February 15, 2011
Host: Ted Simons
Arizona’s Aerospace and Defense Industry
- A discussion about Arizona’s Aerospace and Defense Industry with retired Air Force Brigadier General Tom Browning who’s leading Science Foundation Arizona’s Aerospace and Defense Initiative; John Schibler, Boeing’s Chief Engineer, Attack Helicopter Programs; and Barry Albrecht, CEO of the Central Arizona Regional Economic Development Foundation.
- Tom Browning - Science Foundation Arizona's Aerospace and Defense Initiative
- John Schibler - Boeing's Chief Engineer, Attack Helicopter Programs
- Barry Albrecth - CEO, Central Arizona Regional Economic Development Foundation
| Keywords: space
Ted Simons: Aerospace and defense jobs are an important part of Arizona's economy. Here to tell us what's being done to grow the industry is retired Air Force brigadier general Tom Browning, who co directs the aerospace and defense initiative for science foundation Arizona. John Schibler of Boeing, and Barry Albrecht, CEO of the central Arizona regional economic development foundation. Good to see you all here. Thanks for joining us.
Barry Albrecht: Thank you.
Ted Simons: Let's get it started with where Arizona stands in aerospace and defense. Where do we stand?
Tom Browning: Arizona has an outstanding foundation between the military installations of the aerospace companies and various aerospace programs. We have a good foundation that needs to be shored up in some cases, and we can build upon it as we go into the future.
Ted Simons: Major players, major projects. What have we got going?
John Schibler: I'm a big fan of attack helicopter platforms obviously, but the future is unmanned air vehicles. That's something we need to make certain we're a part of. We have attack helicopters, they can fly manned or unmanned. And be controlled by an Apache. So there's synergy in those two platforms.
Ted Simons: Is Arizona taking the lead as far as these unmanned aviation systems are concerned?
Barry Albrecht: If we leverage our military installations, leverage our ranges, our test ranges that have capabilities of flying these unmanned aerial systems, yes, we can become the center of excellence of UAV test training and development. But other states are well ahead of us. They've done a very good job of leveraging their military installations of creating these jobs. We've got great testing going on in evaluations going on at Yuma with this new emerging industry. Secretary gates mentioned last year, implied that they believe that the F-35 could be the last manned combat aircraft. Everything will be unmanned, robotics.
Ted Simons: Which means, and we're looking at unmanned aircraft right now, and -- which means Arizona is positioned to be a major player on this. What does the state need to do to make sure that happens?
Tom Browning: We need to take advantage of the foundation that we already have. You've got the military installations, you’ve got major companies that are already in there, we need to engage in a resources across the state. And get away from a silo mentality for lack of a better term. And say, in order to be able to pull this off, we need to look at the future and leverage that which we have, and move forward on a statewide basis to bring together the assets from the various and sundry locations. You've got helicopter operations in Phoenix, Yuma proving ground, you've got the Universities, they bring various research expertise to the table. No one institution, no one company, no one military installation is going to do it by itself. It's a matter of being able to bring that together and work together in a comprehensive way that we can build upon those talents and grow it from there.
Ted Simons: Where does government if it in in all of this as far as teamwork, taking -- presenting Arizona as this kind of combined effort? Is government there for news what's going on?
John Schibler: I'd like to see representation from the state of Arizona a little stronger. Our competitors, the state of Texas, Connecticut, I think they get a little better support than maybe we do in Boeing, so I'd like to see them be part of this team as well. And what the general said, it's so critical that the diversity of our pieces when put together working together, the synergy is such a powerful thing. We need to take better advantage of that and work together.
Ted Simons: These interests, we won't call them parochial interests, that would probably be too strong a term, but the idea of the silo mentality, was that always there? Talk about Arizona's history with aerospace and defense and what you're seeing now. What's changed?
Barry Albrecht: We are making strides. We're making the first steps. I think over the past 10 years, somehow we lost focus on this industry. We lost focus on realizing how important the military installations are in the defense industry. For example, the military installations are not just soldiers. They're government employees, both military, nonmilitary, there's defense contractors right outside the gates. They are job magnets. If we help the military installations expand their missions and support what we're new directions they want to go in, then we will have -- we will result in job creation. For example, there's three different divisions of Northrop Grumman in southern Arizona. Raytheon is in Tucson, but it's also in Sierra Vista. So these installations can be a huge magnet for these new companies with jobs.
Ted Simons: The role of skilled workers in Arizona, in particular, but just skilled workers for this particular industry, talk about that and the need for them.
