Horizon, Host: Ted Simons

May 28, 2009


Host: Ted Simons

Arizona Education Funding

  |   Video
  • How much does Arizona spend on public education? It depends on how you do the math. Comparisons of how much states spend, per pupil, on K-12 education often list Arizona at, or near, the bottom. Typically, Arizona is shown to spend around $6,000 per student compared to a national average of more than $9,000, but the Goldwater Institute is reporting that Arizona spends more than $9,500 per student.
Category: Education

View Transcript
Ted Simons:
How much does Arizona spend on public education? It depends on how you do the math. According to several sources, Arizona is at or near the bottom in national rankings for per pupil funding. Arizona spends about $6,000 per student compared to a national average of more than $9,000. Meanwhile, the Goldwater Institute puts Arizona's K-12 funding at about $9,500 per student. Here to explain the differences are Matthew Ladner, vice president of research for the Goldwater Institute, a conservative think tank. And Chuck Essigs of the Arizona Association of School Business Officials. Thank you both for joining us here on "Horizon."

Chuck Essigs:
Thank you.

Ted Simons:
All right, Matt, how much does Arizona spend per pupil in education and how did you get the number?

Matthew Ladner:
If you look at the superintendent's annual financial report it gives a total revenue from all sources of about $9.2 billion. You divide that by the number of kids. 950,000, you get 950 per -- it's a substantially higher number then gets reported.

Ted Simons:
I want to come back to that in a second. I want to ask you, how much?

Chuck Essigs:
We do spend $9,500 if you add in all of the things that get added in the report. But when you look at the national studies, education week, which is considered the gold standard for reporting, the American legislative exchange council, the N.E.A., all of those studies which look at all states, including Arizona, compares them on an apple to apple and orange to orange; Arizona is $6,200 to $6,500 per pupil for operational expenses. What drives the $9,500 is when you bring in capital expenses and self-insurance accounts and student funds and revenues that schools have but really aren't used on a day-to-day basis.

Ted Simons:
Is there a difference between capital expenditures and revenues and classroom teaching?

Matthew Ladner:
There is, now if you do the same procedure I described to you for charter schools, you look at their total revenue you get a figure $7,800 per pupil and that's the same all-in procedure. Public schools get, you know -- actually get state funding for facilities while charter schools don't. We use the facilities for an educational purpose. If school facilities are going to take funding they ought to count it in their expenditure per pupil.

Ted Simons:
Why not include that?

Chuck Essigs:
If you include that in the expenditures that others are reporting. If you want to take the figure for Arizona, which is still below the national average, if you bring in the capital expenditures we're still going to be 48th or 49th, because their spending is not going to be $9,500 anymore, it's going on an average, $11,000, $12,000, because you're including the capital expenses also.

Ted Simons:
Compare and contrast compared to other states all-in.

Matthew Ladner:
I can't tell you that because I don't know what the other states are doing. To get these figures you have to dig into the guts of the report to get an accurate number. My feeling we've got about $9,700 per kid all-in for district schools. About $7,800 for charter schools. The Goldwater Institute did a survey of private schools and 146 schools across the state; we found an average cost of about $5,500. And spending for pupils in Arizona was $404 per pupil, and adjust for inflation, about $2,800 per pupil. So I don't think it's important to know how much we compare to kids in Alaska, I think the point is --

Ted Simons:
If we're ranked low, you don't think that's important?

Matthew Ladner:
I think it's important to recognize that our schools are getting a substantial amount of money per pupil. $9,800 is a lot more than $7,800. And the point is we need to do the best we can with the resources we have available.

Ted Simons:
Aren't results -- academic results what we're going for here?

Chuck Essigs:
Yes, but what will the additional dollars buy? The only state below us is Utah. We have the second largest class size. 24 students on average. The national average is probably closer to 15. You have to give up something by not having those resources and giving schools more money will make them better, but if they -- won't make them better. What are the five things that Arizona needs to do with extra dollars to really have adequate schools for all children and those included full-day kindergarten and training for teachers and smaller schools and individual tutoring for kids who are struggling. Just bringing in more revenue doesn't make your business more efficient. If you use the money appropriately, it does.

