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August 15, 2011

Host: Ted Simons

Hunger in Arizona

  |   Video
  • A new report from the Food Research and Action Center indicates that Arizona has the seventh highest percentage of families with children who can’t afford to put food on the table. Cynthia Zwick and Katie Kahle of the Arizona Community Action Association discuss the report’s findings.
  • Cynthia Zwick - Executive Director of Arizona Community Action Association, Katie Kahle - Manager of Nutrition Programs at Arizona Community Action Association
Category: Business/Economy   |   Keywords: food hardships, food distribution, hunger,

View Transcript
Ted Simons: Nearly 30% of Arizona families with children struggle to put food on the table. That's a report by the Food Action and Resource Center. The report is an analysis of gull will you please poll data gathered between 2008 and 2010. Arizona is ranked as the seventh worst state when it comes to food hardships for families with children. Joining me is Cynthia Zwick and Katie Kahle, the group's manager of nutrition. Thank for joining us.
Cynthia Zwick: Thank you.
Ted Simons: Seventh worst in terms of food hardships for families with kids. Food hardship. Define that, what are we talking about?

Cynthia Zwick: The certify asked families if over the last 12 months they have had a difficult time at any point being able to feed their families A. large number of families in Arizona, 30%, said yes, in fact, they had difficulty feeding their families, they couldn't feed their families.

Ted Simons: That particular question was key, was it not?

Katie Kahle: Yes, it's how USDA identifies food insecure households. And we are really concerned about food insecure households with children as well.
Ted Simons: And Arizona – 29%? Closer to 30%. They answered yes to that?

Cynthia Zwick: And it really varies, depending on the area of the state. For example, in Phoenix and this area the number was actually closer to 27%. Up in district 1, the federal congressional districts, the number was actually 36%. It's just a huge number of families that we're seeing that is really food insecure is the other term; just don't have enough money to puffer food to feed their families.

Ted Simons: Has a study been done before, or a similar study done before?

Katie Kahle: Actually FRAC does these studies on a regular basis where they look at census data and Gallup poll data to determine food security in the United States.

Ted Simons: Do we know how Arizona in general, Phoenix and Tucson in particular, how they have trended in the past?

Katie Kahle: Unfortunately, they are getting worse. We have seen the numbers of food insecure household’s increase. We have seen an increase in the households participating in SNAP which is the federal name for food stamp program increase. We currently have 1.1 million participants in the state of Arizona. It's much, much larger, it's gotten larger pretty much every month since 2007.

Ted Simons: Some folks want to know who exactly did the study, how the study was done. There was more than this one question, I would imagine, although I'm not sure. And who are the food action resource center?

Katie Kahle: They are a national group of advocates and researchers who study trends having to do with food security related issues. They follow a lot of policy issues out of Washington, D.C., but also help a lot of states with local issues, determining the trends and what's going on with hunger. They looked at the Gallup poll data. The Gallup poll took the information and FRAC analyzed it. They looked at every state and then the top 100 metropolitan areas in the United States.

Ted Simons: Sounds like a very big sample. What do we take from this study? Where do we go from here?

Cynthia Zwick: This is more bad news in a long list of bad news items Arizona has recently been receiving. We are the second highest state for poverty level living. Mortgage foreclosures, we heard those are turning around a little bit now. Unemployment rate is still extremely high. What we know is that unfortunately because of the economy here families just are not making it. The unemployment rate, they don't have the jobs, they are unable to get the food to serve their families. What we're really looking at is working to ensure that the funding is at a federal level. All of this funding that provides assistance to families through SNAP and WIC and other food related programs are federally funded. There is the federal deficit and the budget folks will take a look at. But it's essential we maintain programming for these families that are so vulnerable right now, so they can continue to feed their families.

Ted Simons: How much that is funding threatened? Has it been shaved already? Has it been threatened to be cut in the future?

Katie Kahle: The primary threat is block granting. The good news with all this, the programs are set up in a way that they respond almost immediately to changes in the economy. Because the situation changes, the money is available to serve them.

Ted Simons: No limit, right?

Katie Kahle: Essentially no limit. They have never hit a limit before. The big threat coming out now is block granting. Block granting would limit, give a dollar amount it limited the program to that we couldn't exceed. The problem with that is that as times change and more or less people are eligible, it's not responding to the actual need. The WIC program has been cut back a little bit in Arizona, as well.

Cynthia Zwick: The other concern we have about block granting, just conceptually, is the other programs that Arizona receives funding through, we typically get less money than any other state in the country. The formulas are set up that the western states typically receive fewer dollars per capita than other states. We want to really ensure that not only the block grants don't become the rule for the food programs, for the reason that they do limit it. But also so that there's an equitable distribution for families in need.

