Ted Simons: Hello, and welcome to "Horizon." I'm Ted Simons. In tonight's headlines, a forecast for artificial snow on the San Francisco peaks near Flagstaff is more of a reality. Today, the United States Supreme Court refused to hear an appeal filed by several Arizona Indian tribes trying to stop the Arizona snowbowl from making artificial snow from treated wastewater. The tribes consider the San Francisco peaks to be sacred. They claim the artificial snow would desecrate the mountains and violate their religious freedoms. The Ninth Circuit Court of Appeals disagreed with the tribes in a previous ruling. By refusing to take the case, the Supreme Court allows the Ninth Circuit's decision to stand, clearing the way for artificial snow sometime in the future.
Ted Simons: State lawmakers passed a 2010 state budget late last week without any votes from Democrats or the support of Republican Governor Jan Brewer. In fact, the budget has not yet been sent to the governor, who has indicated she might veto it. Joining me to talk about the budget and other legislative news is Senator Rebecca Rios, a democrat from Apache Junction and the senate’s assistant minority leader. Also here is Democrat David Lujan, a state representative from Phoenix who serves as the house minority leader. Good to have you both on "Horizon."
Guests: Thank you.
Ted Simons: Rebecca, start with you. Leadership says this is the best budget possible considering the circumstances. Are they right?
Sen. Rebecca Rios: We're in trouble if this is the best budget they can put forward. You can only question the seriousness when you have a budget pushed through in the wee hours of the morning after a full day of arm twisting to try and get their members on board. This is a budget that not only do Democrats have concerns about, but their own governor had her staff there Wednesday evening, letting folks know she did not intend to sign this budget.
Ted Simons: They say that we are talking about 95% of 2009 budgeting levels for the 2010 budget. 95%. Somewhere in that ballpark. 5% budget cut. Does that seem reasonable for tough times?
Sen. Rebecca Rios: The devil is in the details and it's the way in which they go about balancing this budget. Part of the problem is it's a $3 billion solution to a $4 billion problem. They're already a billion short. When you look at where they take cuts, again, they’re decimating public education, they're decimating basic safety net services for child protective services, the elderly and those are the big concerns that Democrats have. In addition, they're looking at balancing their budget by taking money from the cities and towns. By having moratoriums on impact fees and it's the way they go about balancing the budget that has raised a lot of concerns, not only by Democrats, but even their own governor.
Ted Simons: Again, 95% of the '09 level, can you do that 5% cut without decimating something?
Rep. David Lujan: It's difficult. Keep in mind, these are cuts on top of the cuts we've already seen back in January and back last summer when we first did the 2009 budget. These agencies and services are already cut to the bone. We already have state agencies like child protective services that have said they cannot investigate every case of abuse that comes to them. That's a fundamental state service we need to provide and that's on top of the previous cuts we've already made. These are significant cuts that our agencies just can't bear.
Ted Simons: And yet Republicans will say that the budget reflects reality. That you have to bear it because the reality says there just isn't the money there.
Rep. David Lujan: Well, Democrats and the house and senate have put out a budget proposal that's a reasonable, responsible budget, it balances the budget, and it protects us from these deep cuts to education and other services and we've shown it. It's available on our website. Strongerarizona.com. We as Democrats have shown you can balance the budget and protect the future of our state.
Sen. Rebecca Rios: A lot of us draw exception to when the Republicans say the money just isn't there, because they'll go line by line an disenfranchise, whether its child protective services, the elderly, and state over and over these are tough times and we just don't have the money, but two hours later in their next bill they propose a $250 million tax cut via the county equalization tax cut. It's an issue of priorities and they have very clearly indicated that their priority is a tax cut for business, as opposed to insuring that education is protected or basic safety net services are available to Arizonans.
Ted Simons: I want to get back to the tax cut. I know that's a huge aspect of what's going on there. Before we get to that, your thoughts on holding this and not sending it to the governor. What do you think is going on here? Is it a wise move?
Rep. David Lujan: It's a crazy way to run state government. Here we are 22 days left in our fiscal year before we face a government shutdown and we spent all of last week working on this budget that they knew full well didn't have the support of the governor. They passed it using all Republican votes and now don't transmit to the governor because they're using it as a bargaining chip. I think that they are wasting precious time that we can’t afford to waste.
Ted Simons: Does it make sense to you not sending this to the governor?