Ted Simons:
Do I infer you believe we spend too much on public education?

Matthew Ladner:
That’s not what I'm interested in. I wouldn't say that even. I'm a graduate of public schools; my own children attend Arizona public schools. I want them to succeed. You look around the country; you look at Florida, which is ranked low on these comparisons of state-to-state. Florida got very serious about education reform in 1998 and ten years later, the nation's report card, fourth grade reading, their free and reduced lunch children are outscoring for all children here in Arizona. Ok? That's not spending a lot. It's also with a difficult demographic profile similar to what we have in Arizona. And they're getting more bang for the buck and that's critical because we have a lot of demands on public dollars in the state. Health care, higher education, transportation, criminal justice. We have a $3 billion deficit. We're not going to spend our way to high-quality schools so we need to focus more on bang for buck.

Ted Simons:
How do you explain the success in Florida?

Chuck Essigs:
First, it’s more per pupil. And I don't have the numbers right now. But they aren’t at the bottom.

Ted Simons:
Thanks for joining us on "Horizon."

Tax Incentives

  |   Video
  • CityNorth, a mixed-use commercial development in north Phoenix, is at the center of a legal battle over the constitutionality of tax incentives that cities offer private developers for the purpose of economic development.
Category: Business/Economy

View Transcript
Ted Simons:
Welcome to "Horizon." I'm Ted Simons. A tax incentive agreement between the city of Phoenix and a private developer has land in Arizona's courts. I'll talk with both sides of the legal battle over sales tax rebates for the CityNorth project. But first David Majure has more on the story.

David Majure:
Ken Cheuvront is a state senator, general contractor, and owner of a downtown Phoenix restaurant that specializes in wine and cheese.

Ken Cheuvront:
We decided we would become the cheese mongers of Phoenix.

David Majure:
Pardon the slang, but he really got cheesed off when the city of Phoenix promised a tax break to the developer of CityNorth, a private retail and residential project in north Phoenix.

Ken Cheuvront:
It is completely a fairness issue. If you are somebody who is competing with a retailer or restaurant in CityNorth and getting a tax advantage and you're not, it's really hard to compete, especially in this market. And to me when the cities are picking the losers and winners, that's just not right. As someone who's invested a lot of my own money in my companies I want to make sure that I have a level playing field, and if my competitor is giving special tax treatment or giveaways, that's going to put me at a disadvantage and probably my income is going to be affected by that.

David Majure:
In the summer have you 2007 the city of Phoenix promised to cover the cost of 3,180 garage parking spaces at CityNorth. That includes 200 park-and-ride spaces for long-term use by the public free of charge. Phoenix agreed to make annual payments equal to half the amount of sales taxes it collects from stores at CityNorth. The payments would stop after 11 years or $97.4 million, whichever comes first. The city would start making those payments only after 1.2 million square feet of retail space is open for business. But that agreement is on hold. The Goldwater institute filed a lawsuit claiming it violates Arizona's constitution. Senator Ken Cheuvront signed on as a plaintiff. He says tax incentives make sense in some cases but not for retail development.

Ken Cheuvront:
If it is for the infrastructure, for building the roads, the sewers, you know, public amenities that would be built anyway, and going to be reimbursed for that, yes, I think that there is room for that. But if it's just to help that one business get a leg up at the expense of other businesses, no. I think that's unfair and it really is against the Arizona constitution.

David Majure:
A state appeals court agreed, saying the CityNorth tax rebate violates the constitution's gift clause, which generally prohibits a public subsidy for a private business. The city of Phoenix and CityNorth have appealed that decision to the Arizona Supreme Court which has not yet decided if it will take the case. Meanwhile, Phoenix city officials declined to comment while the case is being litigated, but in the past they've indicated that the agreement was necessary to make sure CityNorth located in Phoenix and they've said the project will generate jobs and tax revenues that far outweigh the taxpayers' initial investment.