Ted Simons: There's such a federal component here. You want folks to specifically contact their congressional delegation, and even more specifically Senator Jon Kyl. Why?

Cynthia Zwick: Senator Kyl will be addressing the Resolution of the deficit, no small task. We would like to reach out to him and let him know how important the perhaps are, not only here but across the country.

Ted Simons: Is there a sense that the congressional delegation in general, the state in particular, just everyone involved in the political process and obviously the corporation process, are they not getting it or doing the best they can with what they have got in terms of revenue?

Katie Kahle: That's a good question. I think you find a mix of both. People are frustrated by the perceived inability to turn around the situation. When you see the numbers of people enrolled in the programs and the numbers of people going to food banks going up consistently, while I think our congressional delegation and our local delegation are really feeling like they are doing their best to sort of meet that need, I think they are feeling frustrated by it. It's an opportunity to find some creative solutions. But we need to make sure they don't undermine the need in our communities. When we're looking at 30% of children who don't have food on their table every day, it's not a sacrifice we should be willing to make.

Ted Simons: What are hearing from Food Banks and service agencies right now? Is it bad or what kind of dynamic we got going here?

Cynthia Zwick: The summer tends to be difficult because many of the children in low-income families have an opportunity to take advantage of the school meals program. They often, the food they get is often provided at school, since school is out, or has been out, 17 families have been turning to Food Banks to receive the food they are not able to afford. The need continues to grow and the Food Bank demand continues to grow. In some of the community action agencies that serve low-income families in a variety of ways are able to serve one in 10 of those coming through their doors. That doesn't account for the folks who can't really get an appointment or really even get through the system.

Ted Simons: Are you hearing the same kinds of stories?

Katie Kahle: Even a little further with the Food Banks, donations traditionally are up during the holiday season and during the summer they see a drop in donations. They struggle to meet that need. There is a summer meals program students can take advantage of if it area meets the criteria. In our heat in the summer and the difficulty in some areas with transportation for kids to get where the meals are provided, not as many households take part in that as are eligible for it. The kids don't have a convenient location to go to get that help.

Ted Simons: Is information, knowledge, do some of these families just don't know resources are there for them?

Cynthia Zwick: I think that's a big part of it. They don't know the resources are there. They have never had to seek assistance before, they have been employed. They don't have jobs and don't know how to navigate the system. Once they figure it out, there aren't always resources available.

Ted Simons: Thank you both for joining us.

Katie Kahle: Thank you.

Phoenix-area Foreclosure Rate

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  • For the first time in two years, foreclosures represent less than 30% of all existing home transactions in the Phoenix-area housing market. ASU Real Estate Professor Emeritus Jay Butler discusses the latest trends and statistics.
  • Jay Butler - ASU Real Estate Professor Emeritus
Category: Business/Economy   |   Keywords: economy, housing, ASU,

View Transcript
Ted Simons: For the first time in more than two years, Phoenix area foreclosures make up less than 30% of existing home transactions. Here to tell us what that says about the valley's real estate market is Jay Butler, a real estate professor emeritus with ASU's W.P. Carey School of Business. Good to see you again. Thanks for joining us.

Jay Butler: Good to be here.

Five straight months of decline. What's going on?

Jay Butler: There are a lot of reasons. The moratoriums are on, the banks say they are slowing things down to make sure everything is correct, they are pacing themselves a little more. The other reason is hopefully we're simply running out of things to foreclose on. We've foreclosed on 14% of the homes in Maricopa County and another 12% of the townhouse condos. You would hope we were beginning to run out of product to foreclose on. The big issue is you normally would think other sales activity would pick up. But it hasn't because of the economic issues, low consumer confidence, all the other things. The total sales are also declining.

Ted Simons: So basically when we got foreclosure rates bellow 3% as I mention earlier, since 2009, back in January or February we were at 43%?

Jay Butler: 43%. And back about a year and a half we were at 46%.

Ted Simons: Is this the natural order of things? Again, something that's happening that could bite us here coming up in a couple of months again?

Jay Butler: I think there's a theory out there for every one of those positions. We really don't know. We've never been here before, so we don't know how it's going to act. I think we're on the beginning to move out of this thing. My concern is continued weak economy. We're seeing some new finance rules and regs going into effect the first of October that could have some impacts on the housing market. And just general lack of confidence. There's a real push that the American dream is dead, which in my years is the fourth time the American dream has died. And pushing rentals out there. so there are lots of stories. And every story has lots of credibility.