Sen. Rebecca Rios: It calls into question the legitimacy by which they obtained their Republican votes to pass it in the first place. My understanding is that there were Republican members that they only voted for the budget on the assurance that it wasn't going to be sent to the governor. The concern I have is that there's no mandate that the bill be transmitted within a certain amount of days. I hate to be pessimistic, but my concern is that with 22 days left, I would not put it past them to use it as leverage over the governor; to send it to her, come June 29th, June 30th and force her hand to either veto the bill or play the blame game of who is shutting down state government -- the governor or the Republicans? That's my concern looking down the road 22 days.
Ted Simons: Is there a possibility of a special session? The bills are done. They're passed. You have to have a special session to alter things unless it's outside of the budget, correct?
Rep. David Lujan: Well no. The governor still hasn't signed this budget so we can still pass another budget and send that one to her. We don't have to call a special session to do it. Once we do pass the budget, I think we're looking next year having a number of special sessions to come back, because I don't think the Republican leadership knows how to get us out of this situation. I think we're going to be seeing a number of temporary stopgap measures to get us through the next year.
Ted Simons: Are you speaking with the governor? How much contact are you having?
Rep. David Lujan: Democratic leadership in both the house and senate met with her last week when she came out with her budget proposal. We meet weekly with her staff. Not with her. They have expressed an indication to work with Democrats. So far, the meetings we have had with her staff would be what I would describe as very superficial and I think that's a shame. We've been asking to bring Democrats into the negotiations and it's up to her. If they only choose to deal with Republicans, you're pushing aside 25 votes in the house and 12 votes in the senate that you're not even going to consider.
Ted Simons: Superficial a fair way to describe this?
Sen. Rebecca Rios: I think so. I think we’ve had three or four meetings with the governor. The initial ones were initiated by Democrats since December - saying this is going to be an issue that affects all Arizonans. Don't invite us after the product is available and then just ask for the vote. Mid May, the question was proposed to the governor, are you going to bring us to the table? And the answer I got, it was way too soon. Well, I would say we're past way too soon and that was a question I posed to her last Monday. Governor, are you going to be the one to bring us to the table? And no direct answer from her. She's in a difficult position but we're past the point where we need our governor to stand up and take the leadership role and bring Democrats that have been begging to come to the table and those Republicans willing to negotiate and come out with a joint plan. We did this with Napolitano. There's no reason we can't with Governor Brewer.
Ted Simons: Is there a feeling that you have more contact or the possibility of more contact and the possibility of being heard more from the governor's office as opposed to leadership? I mean, compare the two.
Rep. David Lujan: Well, right now there's not much communication with either branch. With the governor's office or the legislative branch. I think certainly in terms of the budget proposals that come out, we have some things we could work with in the governor's budget proposal. There's certainly things we can't work with but if she would bring us to the table, I think there's room to find common ground and we're waiting for her to step up and initiate that.
Ted Simons: Let's get to -- we talked about taxes, referred to it earlier. The three options -- raising taxes, you've got borrowing and you've got cutting spending. Those are three primary options. Let's start with the taxes. Leadership says raising taxes is a job killer. You mentioned the equalization rate. Job killer was the exact definition that Speaker Adams used for that return. Why is he wrong?
Sen. Rebecca Rios: I think the fact of the matter is this is a business tax break that's going to largely benefit a few large businesses. The average homeowner may experience a $70 or $80 cost savings. Now is not the time. When we voted for this temporary suspension, it was under the understanding that times were good and it would be reassessed when it was time. Well, clearly this is not the time to reinstate that. So we have a fundamental difference there. In addition, the Republicans have loved to talk about their structural deficit and how, you know, we're not doing anything to address that. This furthers and exacerbates that structural deficit by eliminating a quarter of a billion from here forward.
Ted Simons: The idea we get from the other side is this tax, any tax hurts business in Arizona and also hurts Arizona's ability to compete with other states who might say, look what's going on in Arizona. They might flinch if they see increased taxes in any way, shape or form.
Rep. David Lujan: We've had four decades of Republican leadership in the legislature. Four decades of their model of tax cut after tax cut and I don't think it's done anything to stimulate bringing business to Arizona. What brings business to Arizona is a quality education system, quality infrastructure to support business and if we keep cutting state government the way we're doing, we're jeopardizing the long-term future of our state.
Ted Simons: The governor's idea for a one-cent sales tax, I know you're not crazy about it. How come?
Sen. Rebecca Rios: The democrats have been concerned about a sales tax because it's so regressive in nature. Add to the fact that this is only a temporary three-year sales tax, that's fine for three years and then what? Again you're looking at temporary short-sighted solutions and the fact that they do impact working families harder is of grave concern to Democrats and that's why you haven't seen us jump on board with this.
Ted Simons: Is there another tax that you think would be preferable?