Tom Browning: Well, the world is high-tech, whether we like it or not. So it requires certain skills, and it all starts with what happens at school. Would I start with the stem education program, we hear a lot of talk about it, but now I don't care what profession an individual would choose to be in, whether you're going to go to college or not, but to be a worker in the technical aspects, building helicopters, for example, they have to have a very sound foundation, if you will, in science, technology, computer skills, and so on. Because that's the way business is done today. So it all starts with the public school system, and the grade school -- at the grade school level. So we build that expertise. You carry that on to the technical training schools, not necessarily have to be the University environment. The community college system. Arizona has a great community college system. That is definitely part of that education mix. And then we have the Universities, not only to teach students, but they also create research and products that then can be commercialized for the state. It all starts with the foundation on education. Whether it's aerospace or some other field.
Ted Simons: With that foundation, talk about, again, best ways, better ways to attract and keep skilled workers.
John Schibler: That's a challenge for us, as you think about the generational gaps that we face today. Kids think differently than we did when we were their age coming out of school. That's a challenge that we at Boeing spent a lot of time thinking about. I want to echo what he said, it's so critical. We spent a lot of time from math academy leveling all the way up to executive sponsors to the major universities. They're marvelous places to grab key people that help us take our products to the next level.
Ted Simons: Talk if you will about public-private partnerships. Where that plays in this industry, and where that could play in the future.
Barry Albrecht: Well, probably the best model in Arizona is, a little biased -- I was involved in, but down in Sierra Vista. Where the private not for profit economic group actually built the facility for Northrop Grumman. They leveraged their private status to establish an incentive lease rate that was competitive that put a bottom dollar position with Northrop Grumman to expand to the point where they have expanded three times. And they're providing hundreds of job and they've even recently won a $515 million contract for another system, surveillance system. But it's that partnership that individual cities in the state can't do. But by leveraging your private -- your economic development group, creating an incentive that -- where we can compete with Texas in incentives, that's the only model I know in the state that has really proven effective.
Ted Simons: Could you talk more about that? The idea of public-private partnerships and where we've been and where we could go?
Tom Browning: I think where we could go is really up to us to decide. Where we have been is that we have had some very successful examples of public-private partnerships. In the aerospace and defense world, we have the capability here to bring together a very viable public-private partnership. And when I say the public sector, I'm talking about the state, as a partner, and I'm talking about the federal government. And going back to john's mentioning of the role of the federal delegation. The department of defense, for example, plans at least five years into the future. In building their acquisition programs and so on. So I think with a good presence and looking at the federal government is a potential -- as a potential partner, in programs that aren't going to be funded somewhere in some state in this country. Then Arizona needs to have the wherewithal to bring together our resources so we're in fact competitive. And I think it bears mentioning, it's not work. Those programs are going to happen. They're going to happen someplace. So why not build the next generation helicopter, the next generation UAVs in Arizona as opposed to Connecticut or Texas, or Alabama? So -- or Florida. There's a lot of things. So depending on what it is, you've got to realize the governments, both state and federal level, can be an investor, because they're going to invest in the research, they could be a partner in moving this thing forward, and they will be a customer eventually for many of the products that are sold.
Ted Simons: Sounds great. Is there the political will in this state? Is there the overall will in this state to increase our visibility, our viability as far as this tree is concerned?
John Schibler: We'll see. I really hope so. I want to help be a champion of that. I think we've got the makings, when you think about Arizona and why is Mcdonald Douglas, Hughes helicopters, Boeing, here in Mesa? We're here because we left California. This state has everything that we need to develop and to grow, and it has proven to be so good for us, but we need our state officials and members in Washington and that delegation to be part of this team. And be a stronger voice as part of this team.
Ted Simons: I think a lot of people would like to know, why did you leave California?
John Schibler: Well, restricted air space, weather is second to none here, tax base was essential for us. Getting out of southern California -- southern California was a mecca of aerospace leading up to World War II and following World War II in the jet age, right? My father retired from North American aviation after 50 years of service. That company is gone, how many major companies have left the state of Arizona? And by the way, where are they economically today in respect to fiscal management? And accountability? That's why we're here.
Te Simons: Real quickly, because we're running out of time, but we need to hear something like that. We keep hearing, we need to attract more, find other folks to relocate here. We found some folks, those are the reasons we're here. Are we pressing on those reasons, moving forward?
Barry Albrecht: I think we're taking the first steps. We lost awareness, our state leadership lost awareness on how important and what these jobs look like. And I think we need to task ourselves at the state level to bring in industry officials like general browning, like you, and come in and strategize and implement some actions that are needed to build on the existing job base. Build -- create some competitive tools that ensures that the existing industries are as competitive so we can bring in new industries. Take -- the Fort has an economic impact of 2.6 billion dollars. And that was a 2005 number. They're a work force generator. The soldiers and the average men that come out of our military installations are great employees that. Is a -- an attractive trait for our state. You can hire those individuals with security clearances and etc. and they're well manage and well trained. There's a lot of assets. We need to leverage on them. Some of our military installations has research and development going on. Some of the most advanced technologies in the world are being tested and developed in the Fort, in Yuma, and some of the other areas.
