Ted Simons: Good evening, and welcome to "Horizon," I'm Ted Simons. We now know who's behind a $105,000 contribution to the Republican Party just before last November's election. The money was used to pay for ads against Democrats challenging Maricopa County Sheriff Joe Arpaio and Andrew Thomas. To avoid a $315,000 fine, S.C.A. treasurer Maricopa County Sheriff’s Captain Joel Fox released the names of contributors to S.C.A. Its part of an agreement with the Maricopa County elections department, which says S.C.A. is a political action committee, and therefore must abide by campaign finance laws, which require disclosure of campaign contributors. Phoenix developer Steve Ellman donated $25,000, and was S.C.A’s largest contributor. Several officials from the sheriff’s department contributed a total of more than $12,000 to S.C.A. We're in week two of the special session and lawmakers are still looking for votes to send a special sales tax increase to the ballot. Here with more on that, Senator John Huppenthal, David Lujan, House Minority Leader.
Guests: Great to be here.
Ted Simons: John, let's start with you. You've got a special session going last I checked. Anything going on right now?
John Huppenthal: We had a lengthy meeting with all the caucus members, the first time we've had a closed-door caucus meeting. We sort of let it rip, the challenges that we have. We have a little over $7 billion in revenue and a $3.7 billion deficit and that's just monstrous. We have members absolutely pledged to oppose the sales tax referral. As of now we don't have the votes to put the referral out. We have a governor absolutely determined to get her sales tax referral or take us all over the cliff, from what we can gather.
Ted Simons: Sounds like it was a raucous caucus over there. What was the problem? Was it folks saying it's going to be my way, and that's it?
John Huppenthal: I thought the caucus was very positive. Everybody sort of talked it out a little bit, a little bit of emotional stuff. Then we just started rationally pounding away at the options in front of us, how the leadership team will deal with the challenges, some of the leadership has absolutely pledged to oppose the tax referral. They feel like that's an oath they can't violate. How do we get out of this: I've got a box and I'm handcuffed with a bag over my head and I've got a toothpick.
Ted Simons: Democrats not all that excited about this one-cent sales tax. Why not? Why send it to the voters? Why is that a problem?
David Lujan: We don't have a problem with sending it to the voters. First of all, we think it's the legislature's job to do this. People elected us to do that, to balance the budget, that's our number one responsibility. If we can't do this amongst ourselves in the legislature, I think we should send it to the ballot. The sales tax piece, Democrats have issues with it because we're looking at what is the cost to the average Arizonan of a sales tax increase, and what are the other options. We think there are other options that will cost middle-class families less on a per capita basis every year, and are more stable revenue sources.
John Huppenthal: I have to challenge that a little bit. When David says they are not opposed to a sales tax referral, our understanding is all the Democrats would say vote no on that, so is that the truth?
David Lujan: Ya, that’s true. What I'm saying is we are open to having those discussions with Governor Brewer, and let's talk about other options. We've been saying since she took office, bring the parties together and let's talk about what the options are out there. We still have not had those meetings.
Ted Simons: Sounds like you're saying we can go along with the tax referral, but you need some of the things you want in there, as well. What are some of the things you want?
David Lujan: I don't know if we can go along with the sales tax referral. We want to have those talks and look at other options. To agree to a budget, the things that are important to us are protecting education and protecting health care and other programs that are important to our Democratic caucus. Making sure that we have a revenue source, whatever it is, that's going to provide a stable revenue stream to adequately fund those things.
John Huppenthal: I think the Democrats have been trying to say they want to be a part of negotiations. I think you've seen an example here where first David says, well, we're not opposed to the referral. Well, in fact, they are unanimously opposed to it. We're willing to negotiate with the Democrats. In all 18 years of my legislative development, we're in the biggest crisis situation. $3.7 billion short. Even if you get the billion from the sales tax revenue we still have to make massive cuts. It's a very difficult situation. Without moving left to accommodate the Democrats, our budget is already irresponsible in terms of spending levels. We do not have enough money to make it through the year.
David Lujan: Democrats have put out two budget proposals. I think it’s the first time in the history of the state that the minority party has put out two very responsible budget proposals, two that have gotten a lot of positive feedback from a lot of people, both Democrats and Republicans. We have been willing to work with Republicans since February. So we've been calling on that, we just haven't had the opportunity.
Ted Simons: The one-cent sales tax, again, the concept of referring this to the voters: Why is that a problem?