Ted Simons:
Joining me now is Clint Bolick, director of the Goldwater institute's Scharf-Norton Center for constitutional litigation. The Goldwater institute filed a lawsuit challenging the CityNorth tax incentives. Also joining us Grady Gammage Jr. an attorney representing CityNorth. Good to have you both on the program.

Clint Bolick:
Great to be here.

Grady Gammage Jr.:
Nice to be here.

Ted Simons:
Why did the Goldwater institute decide to go after this particular agreement?

Clint Bolick:
Well, this state was awash in subsidies to retailers, and the notion that the taxpayers need to basically bribe people to sell things to them is just ludicrous. Our constitution has a gift clause, anti-gift clause that was the result of the framers saying that they didn't like railroad subsidies back at the founding of our state. That same clause prohibits taxpayer subsidies for in this case an ultra luxury Taj Mamall.

Ted Simons:
Why was the appeals court decision wrong in your mind?

Grady Gammage Jr.:
The appeals court decision was a shock to a lot of people this. Has been a standard of practice in Arizona for a long time and indeed throughout the United States, that sales tax is use to the rebate into projects to build infrastructure, to make those projects different, to incentivize the collection of more retail sales tax. There's been for about 25 years a test that's applied to those kind of things, we call it the Wiss-Duber test, it had these sort of two-part analysis to it, that this deal was crafted very carefully to fit within, you know, and that is does the federal government -- does the local government actually lose any money over the long term, and is -- are they getting enough to sort of make up for the benefits that they're giving. The court of appeals went way beyond that and said if the private party gets too much, that may in and of itself invalidate it, apart from the balance. And said that in analyzing this you can't consider indirect benefits like tax revenues and jobs and all the things the cities have used this kind of agreement to incentivize. They say you can't do that anymore. So the implications of that go way beyond this particular decision.

Ted Simons:
Back to the general view here of just what we're talking about, why is it bad for cities to give rebates and incentives for major projects that could help areas that might otherwise not get the projects and not get the revenue coming in?

Clint Bolick:
Well, Ken Cheuvront put his finger on it. Really, who is paying for this? Well, regular taxpayers and small businesses that are the backbone of our economy but never get subsidies, but beyond that, government is terrible at picking economic winners and losers, in fact, right her in CityNorth what started as a subsidy now looks like a bailout because this is a white elephant, a ghost town out there. The Glendale arena situation likewise. For every success story there's a failure story, you ought to leave these forces to the market and especially for retailers, there's an adage that retail follows rooftops, if people move to Arizona, we're going to have an abundance of people trying to sell us things.

Grady Gammage Jr.:
CityNorth's not a white elephant. It's actually no retail is doing very well in Arizona right now but about 80% of the stores built out there are occupied. About half of the rental units are occupied at this point. It's doing reasonably well. But it's important to realize none of the money's being paid so far. This none of the money gets paid until the next phase is built, and only paid out of revenues that come from CityNorth. So we're not forking out any money now to bail out CityNorth. If the next phase which includes department stores takes place, then the payment woes begin, and the decision that was made here which was made by the city council under the existing law was that they would get a markedly better and different project if they allowed these revenues to be used to build structure's parking and that by doing that they free up a lot of land for employment uses and office type uses. That's the kind of quintessential decision city councils make. City councils do pick winners and losers. They do it every time they put a road somewhere or pass a zoning ordinance. That's not what the gift clause is about. What the gift clause is about is cities giving away their money, and that's not what's happening here. It's not like the old railroad cases where cities would float bonds and give it to the railroad to build something. The city hasn’t risked a dime in this deal yet and they never do. They always get more money than is being paid to the developer.

Ted Simons:
Apples to apples as far as talking about history and what's happening with this particular development?

