going to see more action in the coming years?

Bill Mundell: Let me put this in perspective. In 2001, Arizona was the first state in the United States to pass a renewable energy standard and then two years ago, we increased it to 15%. Some people think we went too far. Others think we didn't go far enough. So that will be an issue that this commission will be looking at. Whether or not to expand it, and how do you pay for it.

Ted Simons: The solar generating station near Gila Bend, what's the status?

Bill Mundell: It's going to be the biggest. 280 megawatts. For 70,000 homes, it's the biggest in the world.

Ted Simons: So it's still on a go. We keep hearing finance problems could be an issue.

Bill Mundell: We had a hearing in December and we granted approval to go forward and it's on the fast track to be built. The next step is to start construction. It's going to be the biggest in the world.

Ted Simons: Two sides looking at alternative energy. Some say you need to push harder. Arizona should be the Saudi of solar. Others say you're pushing too hard. It's got to be more affordable.

Bill Mundell: I said that myself. Having said that, we have 15% renewable energy for our utilities. The far left thinks we went -- haven't gone far enough. The far right, too far. We were sued by the Goldwater institute saying we overstepped our boundaries. I think 15% is a good starting point and the new commission will have to decide again what percentage and how to pay for it.

Ted Simons: Will that be the biggest challenge and if so, what other challenges?

Bill Mundell: I think it will be a big challenge. The other big challenge will be if congress passes a carbon tax, electricity generated from coal will go up in price and the new commission will have to figure out how to deal with that.

Ted Simons: From your time on the commission, let's talk about what you're most proud of, the most satisfying aspects, and start with the positive aspects.

Bill Mundell: The thing I’m most proud of is the renewable energy standard. I was chairman in 2001 when we passed the first renewable energy standard in the United States and then subsequently increased it to 15%. That's what I’m most proud of. And energy efficiency programs, some call it -- you reduce the amount of electricity that homes use and you save customers money and reduce the amount of pollutants in the atmosphere. Because of our energy efficiency programs, we've reduced that.

Ted Simons: As far as frustrations, things you wish could have been achieved but still not done?

Bill Mundell: I went through the Jim Ervin era were we had a commissioner investigated for unethical acts and that was a down part of my tenure. I called for his resignation along with the other republican commissioners and that was a low point in my tenure. The thing I probably would like to see us continue to move on is the energy efficiency programs and renewable energy standard.

Ted Simons: And do you think this new commission will have that in mind?

Bill Mundell: Two of them campaigned as increasing it to 50% and that's certainly a laudable goal. The question is how do you pay for it?

Ted Simons: Last question. Do you think that people truly understand what the corporation commission does?

Bill Mundell: When I go to the rotary clubs and other clubs I always say, do you know what I do? And most don't. Every time an Arizonan turns on a light, their air conditioner, takes a shower or cooks or heats their house with gas, passes over a railroad track, buys gasoline, invests in a stock or bond or starts a business, a decision by the corporation commissioners has probably impacted their lives.

Ted Simons: Very good. Thank you for joining us.

Bill Mundell: Thanks for having me.

Journalists Roundtable

  • Because of the state's budget deficit, the legislature could hit the education community with budget cuts. Hear from three education advocates about what they expect from the legislature during its upcoming session.
Category: Journalists Roundtable

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Ted Simons: When the state legislature starts its new session this Monday, balancing the budget is expected to be its first order of business. Will public education feel the pain of the budget ax? Hear what education advocates have to say in a moment. But first David Majure shows us some of the issues that are in play.

David Majure: 2008 was an eventful year for public education. The Arizona supreme court heard a challenge to the school voucher programs for foster and disabled kids. A Tucson charter school continued to rank among the nation's top high schools. Lawmakers approved a plan to help school districts afford the rising costs of utilities.

A man: Arizona is the worst. We spend less per student than just about every other state in the country.

David Majure: In 2008, there were plenty of discussions about improving education. As we enter 2009, the focus may have shifted to saving the education from the faltering economy. The new governor is already sharpening the -- looking for ways to close the gap and an expected shortage of more than $2 billion in 2010. General fund spending this year is about $9.9 billion. Of that amount, $4.2 billion goes to k-12 education. That translates to 44% of all general fund spending, makes education the state's single largest expenditure. Education advocates are bracing for possible attempts to cut funding for full day kindergarten. They’re preparing to fight an attempt to permanently repeal the state education equalization property tax and are facing a possible one-year suspension of the tax credits for extracurricular activities and private school tuition.

Ted Simons: Here to talk about that are lobbyists for three of the states major education advocacy associations. Janice Palmer represents the Arizona school boards association. Jennifer Loredo is with the Arizona education association, the state's largest teacher's union. And Dr. Chuck Essigs represents the Arizona association of school business officials.

Ted Simons: Thank you all for joining us.

