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January 20, 2011

Host: Ted Simons

Democratic Legislative Leaders

  |   Video
  • Senate Minority Leader David Schapira and House Minority Leader Chad Campbell discuss issues facing the 50th Arizona State Legislature.
  • David Schapira - Arizona Senate Minority Leader
  • Chad Campbell - House Minority Leader
Category: Government   |   Keywords: democrats, ,

View Transcript
Ted Simons: Last week we talked about legislative priorities with the senate president and speaker of the house, both Republicans. This week it's the democrats' turn. Earlier today I spoke with senate minority leader David Schapira and house minority leader Chad Campbell. Gentlemen, thank you for joining us. David, start with you. Thoughts on the special session regarding this bill requesting a waiver from the federal government regarding state AHCCCS.

David Schapira: There's two major issues on this bill we passed in the special session. The first is legal and the second is this a good policy decision. On the legal side, we're fairly confident that the folks pushing this, the governor and the Republican leadership, they don't have a leg to stand on. First of all, we don't think the federal government is going to grant the waiver, but let's say they did. The voters passed an initiative, prop 204, which said we have to cover the populations that are covered under our state's Medicaid program. For us to undo that, for us to go against that we'd have to get the voters' permission or they would have to win a lawsuit, which they just can't win. Because the voter protection act says that it's covered. Policy side, it's a bad policy decision, because we kicked 280,000 off health care. They don't stop needing health care. We just stopped giving them preventive care, and now we're going to treat them in hospitals instead, which is a bad fiscal decision.

Ted Simons: Let's go with both of those ideas. First of all, the idea that it is -- that the federal government would not grant this waiver, even though the state would request it. Some lawmakers are confident that the president would grant the waiver because waivers, similar waivers have been granted to private businesses, private insurance firms, and such. You say --

Chad Campbell: I say those are the same lawmakers who thought voters were going to repeal first things first and the land conservation fund last year, and those -- both of those initiatives got shot down overwhelmingly by the voters. I think that we need to be realistic here. This is just another gimmick, and this budget is based on a lot of unrealistic assumptions. I might as well go plant a money tree in my backyard and hope it starts growing tomorrow. And I probably have just as much chance of this budget solving our problems right now.

Ted Simons: Why not go ahead and try and ask the federal government, see our situation, understand what we're dealing with here, give us a break.

David Schapira: They say yes, it still doesn't matter. We had -- when prop 204 passed, the legislative council, which is our lawyers at the legislature, basically came out with an interpretation of the law that said that basically the future legislatures could not cut the enrollment levels or the funding levels for our state's AHCCCS system within the eligibility requirements that we had. So when our own lawyers are saying you can't do this, that basically tells us we're going lose any lawsuit, even if the federal government grants the waiver, we will lose any lawsuit from our own citizens.

Ted Simons: We had John Kavanagh who was confident that the state would win such a lawsuit, because prop 204 was supposed to be covered by tobacco funds if tobacco funds don’t do the job. Any quote unquote available funds should be -- there are no available funds to be used.

David Schapira: John Kavanagh didn't even read the legal opinion I'm talking about, until today.

Chad Campbell: But I want to just counter, there are available funds. We've actually appropriated about $200 million in new spending in this budget. So there is available money. So that is a misstatement I think on the part of John Kavanagh. I also just want to say though that this is just a bad idea policy wise. Putting aside the health care aspect, economically this is a disaster for the state of Arizona. It will destroy our economy.

Ted Simons: We had House of Senate leadership in last week, and they're saying this is the fifth richest Medicaid state Medicaid program in the country. We simply can't afford it.

David Schapira: We have so many people on AHCCCS in our state, because our economy is broken. We have failed to diversify our economy for so long, when they say it's the richest, that means we have so many people below the federal poverty line that qualify. So, yes, we have a lot of poor people in our state because of some of the failed decisions that have been made by the leadership in this state for many years.

Chad Campbell: And by pulling this coverage right now, we're losing over a billion dollars in federal matching funds that taxpayers in this state are paying to D.C. regardless of whether or not this waiver is in place or not. We're still going to be paying that money. We just won't be getting it back.