Clint Bolick:
No, the railroads actually were the life blood of the economy. You certainly can't say that about a luxury shopping mall. So if the railroad subsidies were wrong, this is even more wrong, and with due respect to my friend Grady, the parking garage situation was a sham. They were required to build structured parking in order to attract Nordstrom's, what this is about is keeping these retailers out of Scottsdale and in Phoenix, what the city should be doing is sharing their revenues instead of having a war over tax revenues. That way the tax money all ends up in the governor's coffers, not in some Chicago developer's pocket.

Grady Gammage Jr.:
Ted, we could go back and forth like this and never let you get a word in edgewise. Nordstrom didn't require the building and structured parking. That was a decision to make this something other than a conventional mall. And that is beneficial to my clients, beneficial to the city, and to everyone else. So that's really not the case as to what happened.

Ted Simons:
As far as though incentives, rebates, and these sorts of things, back to what we saw with Ken Cheuvront and the idea that if he opens an eatery at CityNorth that would be subsidized in a way in which the downtown eatery would not be. Is that fair?

Grady Gammage Jr.:
That may or may not be the case, by the way. That depends on whether or not the landlord passes that benefit on to the tenants which frankly I'm a tenant in a building that's had some subsidy and we don't see a lot of that. The rent is typically set by the market.

Ted Simons:
You have a better chance of seeing it in CityNorth though, wouldn't you?

Grady Gammage Jr.:
I'm not sure that's right. I think the market is what sets the rent. I don't think the issue is about picking winners and losers. I think the issue is about what is the gift clause intended to protect the public against, and I think it's intended to protect the public against spending money the public already has, taking risks with public credit, floating bonds with things and hoping they’ll be paid back. That by the way is the situation with the Coyotes. It’s a very different situation than this one. The public hasn’t risked anything at this point.

Ted Simons:
I want to get to the public good because we are talking legalese and were talking a particular product and a particular project. But in terms of the public good, if these kinds of subsidies and rebates, if it takes 3 dollars to earn 2, in this sort of business. If it helps business, helps development helps get things in society that people seem to want but can’t get developers to do without a little bit of a push, what’s wrong with that?

Clint Bolick:
Well the fact is that is not the case, especially with retail. Retail will come no matter whether you subsidize it or not. And when you look at the actual record in this case, what you saw was a frenzied effort on the part of Phoenix to keep this development out of Scottsdale because of sales tax revenues and as a result the taxpayers will spend $97.4 million to give to a developer. The city hired a consultant to advise the city on whether the subsidy was necessary the consultant said no and the city ignored his recommendation.

Grady Gammage Jr.:
That issue is no part of the court of appeals decision and so is really not relevant as we go to the Supreme Court. The issue I really think is relevant is who should decide. Who should decide when these deals are good deals or bad deals? And I think the answer is a legislative decision. It something our elected officials should decide. The Phoenix city council voted for it, the Scottsdale city council voted to subsidize the parking at Scottsdale Fashion Square. The Phoenix city council previously voted to subsidize the parking at Keerland. There are reasons why you do this and when you are on the city council, you listen to consultants and arguments and other kinds of things. And like any legislator you sort those things out and make a decision. That's where the decision should be made. Not in a court. I think it's kind of ironic that what we have here, and Clint's a wonderful lawyer, but you have a lawyer beseeching judges to be very activist in interfering with economic regulation by a legislative body.

Clint Bolick:
And should the council members who received campaign contributions from the developer recuse themselves? They didn't in this case, you need an independent arbiter to say does this violate the rights of the tax payers and that can only be the court. The council cannot be the judge of its own actions.

Voter Registration

  |   Video
  • We’ll take a look at what may account for the differences in changing voter registration The Democratic party in Arizona lost registered voters in the latest report, and the Republican party lost even more. More and more Arizonans are registering as independents. Cronkite-Eight Poll Director Dr. Bruce Merrill analyzes the change in Arizona’s voter registration numbers.
Guests:
  • Dr. Bruce Merrill - Director,Cronkite-Eight Poll


View Transcript
Ted Simons:
Voter registration in Arizona is on the rise. There are more than 3.1 million registered voters in our state, about 1.1 million Republican and just over a million are Democrats. Nearly 900,000 are Independent. Since last year's general election, Democrats have registered at a faster rate than Republicans, but neither party is keeping up with Independent voters for registration. Earlier I spoke with Dr. Bruce Merrill, Director of the Cronkite/Eight poll about changing Arizona's political landscape. And Bruce, thank you so much for joining us on "Horizon."