All: Thank you.

Ted Simons: Janice, what do you hope to see out of the legislature?

Janice Palmer: We have a $3.4 billion deficit we're looking at for fiscal year '09 and '10 and so we're trying to minimize cuts to education but also realize in all likelihood this is going to be a tough year and we have to do the things necessary to keep the classroom whole. We're hoping as little cuts as possible. We have to explore areas like tax cuts but also reduce the administrative paperwork that school districts have to do to try to ease the burden.

Ted Simons: Is it a question not if, but how much?

Charles Essigs: I think there's some reductions to school districts but hopefully to a minimum and the people will consider the long-range impact and try do the things that have the least impact on the school districts.

Ted Simons: Do you have a sense they're keeping that in mind?

Charles Essigs: I believe they are. They're trying to define the issues.

Ted Simons: Hopes and concerns regarding the legislature?

Jennifer Loredo: I hope it doesn't come down to a crash and burn session. We need to keep k-12 education at the forefront. When we look at investment in education, in the long run, it's the way to go. If we start cutting salaries and benefits and programs, the whole entire Arizona economy is going to suffer.

Ted Simons: Let's get to the more volatile aspects. All-day k. Does it stay or does it go?

Janice Palmer: I think we've seen a lot of support out there. I think governor-elect jan brewer has come out and saying it's a critical program. We've seen in the research that kids and the schools, the accountability levels are so, so high that we need as much education as possible for these young kids to be successful in the future.

Ted Simons: There has to be a concern that now is the time they may jump.

Charles Essigs: There's been good bipartisan support. Hopefully people will look and try to balance the budget.

Ted Simons: As far as those areas are concerned, the state equalization rate was in a lot of lawmakers minds the last session. What do you think this go-around?

Jennifer Loredo: That's one of the Arizona education association's biggest concerns. The state equalization rate is imposed at the county level and funded by homeowners and business owners. It generates $250 million for schools to offset the basic state aid for education. If we permanently cut that which some of these legislators are saying they want to do, we're eliminating $250 million every year that's going to go to our k-12 education system and when you're in an economy like we are now, you can't keep digging. And once we lose that money, it's gone and education will never see that again.

Janice Palmer: That's scary. When you look at $250 million to $350 million, why would you do that? It's the right thing to do to have that come back into the state and figure out budget cuts otherwise.

Jennifer Loredo: We're in favor of looking at tax relief, but not until you pay your bills. And that's what we need to look at with this. Are we on top of the game? Absolutely not.

Ted Simons: How do you respond when a lawmaker says this is essentially a tax increase if what has been suspended comes back?

Charles Essigs: Well, it wasn't a tax. It was a suspended tax for a few years to see what the impact would be on the state and the difficulty, if they do eliminate it, if it's a simple vote, but to ever bring it back, a super-majority. As Jennifer mentioned, once it's gone, it's gone.

Ted Simons: Talk about the debt limit, what is that and how is that at play next session?

Charles Essigs: It could impact school districts this year. There's a limit on school spending in the state which is tied to inflation and increases in students. For example, if you have 1,000 more students or 10,000 more, the spending limit goes up. One of the problems Arizona is facing is when they changed the funding for full-day kindergarten, they didn't change how they're counted. They're still only counted as half. All of that growth in spending related to going to full-time kindergarten, the constitutional limit did not go up so we're over the limit by about $98 million. If the legislature doesn't override that limit, schools would have to cut this year's budget by $98 million. To put that in perspective, the full inflation increase the schools got this year was $100 million. So it would be like taking away all of their inflation increase and they would only have a few months to adjust.

Ted Simons: What's your sense?

Charles Essigs: They passed an override the last two years, some legislators said that's a top priority, but this year, it's going to take a lot of work on everybody's part to get it passed.

Janice Palmer: I think we've seen leadership from the speaker-elect who said this is going to be one of the first bills that goes through the house. You have school districts out there that have three months to come up with $600,000. Or up to $7 million at one school district. We're -- it's not the place to go in order to get those cuts without impacting programs and kids.

Ted Simons: You mentioned school donation tax credits earlier. Talk about that.

Janice Palmer: There's been a lot of conversation about school tax credit for public schools, goes for band and choirs and those things. And there's private school tax credit which goes for tuition for private school. It's about $100 million from the numbers of 2007. $100 million to $200 million that's up for a moratorium. It would not go away permanently. Just a one-year suspension so the state can hang on to deal with the deficit.

Ted Simons: Of all the ideas, is that the one that education officials might be able to live with?

Janice Palmer: I think it's something we would definitely like on the table and when you're in a tough budget time like we are, keeping the classroom whole is critical. Different times and different conversations but this one is very, very -- this one is critical.

Jennifer Loredo: I think if you coupled this for one fiscal year -- that's $125 million. You're giving the state legislature $350 million off their plate and that can directly come from education without impacting the classroom. Is the way to go.