Ted Simons: Okay, let's go beyond the waiver here and talk about some other things, the $1.2 million for transplants, is that being talked about? What's going on with that?

Chad Campbell: It's being talked about by us. Unfortunately we have seen no movement by the governor, no movement by the majority party, to fund those transplants. We've seen $1.8 million in the new budget going to for-profit charter schools, yet no money to transplant programs.

Ted Simons: Speaker Adams on this program said you pull money from one area for these transplants, you've got to find the money in another area. It's more complicated than just finding the money out of clean air.

David Schapira: We have found it and countless ways. We have found countless ways. Representative Campbell, Representative Tovar, Senator Cinema and myself have identified countless ways of paying for this and have provided those means to the governor. In fact, we've even introduced them in bill form. There are so many ways to pay for this within the AHCCCS system itself. But they just don't want to pay attention or they want to pretend that they’ve never seen it -- I think their shredders are pretty full right now.

Ted Simons: The idea of revenue, I know that broadening the tax base has been a big idea among democrats, but again talked to leadership last week, and they're saying that is nothing more than a tax increase when you're talking about everything from medical bills, to car repair, and all points in between, that's an increase in taxes for those folks.

Chad Campbell: First of all, we're not saying you close all the loopholes all the exemptions there are some things you want to remain untouched. Medical probably being one of those. But there are several billion dollars worth of loopholes we should be taking a look at. And I'll say why -- it's a very simple process of being fair. Why should one business be paying a TPT or sales tax and another one not? Why are we as a government picking winners and losers? Why not make our system more fair more stable and it give us the flexibility to lower some of our business tax rates as well as some of the sales tax rates across the board.

Ted Simons: Does broadening the tax base, and again it sounds like already an exemption here for medical, could obviously maybe see one for tuition who knows, there could be a lot of folks coming in hat in hand -- saying we can't go back to the situation. Even if you got that broadening -- is that enough to handle this deficit?

David Schapira: There are $10 billion of taxing polls out there in the state. We certainly can't deal with all of those. We don't need to. Our budget isn't even $10 billion anymore. We need to look at the ones that aren't working, those that aren't creating jobs, those that aren't benefiting our economy. Let me just give you an example. When I go to the store in Tempe right now to buy baby formula for my daughter, I pay a tax to the city of Tempe on that now. But if I wanted to go get a country club membership in my district, I pay nothing in taxes.

Chad Campbell: But I want to add one thing. I'm not going to sit here and say that if we close the loopholes we're going to solve the entire budget deficit. That's not the case. There has to be some cuts. Let's be realistic. But we have not talked about updating our tax code, modernizing, and making -- making any revenue adjustments whatsoever. In three years in this state. It's high time we do that, and if we don't we're going to continue to fall behind, and we've seen many people, including the Morris institute and others say we need to do this and we need to do it now.

Ted Simons: We had Russell Pearce on this program last week saying the best thing for the legislature to do is to create an environment in which jobs can grow. Their idea is, cutting corporate income tax, private property tax or businesses, these sorts of things, that's what's most important because that gets people back to work.

David Schapira: They want to do across-the-board sledgehammer style tax cuts. For any business, whether they create a job or not. I've talked with some of my colleagues at the capitol, we cannot afford right now to do tax giveaways to somebody that is not going to create a job in the state to something that’s not going to spur the state’s economy. What we can do, and I think we should, is do some targeted tax breaks to folks that are creating jobs. And the governor's commerce authority, it's just too broad based and one of the things they're doing is they’re suggesting basically doing a shift in our property tax base, where were going to push property tax increases on to residential property taxpayers. The governor came out and said, I don't want to do that, that's not really part of this plan. The alternative is, cut even more money from education than what's being cut in this budget we can’t afford it.

Chad Campbell: And I think that’s the point. You can talk about taxes all day long. I think we need to make some adjustments to our tax code. We do need to make some competitive moves in terms of the business property taxes and our corporate income tax rate. It needs to be done in the context of overall tax reform, and not at the expense of education, and health care and infrastructure. There's not a business leader I talk to that says I'm going to come to a state where have you the smallest amount of funding for education, your health care system is falling apart and your public safety system is not doing the best either. We need to think in the greater context of things.