Ted Simons: Alright, we do have to stop it there. Good discussion. Thank you so much for joining us.
Tom Browning: Thank you.
Ted Simons: My pleasure.
- State lawmakers are working in special session this week on a bill designed to grow jobs and improve Arizona's economy. Speaker of the House Kirk Adams and House Minority Leader Chad Campbell discuss the measure.
- Kirk Adams - Speaker of the House
- Chad Campbell - House Minority Leader
| Keywords: legislature
Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. State lawmakers are working in special session this week on a bill design to grow jobs and to improve Arizona's economy. Here to talk about the measure is speaker of the house Kirk Adams and house minority leader Chad Campbell. Good to see you both here. Thanks for joining us. Speaker, we'll start with you. The idea of -- let's get to some of these quickly, cutting corporate income tax rate, why is that necessary?
Kirk Adams: The bill represents a 28% reduction in the corporate incomes tax rate. The reason why that is necessary, Arizona's corporate income tax rate right now is uncompetitive regionally. If you want to attract new capital to our state, investors, you have to provide a competitive rate of return on that investment. We begin to do that now with this bill.
Ted Simons: Response?
Chad Campbell: I don't disagree with the fact that our business tax rates in the state are uncompetitive. The problem with this bill is we're not paying for those tax cuts and democrats have been saying this for about 2½ years now. We need to make it competitive, but we need to pay for them. This bill will cost the state about $540 million over seven years, and we simply can't afford that in today's fiscal crisis.
Ted Simons: The governor's office says $400 million, the numbers vary here. This would be annually come 2018. How do you respond to the idea that we can't afford this, and what do you think of those numbers?
Kirk Adams: When you hear we need to pay for these cuts, what that means is other people need to may more in taxes. That's the wrong way to approach this recession. What this bill represent and why it is supported broadly by the business community is it represents as combined approach of broad-based tax policy to make us competitive, targeted programs to allow us to be competitive, and a change in state leadership on commerce. So we're transitioning to department of commerce from a traditional state-run bureaucracy to a public-private partnership with the involvement of the private sector business community. Those three things combined make this a package that will make Arizona competitive.
Ted Simons: Maybe not everything you want, but you put it together in a package like that, viable, valid?
Chad Campbell: Not at all. Let me counter the speaker's first statement. We are not saying you need to raise taxes, what you need to do is end some of the credits that don't work. I have a bill introduced at this session that actually ends all the corporate tax credits while reducing the income rate down to 5.4%, makes it revenue neutral that. Ends the game of government picking winners and losers, and makes it a broad-based tax base. There is absolutely no legislative oversight on this commerce authority in terms of where they're spending money, and it's requesting $25 million to be funded and I find that very troubling when we're cutting health care, can't fund a 1.2 million dollar organ transplant program, among many other things and we're giving another $25 million to this body.
Ted Simons: What about the oversight concern?
Kirk Adams: I think that's completely incorrect and not based upon facts in the bill. For example, it's a 17-member commission, The Arizona commerce authority. Eight of those appointments are legislative. It is still under the purview of the legislature, their funds are still appropriated by legislature, on an annual basis, like every other area of state government. The policies it impacts the commerce authority can be changed and altered and modified by Arizona state legislature at any time. So to say there's no over sight is simply not accurate.
Chad Campbell: As it stand right now, page 49 of the bill says, this body does not have to adhere to state accounting principles, or reporting requirement and they can set their own rules that. It is in the language of the bill, very clear that we do not have legislative authority as the bill stands right now. And we've seen where that leads us, we sought Fiesta Bowl board mishap we've seen over the past couple weeks, we know where power like this goes without any type of oversight, we know where that leads.
Ted Simons: Last point on this, could it be tightened up a little bit?
Kirk Adams: Let me just say this, that that's apples and oranges. The Fiesta Bowl situation is a private entity, nothing to do with state government. Could this bill be improved? I'm sure it could be. I haven't seen a perfect bill yet at the Arizona state legislature. But I'll tell you this much, the bill has accountability measures in it, the oversight is maintained by the legislature, and executive office, and it wouldn't be the first agency that was able to set its own rules. The fact of the matter is this. This bill represents the combination of good tax policy, good economic programs, and a change in state leadership on commerce, and this is why you see business groups across the board supporting this, because they recognize the impact that this will have on job creation in the state of Arizona.
Ted Simons: Regarding the concern and the idea of just abolishing the corporate tax rate -- getting it down to 5.4%. Broadening that base, working from there, we've heard from some folks, some relatively conservative economic minds saying that's not necessarily a bad idea. Something to consider?