Sen. Rebecca Rios: I think there is. When Republicans talk about the structural deficit and we need a comprehensive review of our tax rate system, I think what you'll find is that the Democrats did propose a very good solution that reduces the sales tax rate but broaden the types of services that would be taxed and so that over the years, you'll be bringing in more income. We'll experience a lower sales tax rate and those are the types of ideas we need to look at long term. Not short-term sales tax increases.
Rep. David Lujan: Rebecca is right. The thing Democrats like about our budget proposal, particularly in these difficult economic times when middle class families are struggling, we want to make sure any tax reform is going to hit them in the pocketbook the least. If you look at Governor Brewer's temporary sales tax, it would cost about $438 a year for the typical family, whereas, the democrat's would be cheaper. About $200 a year cheaper.
Ted Simons: And yet you see things like dry-cleaning and haircuts and car repair and these services included in a democratic plan. Why go that route?
Rep. David Lujan: I think a number of states are going that route. I think a number of states are going this Route. Particularly in Arizona, where our tax structure is so dependent on the sales tax. If you have an economic downturn, you need that broad base in order to bring in the revenue to sustain the things we need to have the quality of life in this state and the quality education system and so I think it makes sense to broaden that sales tax base because you're giving taxpayers a lower rate at that point. We can lower the sales tax rate down 2 percentage points by broadening the base.
Ted Simons: Is that how you see this, because I know a lot of hairdressers and car repair people and dry cleaners are going to be saying, wait a minute.
Sen. Rebecca Rios: I think it's important to realize that each year we forego $10 billion of income that could come into the general fund via these sales tax exemptions -- everything from the purchase of peanuts by airlines to food and drink consumed on the premises of a jail or prison. You have to question the logic of these exemptions and they were put into place because they had savvy lobbyists that got folks to vote for them. And you have to question, how fair are these? And should we be foregoing $10 billion a year in tax revenue and then putting a tax increase on Arizonans on top of it? You have to look at it holistically.
Ted Simons: The second option was borrowing and the idea, critics will say, you've got to pay it back sometime along with the interest and also the credit rating starts to get threatened as well. Your thoughts on borrowing?
Rep. David Lujan: I think -- and we had some borrowing in our budget proposal, but I think it has to be to a minimum. It's a bit of a reversal from previous years, but the Republican proposal, they want to basically borrow and cut their way out of the short fall. Borrowing to the extent they want to borrow, we're mortgaging our future and it's going to make it that much more difficult to get out of this economic crisis. As Democrats, we've said we need to look at the revenue side. Let's propose tax reform so we can fix this problem, not only for this economic downturn but help to prevent future downturns.
Ted Simons: Is there a risk with borrowing? A little bit could become too much and you don't realize it.
Sen. Rebecca Rios: I think the borrowing concept is one that you go to as a last resort and it's interesting because it was one that Governor Napolitano put in a plan before she left and the Republicans hated it and within weeks, the "B" word wasn't so bad. So the reality of the situation is hitting and if we can securitize the lottery and borrow against that short term and it's a choice between that and laying off more state employees or cutting education, it merits looking at.
Rep. David Lujan: We also have to look at the type of borrowing. I think some of the borrowing proposals that the Republicans put forward jeopardizes the security of Arizonans. They want to privatize our state prisons and lease them to private companies, including the prison facility that houses death row. Do we as Arizonans really want a private company running our death row? I don't think so.
Ted Simons: Let's get to the third option. I was going to bring up the prisons but I don't know if we'll have time. But the third option was cutting. Cutting programs. I know this is heavy on the leadership's proposal. The -- they'll tell me -- and we're going to have leaders on tomorrow night -- that we spent too much in the preceding years and we've got to cut. Again, why are they wrong?
Sen. Rebecca Rios: I don't think they're taking into the account the population growth we've had. They also don’t add into the mix the hundreds of millions of dollars in tax cuts that went along. You're getting a lopsided angle when they say that we have cut as deeply as we can. So I don't know where they would cut from, unless we pursue the proposals to eliminate entire departments.
Rep. David Lujan: Take education, where we spend compared to other states. We were 49th in the country in terms of what we spend on public education. With the massive cuts that the Republicans have enacted, we've now dropped to 50th. We don't have a spending problem. We have a spend problem in that we're not spending enough on education.
Ted Simons: Should spending be limited? This is something that the governor has talked about. Should it be limited to population growth and inflation? Should there be that cap?