Ted Simons: Real quickly though, businesses do look for stability, and if some of these things they know they're out there in three years, delayed start, implementation, these sorts of things, at least they know they're going to happen.

Chad Campbell: I agree with you, but they also look for stability in other places. And right now with many of the situations we see, regarding so many -- the divisiveness around immigration, around the public safety issue, around many other issues, there is no political stability in the state, none. And I talked to people across the country who tell me that time and time again.

David Schapira: Let me give you an example, an example is the state of Nevada. Where they have one of the most business friendly tax structures in the country, because they've got so many from gaming, it's a great place to move your corporate headquarters. Last week two corporations that were considering moving corporate offices to Nevada, they talked to some of the bureaucrats in the state, they deeply considered moving there, they decided not to. When the bureaucrats asked them why didn’t you bring your businesses to Nevada, their answer was, there are not enough college graduates in your state. And we don't think it's a sustainable business model to move corporate offices with white collar jobs, high paying good paying jobs, to a state where there is not a high number of college graduates. That's the direction our state is headed. We can do all the tax reform in the world and have the most business friendly tax structure, but if we continue to do what we're doing to our higher education system, we are endangering our future economic prospects.

Ted Simons: Very quickly, last question, these voices, your voices were heard by voters all around the state, and yet voters sent a very sizable majority of Republicans and conservatives to the state house and as has been said many times, no one who said, let's cut government, let's cut spending, got voted out of office. What's going on here?

Chad Campbell: Well, first of all, I think there was a national mood that led to the decline of the Democratic Party here in Arizona. And across the country. I think we got swept up in some of the national mood. Some of the anti-federal sentiment. We had Senate Bill 1070 which obviously was a game-changer for many people. And I also think that many of the people running right now, or that got elected and ran last time were still talking about some of the previous decisions made by the Napolitano administration, and I will tell you, there's no more excuses. They have control of the state from top to bottom, democrats have absolutely no position in the executive authority, in the legislative branch. It is the Republican state now, let's see what they do with it, and we're going to be holding them accountable and making sure it's a transparent process.

Ted Simons: Is that the best you can do, hold people accountable?

David Schapira: The voters in the last election may have voted for certain people, but they also voted on certain policies. One of the policies they voted on, which Chad just mentioned, was to essentially raid funds from education money. So although the voters may have made certain decisions on people, on the policy, they're right there where we are. What we're talking about right now, is we can't afford after passing prop 100 last year, where the voters thought we were going to have new money for education, or at least the same money for education, we can't afford to then go back and cut it. The voters are not going to put up with that kind of thing.

Ted Simons: Alright gentlemen, we've got to stop it there. Good to see you, thanks for joining us.

Proposed Budget Cuts to Higher Education

  |   Video
  • Governor Brewer's plans to deal with the huge budget shortfall includes substantial cuts to higher education. Chairman of the Arizona Board of Regents Anne Mariucci and Arizona State University President Michael Crow talk about the proposed cuts.
  • Anne Mariucci - Chairman, Arizona Board of Regents
  • Michael Crow - President, Arizona State University
Keywords: universities, budget, ,

View Transcript
Ted Simons: Governor Brewer's plans to deal with a huge budget shortfall include substantial cuts to higher education. In a moment, we'll hear from the president of Arizona State University and the chair of the Arizona board of regents. But first here's what the governor's budget director had to say about proposed cuts earlier this week on "Horizon."

John Arnold: There's no question that budget reductions are placing a strain on the University system as they have on all of state government. Certainly higher education is a big portion of the state budget, we spend about $900 million on the University system. So what we are proposing is a reduction of that support of $170 million. It's about 20% of their total state support.

John Arnold: You look at the total funds the state University system, there's state support, there's tuition dollars that flow into the system, enterprise funds that come into the system. And then also federal dollars. And federal dollars are largely dedicated to specific projects. But it's money that comes into the University system. So the question has been, if you reduce state support, does that necessarily mean that tuition goes up? And we don't believe so. What the governor has called on the state University system to do, and she called for this two years ago, recognizing that this cliff, this budget cliff was coming, she said, we need you to look into your processes, what you're doing, what your education and finance models are, and find new ways to educate Arizonans at a high standard at a lower cost.