Bruce Merrill:
Delighted to be here.

Ted Simons:
What do you make of the registration number sentence?

Bruce Merrill:
Arizona is going through the same process the whole nation is going through. People are turned off to both political parties, frankly. The big increase, both parties in Arizona are losing members. The only group increasing are independents or the other category. In five years there will be more Independents in Arizona than either Republicans or Democrats so big changes are occurring.

Ted Simons:
Let's go with each party. The G.O.P., numbers are down. Why?

Bruce Merrill:
Well, I think for a lot of reasons. Number one, we've gone through a presidential election where the Democrats have a very, very strong, very attractive candidate in Barack Obama. That had a big impact, particularly with young people all across the nation and in Arizona. The other thing that's happening in the Republican Party, two things that are very, very important is, number one, there's a big division in the Republican Party between the more conservative religious right Republicans and more moderate Republicans. That split is about as big as it's been in the last 40 years that I've been in Arizona. And the Republican Party is in danger of becoming a white, right-wing party that's kind of a very conservative party. If that happens, that's not where the nation is going. America is becoming a much more pluralistic, multicultural society. And so the Republican Party frankly is kind of out of step with what's happening.

Ted Simons:
Let's go Democrats now. Their numbers are down in Arizona, as well. Why?

Bruce Merrill:
Well, in this particular case what happened is that John McCain is from Arizona. I honestly believe -- again, this is just my own opinion -- but if the last election were held and John McCain had not been from Arizona, I think Arizona would have actually voted for the Democrats this time. A lot of it is demographic change. What happens in Arizona, you have an increasing Hispanic population that makes the population much younger. Hispanics are two to one Democratic over Republican. At the current rate, Hispanics will be 50% of Arizona's population in 25 years.

Ted Simons:
So you see this as a clear trend, as opposed to maybe fallout from the last election.

Bruce Merrill:
Absolutely. I think this simply reflects what's happening in America. America is changing as a nation. It is a very different nation than it was 25, 30, 40 years ago. And I think the thing that overrides a lot of this is simply the alienation that people have towards political parties in general. They don't think either political party is addressing the needs of the people.

Ted Simons:
With that said, could there be a third party, an independent party, a centrist pragmatic party? Could that blossom or is that just too difficult?

Bruce Merrill:
Not only difficult but almost impossible in America. We have single-member districts with plurality election. That's a winner take all system. It's almost impossible for a third political party to exist more than a single election or two. Think back to the American Independent Party with George Wallace, 22, 23% of the vote. Within a year, the Republicans moved over and took a more conservative position and kind of coaxed those people to come and vote Republican. In America we have a two-party system; the role of third parties is to bring about change in one of the other two parties. So not likely.

Ted Simons:
Is it likely, though, that the Republican Party, instead of veering further right, starts becoming more centrist? Or the Democrats, instead of becoming more centrist, start veering further left, could we not see a shift back to the Republican Party? Are you saying demographics are really more at play here?

Bruce Merrill: The demographics are at play but what you've described has tended to happen in America in the past. As the Democrats get bigger, they will end up with more factions within the party. Then they will start fighting. One of those factions tends to break off and becomes absorbed by the minority party. I think the greater danger here is that, because we communicate in mass communication and people are so turned off the partisan politics, I think the greater danger is this growing number of independents, frankly about 60% of the people in America that are registering as independents are under 25 years of age. They are either coming in as Democrats or as independents. That's going hurt the Republican Party. We know, Ted, that once a person acquires partisanship, once you become a Republican or Democrat, very little change occurs through the rest of your life.

Ted Simons:
That is it for now. Thank you so much for joining us. I'm Ted Simons. You have a great evening.

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