Rep. David Lujan: It doesn't work when you have a state that's growing as fast as Arizona, plus taking into account, for example, when you have new technology, you know, for example, if you have new technology, you have to have a greater investment and you have to spend more in order to take advantage of it. You have additional costs up front. Look at the state of Colorado. They tried to pass the taxpayers' Bill of Rights. It decimated services in Colorado for many years. It didn't work there. I don't know of anywhere where it has and it's not the right plan for Arizona.
Ted Simons: As far as stimulus money, there's some concern, I know, with education and with access as well. Talk about the concern. I know that they've got something in this afternoon saying the concern regarding the education and the universities, they are unaware that this would be a problem.
Rep. David Lujan: They're unaware because they didn't check to see if it would be a problem. I would think they would check with the federal government to see. It really is a significant problem. We've found that the budget that the Republican leadership passed last week could jeopardize over $2 billion in federal stimulus money -- us receiving it. The cuts to university spending were so deep it dropped us below the threshold where we could qualify for federal stimulus. It requires that you maintain spending at a certain level and there were provisions in the bill for access for Medicaid, where it would require only certain types of documents be used for proof of citizenship to receive Medicaid assistance. That's in violation of the federal stimulus requirement. We could end up losing that as well. The budget that the Republicans passed last week puts us in danger of losing millions, if not billions of dollars in federal stimulus money.
Ted Simons: I want to get to more general ideas here. But it fascinates me to get people's take on this. How did this happen?
Sen. Rebecca Rios: In terms of the budget deficit?
Ted Simons: How did we get here?
Sen. Rebecca Rios: I think you get here after years under Republican control where they wanted to give away tax cuts. And I think what we've seen is the accumulation of many tax cuts eroding the tax base and the economic downturn that the entire nation has dealt with, Arizona was hit doubly hard. So here we are. While we're here, we have the same folks that put us largely in this position recommending more tax cuts and credits. And so they're continuing down that road.
Ted Simons: The widest relative budget gap in the country, is it all because of tax cuts? What else is going on here?
Rep. David Lujan: It's the tax cuts and it's the fact we were the fastest growing state in the country for a number of years and we had to increase spending in order to keep up with that growth and yet cutting taxes at the same time. It's also how we generate our revenue in the state. We're so dependent on the sales tax. More so than any other tax. And when the economy took a dip and people stopped buying we suffered more because we're so dependent on that sales tax. So I think it was a combination -- and also, we don't have the diversified economy. We're dependent on the construction and housing market and if we want to diversify the economy and bring in new industries, you have to develop that quality workforce for the future.
Ted Simons: We have a lot in the way of unfunded mandates. The governor is thinking we should take another look. Maybe re-approve some of these ballot measures that were -- do you like that idea at all? Does it make sense to you?
Sen. Rebecca Rios: I have a lot of concern about basically her proposal to have voters go back and reaffirm. They knew what they wanted when they passed prop 301, the tax for education. The fact of the matter is, the populace was speaking out because a legislature had failed to adequately fund education or failed to provide adequate healthcare and to go back now and question these folks and say, did you really know what you meant, I don't think that's the route to go. I don't support that provision.
Ted Simons: Same idea?
Rep. David Lujan: Yes, I agree with that. Particularly, for some of these initiatives where people had to raise a lot of money to get it on the ballot and promote it. They've done that once, and now they have to do that again? The voters have already spoken and they want these programs and we shouldn't be second-guessing the voter.
Ted Simons: Do they want these particular programs in an environment where money is scarce? Again, leadership will say families are cutting back, cities and towns are cutting back and everybody is cutting back, the state has to too.
Rep. David Lujan: Poll after poll, Arizonans don't want us to put this back on the ballot. They want us to respect the will of the voters and not second-guess them in how they originally voted. I think Governor Brewer would be making a big mistake to put it back on the ballot.
Sen. Rebecca Rios: Arizonans are willing to tax themselves if it goes specifically for education or healthcare.
Ted Simons: Thank you for joining us. We appreciate it.
Guests: Thank you.
Ted Simons: Tomorrow on "Horizon" -- Republican leaders share their perspectives on the state budget. Senate President Bob Burns and House Speaker Kirk Adams will talk about their budget plan and efforts to negotiate a budget that the governor will sign. That's Tuesday at 7:00 on "Horizon." Wednesday, "Arizona Capitol Times" reporter Jim Small will be here with a mid-week legislative update. Thursday we'll take a look at how the state budget may impact Arizona hospitals and safety net healthcare programs for kids and the poor. Then on Friday, the Journalists' Roundtable takes you behind the headlines of some of the week's top stories.
Ted Simons: That is it for now. I'm Ted Simons. Thank you so much for joining us. You have a great evening.