Ted Simons: Here now to talk about the proposed cuts to higher education is Anne Mariucci, chair of the Arizona board of regents. And Dr. Michael Crow, president of Arizona state University. Good to have you both here. Thanks for joining us. Higher -- we're talking $170 million reduced for FY-12. Impact, on Arizona State University, on all Universities here in the state.

Anne Mariucci: Well, I'll comment on behalf of the system, all three universities together. The number is not a tremendous surprise to us. It's a serious number, but more importantly, I think we focus on what's happened on a cumulative basis since the cutting started in fiscal '08. And on that basis, we've been cut $400 million. While our system has grown in enrollment by just about 20% of the students. So we measure everything on a per FTE, full-time equivalent student basis, and on that basis, our state appropriation has been cut by 46%, or just under $5,000 a student. And that's serious business.

Ted Simons: Serious business?

Michael Crow: Absolutely serious. On the per student basis, the way to look at this, we're working our way through and we're all trying to carry a part of our -- part of the challenge, if you will, of living through this economic shift in the Arizona economy and the American economy. It's serious business because for us, the first round of the cuts in '08 was a 30-year reduction on a per student basis. The proposed recommendations coming from the governor, which I know is a very difficult decision for her, because she is committed to education, are represent for USA 50-year reduction on a per student basis. So these are serious challenges for which we've got to do all kinds of things to respond to them.

Ted Simons: What kinds of things? Are we talking enrollment caps, larger class sizes, fewer class options, furloughs? Is everything now being considered with a cut of this size?

Michael Crow: I think the most important thing we're looking at is how can we innovate. How can we drive the University into new ways of doing things that can improve our quality of our outcomes, enhance our efficiency and our effectiveness, and lower our cost on a per student basis. So the first thing we're going to do is continue to advance innovations, and then in addition to that, we will have to reduce our costs in certain programs, we will have to shift programs, link programs, and combine programs, we'll have to do all of that.

Ted Simons: We heard from the governor's budget director, saying universities have to find new ways to educate Arizonans at a higher standard, but at a lower cost. First of all, is that doable, and secondly, is that process underway?

Anne Mariucci: It's absolutely doable. It is our mandate. It's something that we’ve been working on for, you know, many years now. The pace will accelerate because this level of crisis has proven to be a real accelerator. Some of those things can be done with minimal amount of capital investment, others that have been suggested and called for such as the state college system, obviously is an enormous brick and mortar undertaking, and the capital to finance that is of unknown means at this time. But online education, more efficient academic delivery on campus, off campus, regional partnerships, more partnerships with community colleges, all of that is not new to us, we're well down the road of implementing that. This just provides an accelerator.

Ted Simons: Is that how you see it as well? You talked about an opportunity for innovation. I'm hearing accelerator as well. It's still $170 million out of that next fiscal year budget. That's a lot of money.

Michael Crow: This is a massive reduction, and the state in its wisdom will have to decide at what point it's not going to be able to really advance the Universities as the powerful drivers of social and economic success that they have been for the last few decades. They have a duty to do that, and they're in my opinion very close to that point where their duty needs to be carefully thought about. But having said that, it also is our responsibility to determine how to scale the model, so as public higher education continues to be of higher demand, we have to find ways to provide it at a cost that's not ever increasing. So that means through some combination of tuition investment, private investment, and public investment, we have to find a way to operate the University without its costs continuing to rise.

Ted Simons: Can you do that without increasing tuition? We're close, are we reasonably close now to the national average? How much more can -- can tuition be raised?

Michael Crow: For us it's not so much the price of tuition but the cost to the individual student. What we are operating under is what we call a modest tuition high financial aid model. That model for ASU and for our sister institutions, has been more successful than the low tuition, low financial aid model. That was a less successful model. This is a more successful model. We now have to take that model to the next level. Can we advance without tuition adjustments? The answer is we can't adjust that quickly. Even if we were innovating at the fastest possible rate. And so it's probably going to be some combination of cuts and tuition adjustments that we'll be proposing to the regents.