Ted Simons: Who's buying right now?

Jay Butler: Investors. Basically it used to be a lot of Canadians and Asians buying it. You're back in the same group that bought homes in the hyper market. Individuals and investors, we were seeing the seminars repeat themselves again. One side advantage with a lot of these homes, we have old housing stock. A lot of these homes are being fixed up and it's improving some neighborhoods.

Ted Simons: The ramifications of investors buying more so than owner-occupieds, what does mean for the future?

Jay Butler: It better mean we're growing or filling those rentals. We saw an increase in vacancy in apartments. We're running heavy 8% of single-family homes are vacant in Maricopa County. Almost 10% of condos are vacant. We have a heavy vacancy level out there, also. We're not getting the population growth because we don't have the job growth.

Ted Simons: And people just aren't coming here like they used to. Are we seeing more short sales, fewer foreclosures but maybe more -- I think we had a lender on the program that said short sales seem to be on the increase. You see that as well?

Jay Butler: Well, I think they are tending to really, the MLS, the only source of numbers. It's not one that you can publicly pick up. But there's a sense that lenders are more prone to do them than they were a while ago.

Ted Simons: You've got to be patient, it'll a lot of paperwork.

Ted Simons: The idea of this kind of graph going down, as far as foreclosures, yet the economy seems stagnant. The job picture just kind of signature there on this plateau. Does it make sense that the economy is somewhat stagnant but the foreclosure rate is still coming down?

Jay Butler: I think it makes sense when you're running out after product to foreclose on. The second is, if banks are in fact cooling the process and stretching it out to make sure they are doing it right and following all the procedures, you would expect that. Now, we're at 29%, historically we're at 3%. We've got a long ways to go. If it's simply pacing itself, we could expect this to continue on for a longer period of time. You've got look at the motivation. It's not clear really what the motivation is. It’s not clear as to what the motivation is.

Ted Simons: Do you see the motivation for the banks to continue being strict or a little more strict, I should say?

Jay Butler: I think it pays for them to do that right now because of the headaches they had starting back in October with the lawsuits and the bad press and other things. I think they want to be very careful about what they are doing at this particular point in time.

Ted Simons: What are we seeing as far as median prices? It looks like those continue to go down.

Jay Butler: Well, you're seeing some improvement in some areas. This recovery once we've started is not going to be even. We're seeing some strengthening in some of the East Valley communities. Some lower levels in the we feel valley communities, surprise, a couple of those are pulling in. Pinal County is still seeing some serious issues. They are still drifting a little bit.

Ted Simons: That's single-family homes. What about townhomes, condo market?

Jay Butler: That's falling down.

Ted Simons: With everything in mind we've talked about here, are we bumping bottom as far as prices are concerned.

Jay Butler: We probably are. As much as we're talking about a double dip recession or double or triple-dip prices. We're down around $125,000 right now. You could see if the economy went further down -- I think if we're running out of product to foreclose on, the market is simply going slow down. You're not going to sell because you're underwater. One of the benefits right now is remodeling is quite a strong part of this market right now. People are saying, we can't sell our home, we don't really want to, let's fix it up. We forget there is a group out there that is relatively happy with where they are good schools, reasonable mortgage and everything else.

Ted Simons: The old-fashioned idea of people buying homes and staying in homes because they like to live there.

Jay Butler: What a unique concept.

Ted Simons: Jay, good to see you.

Jay Butler: Nice to see you too.

US Credit Downgrade

  |   Video
  • Gary Gibbons, Ph.D., visiting professor of entrepreneurship at Thunderbird School of Global Management, talks about the U.S. credit downgrade and how it impacts Arizona.
  • Gary Gibbons, Ph.D. - Visiting Professor of Entrepreneurship at Thunderbird School of Global Management
Category: Business/Economy   |   Keywords: economy, credit, US,

View Transcript
Ted Simons: Good evening and welcome to "Horizon," I'm Ted Simons. The ramifications of the U.S. credit rating downgrade are still being felt in a variety of ways, most notably on Wall Street. But what does the downgrade mean to Arizona? And where does the state and country go from here? Joining us with some perspective on the downgrade is Gary Gibbons, an expert in investing and corporate finance, and a visiting professor of entrepreneurship at the Thunderbird School of Global Management. Thank you for joining us.
Gary Gibbons: Thanks for having me.
Ted Simons: Were you surprised by the S&P downgrade?
Gary Gibbons: No. The S&P were telling us a long time they were intending to downgrade. They laid out their reasons, and what the government had to do in response to the negative watch they put the government on. In fact, they followed through with what they said.