John Huppenthal: Well, people view that voting today is supporting a tax increase. That's their opinion. My opinion is, I've been successful at supporting tax reduction and getting us below the national average of taxation. In my view, you have to look at this tactically. What are the best interests of the taxpayers? We are going to increase property taxes by $250 million. My fellow caucus members need to look at that and say that is disastrous, we need to focus on that $250 million, that's more important than the referral.
Ted Simons: Does there not have to be some kind of tax increase, whether it's a sales tax increase, some sort of a flat tax that's not all that flat, does something have to happen? Crisis indication: Can you just cut your way out of that problem?
John Huppenthal: I don't think you can cut your way out of it. You have to do enough cutting to convince the financial markets that you have credibility. We might have to borrow as much as $12 billion. With the $3.7 billion deficit, there's no way we will have that credibility. Our crunch will happen sometime between December and March of this year, we are going to go into a cash flow crisis that is going to boggle people's minds.
Ted Simons: The credibility issue, address that, if you would.
David Lujan: You have to look at the revenue side of things. You cannot cut your way out of this budget shortfall. We've had significant cuts to correct the 2009 fiscal year budget. We already saw the most massive cut to public education in the history of the state. We need to look at the revenue side of things. Democrats put out the two budget proposals because we were concerned about we need to have credible solutions and look at a comprehensive approach to addressing this budget crisis.
John Huppenthal: Lets be serious here. Analyzing those Democrat proposals, it's a scaffolding out over a canyon. It doesn't get out more than two years. We have to do significant cutting. Even if we do the sales tax referral there's no guarantee at all, despite the public opinion poll showing the high support levels. People are going to be motivated to come out and they will be people that realize you do economic damage with a tax increase.
Ted Simons: At what point does the cutting become too much cutting, in terms of education, social services, these sorts of things? Where's that line?
John Huppenthal: If you accept that Arizona ranks 50th in education, it's problematic. The very best research shows the quality of our schools ranks around 21st. We do very well with the resources that we have. It is going to be a challenge. But all the research indicates that we are capable of meeting that challenge, even with resources that are a little more limited to improving the quality of our schools. But we have this crescendo saying that we rank 50th, that's false. We rank slightly above the national average.
Ted Simons: You get that from where?
John Huppenthal: The Rand Corporation premiere think tank of the United States.
Ted Simons: Do you agree with these numbers?
David Lujan: No. We’re dead last in the country in terms of how we fund education, we're last in terms of class size. And there are a lot of different groups that put out very similar ranking that put us dead last. The one that I always like to cite is the one from the Alec Group, which is the American Legislative Exchange Council, a very conservative Republican group, puts out a lot of conservative policies and they rank us last.
John Huppenthal: You're hearing two different things, David is talking about spending. I'm talking about quality of our schools. We rank 21st in the nation.
Ted Simons: With that in mind, and with so much cut from education, at what point, pick a number, when does the quality of that education suffer because of budget cuts?
John Huppenthal: Well, there's a challenge there. We would love to be able to say we can increase spending in education. The truth is we have $3.7 billion short. Even if we get the billion from the sales tax referral, we're still 2.7 short. We're sort of deluding ourselves that we can't come to grips with this.
Ted Simons: Is everyone looking at this as though X, Y and Z will work when you are looking at such a chasm, such a deficit that's beyond most folk's comprehension on how to do it in the short term, and B, not to ruin long-term interests.
David Lujan: Its such a significant problem. I think what we have to do, the approach Democrats have been saying we have to take is the budget process is a process about our values. What is it that we value as a state? If we're going to value public education in this state, we need to see the appropriate level where we can provide that quality education. How do we maintain that funding both in good times and in bad times? Because you're a student going through the school system in good times, you shouldn't be the only one getting the benefit of good class sizes, it should be the student going through bad times, as well. So we need to figure out whats the revenue source to maintain that funding.
Ted Simons: Very quickly.
John Huppenthal: The quality of education, both David and I are on school boards. I’m on the board of two charter schools. We show our values, measure teacher job satisfaction twice a year. We read every comment and see how we can support our teachers. David is on the largest school board in the state, and they do not measure teacher satisfaction. There are different ways of expressing your values. Not just throwing money at a problem.
Ted Simons: We'll have to stop right there. Thanks for joining us here on "Horizon."
Guests: Thank you.