Ted Simons: I asked the question because I know a lot of folks watching right now are very concerned about tuition rates, and see them going up and say, wait, a minute, I thought it was supposed to be as close to as free as possible, and under constitutional mandates, what's going on here. What is going on? What can you tell them?

Anne Mariucci: Well, what I can tell them is that we are very, very sensitive to it. It's become more sensitive as we have hit that midpoint compared to national averages. At the same time, I think the public needs to understand some nuances underneath those numbers. And just let me give you an example. We've increased the sticker price of tuition by 50% in the last three years. However, almost 50 cents of every incremental dollar has gone to financial aid. As a result, I think the Arizona public would be very surprised to know that the average tuition, actually paid by an in-state undergrad student is $2200 a year. 45% of the undergrad students are paying zero. So just like anything you shop for today, rarely do you really pay sticker. Never before has that relationship been more pronounced at the universities. I would say that at $2200 a year, that's about the greatest bargain for a higher education with the quality that we put out of the state than anybody could ask for. At the same time, we're very, very sensitive to it.

Ted Simons: We had the legislative leaders on last week, we talked about the University cuts, and they both mentioned that they considered universities among those protected from cuts compared to the rest of the state government. And that there's no pot of money anywhere for anything much less something like University. That's basically what they said. How do you respond to that?

Michael Crow: I think that the error in the calculation might be if you look at our total budget, all of our revenue sources, and you take some of our funding away from the state, you'd say well it's a small percentage of cut. Unfortunately, our instructional programs have two sources of revenue. Tuition and state investment. And within those areas of the University's operation, we can't move in money from federal grants and from gifts for program X or from other kinds of programs that we have, it doesn't work that way. So there might be a miscalculation in the cut, the cuts are on a per student basis, at least at ASU, we're at 50% with these additional recommendations being made on a per student basis. At the same time, if you look at the overall budget of the University, it would appear to be small, but you can't look at it that way.

Ted Simons: We did have one lawmaker look at the overall budget of the university, and he said he found that the Universities have a more money today than they did in 2008. First of all, is that accurate? And secondly, how do you respond to it?

Anne Mariucci: In a way, it is accurate. And it goes largely to what Michael just said. There's resources that come into the Universities that are for very specific dedicated purposes. We can't use them for instruction. If you're counting those, the research -- the research functions at the Universities have had banner years, and I'm very proud of that. That brings distinction to this state. On the other hand, the amount that we have to spend on a per student basis to educate our young people has irrefutably decreased by 40-50%.

Michael Crow: Let me just add to that. Speaking now only for ASU, because I know the numbers better, our total amount of resources that we have on a per student basis, even with tuition going up, is actually less than it was when we started this process. So our total amount of money has gone down on a per student basis that we have available to us.

Anne Mariucci: to be fair to that point of view, we were uniquely benefited by the federal stimulus to the tune of $220 odd million. But that's a -- that was a one-time windfall, per say, that gave us a reprieve, gave us breathing room for a year to prepare for the cliff as Governor Brewer aptly refers it to. It is not a long-term sustainable permanent addition then to our funding, it was a one time deal. So we're -- and I credit -- the universities and the presidents for not spending that money the minute it came in the door. So have they created a bit rainy day fund to allow for some of this cliff coming yes, and I think that's been good management and good leadership.

Ted Simons: Last question, I'm a lawmaker, talk to me. Convince me that $170 million dollars cut in FY-12, when everything is getting cut, that this is going to seriously impact the Universities and it's something that lawmakers should reconsider.

Michael Crow: Well, I think all lawmakers have to look at issues that are actually higher level than this. That is, this is -- this problem, this $170 million cut is a symptom of a structural problem in Arizona financing. There are deep structural issues. We have the largest structural deficit of all 50 states. That structural deficit, even with these cuts, isn't going to go away. So my hope is, and one of the things that I've been urging legislators to do is to sort of go up to the 50,000-foot level from the 20,000-foot level, where they're trying to adjust this and adjust that and really look at that structural deficit. It's not a deficit that's driven by the economy going up or down. It's a deficit that's inherent in the structure of a not well-aligned overall financial model for the state.

Ted Simons: All right. We've got to stop it there. Good to see you. Thanks for joining us. We appreciate it.

Michael Crow: Thank you.