Ted Simons: Yeah. And I know that their press release was relatively succinct. I think we have it here in a second. It says it's basically the debt and the government that is lowering of the rating was prompted by a perception of grating policy-making uncertainty consistent with our criteria. Again, not surprised?
Gary Gibbons: No, not at all. They did exactly what they said they were going to do. In their view, the deal that was struck last week in Congress was not sufficient. And they also doubt the ability of the different parties, the presidential branch, and the Senate and the house to get together and resolve the issue.
Ted Simons: Why trust S&P? I mean, these folks didn't have a very good track record with those mortgage backed derivatives. Why do we put so much trust in them?

Gary Gibbons: That's a good question, they have had some notable failures. Enron was one of them, the mortgage-backed securities was another one. However, for the times they have gotten it wrong, they have gotten it right a lot of other times. The reason we trust S&P or Moody's or Fitch or anyone like that is because they represent an independent view. When they do ratings, they do publish reports that explain exactly what their view is. Now, if they miss something, that's a problem. But in general they typically do get it right.

Ted Simons: I know some critics are concerned because they are paid by some of the companies they rate. Talk about that concern and talk about that situation.

Gary Gibbons: Well, they do get paid by companies that they rate. When they rate sovereign debt, they get paid by funds that subscribe to their sovereign debt reports. They get paid both by the people they are rating and the people that consume their advice. But I can't think of any other way to do it unless you had a government agency doing the rating and that wouldn't resolve the problem.

Ted Simons: So with that in mind, for those who say there's too much dependence on credit ratings, when an S&P can do this and Wall Street blows up. You would say that's the nature of the beast?

Gary Gibbons: Well, S&P did it, it didn't have much effect on the U.S. Treasury markets. It did have a lot of effect on Wall Street, I agree, but there were other issues in the economy Wall Street was also worried about at the same time. The crisis in Europe is very substantial. What the French bank and the German banks are going to do with Italy and Greece, these countries, that's a big unknown, as well. It's as dangerous if not more dangerous right now than the downgrade of the U.S. debt.

Ted Simons: Back to the downgrade and back home here: How does that downgrade impact everyday life and business here in Arizona?

Gary Gibbons: Well, I would say the first place that it affects all of us here in the state is that our debt, the debt that's issued by our revenue districts, like the airport authority or the board of regents at the universities, that debt is in danger of getting downgraded, as well. Because when you have sovereign debt downgraded, then you have S&P looking at all other debt that follows along the line behind the sovereign debt, and giving more scrutiny to that debt. S&P in fact downgraded 5,000 issues nationwide of municipal debt. I expect that's going to be an issue.
Ted Simons: It's interesting you being up on municipal debt. I would think if you're a city or a town, if you've got a Triple-A rating, which might be a relatively attractive place for some folks to park their money.
Gary Gibbons: Well, I think that would be a Triple-A municipal debt that's fully guaranteed by general obligation of a state or a municipality would be good solid dote have right now. We don't have any general obligation debt like that in Arizona. The Arizona constitution forbids the state from issuing general obligation debt, for all practical purposes. So for us, we are looking at debt that is not rated as general obligation debt, obligation of the state. But debt that's an obligation of, oh, the universities and it's funded or paid only from the revenues that are -- that the universities receive from tuition or from a sewage district or a water district or something like that. That makes that debt more suspects, especially in a time of economic slowdown.

Ted Simons: So impact on cities and towns, yes?

Gary Gibbons: I think they will see their debt given more scrutiny. We'll have some downgrades. I think Dysart School District was downgraded already and a few others.

Ted Simons: There are a few issues regarding the debt deal, as well, including a trigger if something doesn't get figured out here. Talk to us about how that might affect Arizona.

Gary Gibbons: Well, that's a good point. The congressional select committee has to provide a report to Congress about what they are going to suggest, about a trillion and a half in cuts that they are going to try to generate by Thanksgiving. If they don't manage to do that, then there's going to be a debt trigger that kicks in. It simply says, arbitrarily, that we're going to take a trillion and a half out of entitlements, 50%, and the defense budget 50%. Arizona has a lot of dependence on the defense budget. We have three major bases; we have Luke, Davis-Monson and Fort Huachuca. We have to work hard to save those bases and keep them from being cut. Plus, we have a defense industry that has a pretty substantial presence in our state. If we get to that trigger and $750 billion is taken out of the defense budget, Arizona is going to suffer.

Ted Simons: All right, great information. Thank you so much for joining us, we appreciate it.

Gary Gibbons: Thanks for having me.