Kirk Adams: I certainly think that's worthy of the discussion. In fact, I had that opportunity, the house ways and means committee earlier this week. But the lowering the corporate income tax rate to 5.4% does not take us far enough. Furthermore, you have to ask the other question, what does the bill as proposed by Mr. Campbell actually do? For example, it would eviscerate the wildly successful solar tax credit program in the state of Arizona. And eliminate those credits. It would also displace thousands of students who rely upon the student tuition organization tax credits to obtain a private education, a key component of Arizona's school choice program. So it would Reyes raise taxes on some, and it would have a dramatic impact. Those are the types of discussions that are worthy of having, but I'll tell you this much, 5.4% does not put us in a competitive position whereas this bill takes it down to 4.9%, and does put us there.
Chad Campbell: What doesn't put us there is cutting education again. We just asked the voters of the state last year to raise the sales tax on themselves so we could better fund education that. Is the governor's request last year, with her big issue. And the voters overwhelmingly supported it. Now we're going to give over half of that back to large corporate interests, and what that means is we're going to have to come back and cut education for the same amount, which is about $500 million. That is not a good strategy for Arizona and the long-term implications means we don't have an educated work force, we don't have fiscal stability and no matter what the tax rate is, we're not going to attract businesses to a state that does not have qualified educated work.
Kirk Adams: To be accurate, the tax cuts in this bill did not begin until after the expiration of the sales tax. That is the governor's position, that's the position she's continued to maintain. And that's what's included in this bill.
Chad Campbell: Which makes it worse, because once the sales tax ends we'll lose another billion dollars in revenue. Right now we have a multibillion dollar deficit in the state, and we're proposing right now with this bill to cut it by another $540 million as well as lose that billion dollars in revenue from the sales tax. That means we're losing $1.6 billion.
Kirk Adams: You can't compare them. The $540 million is at full implementation in 2018. Full implementation in 2018. It is not relatable to the current budget deficit. I promise you this, we will have a budget that balances. We will have a budget that makes those tough choices. But we cannot ignore the pain in the private sector while we take care of the state's business. This begins to address the need for job growth.
Chad Campbell: But our balanced budget means we're going to balance a budget by massively cutting education, which is already the lowest funded education system in the country, and cutting health care for hundreds of thousands of people. And I want to point out, I think it's ironic the AHCCCS cuts that the Republicans are trying to make right now, cost about $540 million, the exact same amount of this tax cut bill.
Ted Simons: The idea behind the tax cut bill is changes mean more business, more business means more tax revenue, and that will -- it's a moving --
Chad Campbell: I agree.
Ted Simons: It's moving target. How do you know it's going to be $400 billion?
Chad Campbell: Ted, here's the point. You can do all of these tax cuts. I have a bill that actually repeals entirely the business personal property tax in the state. More than this bill does. You can do all of this without costing the state and our education system and the kids of this state $540 million. And that's what we should be doing. Comprehensive tax reform that makes sure the long-term fiscal stability state is kept in mind.
Kirk Adams: Comprehensive tax reform is a euphemism for tax increase.
Chad Campbell: Not it is not. It is simply not. That is a red herring that they throw out there. My bill does not increase taxes, it ends tax credits, handouts to big businesses and treats everybody fairly.
Ted Simons: Are you ready to lose tax credits for R&D?
Chad Campbell: You have to pick which one you want to do. It's either do these targeted tax credits or do across the board fair lower taxes. But you can't do both when you have a multibillion dollar deficit in the state and the economy is not turning around.
Ted Simons: Last question here, there's been some concern that this is not been vetted enough, that a certain few number of folks got together, made their decision, special session was called without a heck of a lot of warning and now it's going to sail through the special session. Talk to those who say this could be rushed?
Kirk Adams: One simple word -- hogwash. This bill has been vetted for a very long time. The fact -- the jobs bill that went through the house last year is closely resembles the bill that we have today. The various elements in this bill, some have already gone through the legislative committee process already. But these are concepts and things that have been discussed widely at the legislature, and in the business community, and various economic reports that have been done over the years. There's nothing new under the sun here, what this bill is doing is putting them into a single bill so that we can vote on this and get this done and move Arizona's economy to a better spot than we are now. I refuse to accept this notion that we're better off doing nothing. I mean, we need to act to create these jobs, this bill does it.
Ted Simons: Final point.
Chad Campbell: I would agree. There's nothing new at all in this bill. It's the same failed policies we've had in the past that got to us this point in the first place. I want to point out, last year, many Republicans in the senate and the governor said we cannot afford this bill. Guess what? Our fiscal situation has not changed at all. And yet now we're pushing through the same package.
Ted Simons: We're going to have to stop it there. Great discussion. Thank you so much for joining us.
Chad Campbell Thank you.