Ted Simons: Is there a thought, a mindset to change the funding formula for education in Arizona? Is that something that you would like to see? Is that something that's going to get done?

Charles Essigs: All of the studies show we're 48th or 49th in the country. The problem is that's a long-term activity. The Arizona business and education coalition has undertaken that study but that will take about 18 months to complete but at some point, we need to redo the funding formula for schools in Arizona.

Ted Simons: Is that a problem that has to be addressed?

Jennifer Loredo: It does, and you got to look at it on both the expenditure and revenue side. One of the problems that the legislature has created for itself through the student first funding, which goes to build schools and provide maintenance for schools, is funded off the state's general fund so they've created a program without having a dedicated funding for it. When we look at the bigger issue, we have to look at how do we pay for things. And I think that's something that hasn't been done yet.

Ted Simons: Is there a sense there needs to be more flexibility as far as spending in Arizona?

Janice Palmer: I think you can look at charter schools who are members of the school board. They have flexibility, and it allows the flexibility in order to address the needs of the schools, rather than arbitrary pots that are audited. That's the issue. Making sure the money is spent properly. It's time to have a conversation about being accountable for the product and dollars.

Ted Simons: I know there's criticism regarding the idea we need cuts in things that are unnecessary. These sorts of things. Are those criticisms valid? More valid now than in previous years?

Charles Essigs: Well, I think the school superintendents, I think, have taken a good position. If the legislature does cut schools, they should give schools the flexibility, because in one district you might want to cut one area and another you might want to cut somewhere else. If cuts are made, schools want the ability to decide where it's best to make the cuts, in individual cuts rather than one size fits all across the entire state.

Ted Simons: I guess the question is premised on the idea that there are some things that are not entirely essential that could manage to be cut back. Are there such things?

Charles Essigs: I think in some districts that might be lower priority but when you're 48th in the country and what you spend for pupil, but priorities, there are some districts that find some things of a higher priority than others.

Janice Palmer: The administrative reduction, that's an area we could see more resources but our local districts are cutting school nurses and cutting assistant librarians and rerouting bus routes. These are not good decisions that districts wanted to make but they're a reality when you're in tough times.

Ted Simons: We went through a thing here regarding unification in Arizona. Do you think that will bubble back up in the next session, do you think?

Jennifer Loredo: I think it’s touch and go, and a lot depends on the chief lobbyist for the utility company, Marty Shultz. And I think he's pretty upset with the way the courts have ruled and I think we could see something, maybe see a proposal for the areas that voters did by a majority of those actually went to the polls and we could see something maybe for the west valley again and two of the other areas that passed it, but --

Janice Palmer: I would really hope not. Because one of the things that had to happen, we're talking about budget cuts, school districts had to pay for those elections. They spent $420,000 in order to put these questions on the ballot that failed. I think the thing was there and failed and now we need to figure out how to make education world class.

Charles Essigs: And we're still 48th in spending. Even if we were unified -- if we took Chrysler and Ford together, that doesn't solve any problems. Just putting districts together doesn't create a more balanced funding base for education.

Ted Simons: Another hot topic. Are you hearing, sensing that aims will be something addressed next session?

Janice Palmer: Aims taskforce is meeting. They're meeting regularly. In fact, you have a taskforce member right here. [laughter] supposedly April there's some recommendations coming out. The goal of the taskforce is to have something in place.

Charles Essigs: The only concern may be that this will be a short legislative session and if that's the case, you won't see it addressed. But if it's a longer session, then it could possibly be addressed. Even though the taskforce is trying to get the information to the legislature in a timely manner.

Ted Simons: We've talked about don't want cuts and can't do it now, this sort of thing. A lawmaker comes up to you and says, "We don't have the money anymore," how do you respond?

Jennifer Loredo: I think we've got to put things on the table and look at revenue enhancement. We're in a hole and we're going to have to put a lot of things on the table. A moratorium for three years, it was put into play when we were flush with cash and we're hurting now. When you're in a hole, you don't keep digging. So I think my retort would be going to a school district and talking to a third grade teacher and see what they say about where they would make cuts.

Ted Simons: We don't have money, we just can't afford it. What do you think?

Charles Essigs: You show that you've made k-12 a priority. That you've looked at all of the other areas that could be cut. But look at what you can do to enhance revenues. And then once you've exhausted the possibility of revenue enhancements, then you look at cuts. But that ought to be your last step. Others want to do the first thing, is go ahead and cut. That ought to be the last step.

Janice Palmer: It's not just k-12 for the future of Arizona. It's an economic engine and vital for the state. Make it a priority. Let's look at the items that are non-essential classroom and have a discussion about that. So we move forward in a good manner.

Ted Simons: Thank you for joining us. Great Discussion.