April 16, 2012
Host: Ted Simons
- John Arnold, the Governor’s budget director, discusses the latest State revenue forecast and its impact on budget negotiations.
- John Arnold - Governor’s Budget Director
| Keywords: budget
, revenue forecast
, budget negotiations
Ted Simons: Good evening, and welcome to "Arizona Horizon." I'm Ted Simons. Legislative budget analysts recently lowered their forecast for Arizona's revenue growth in the next three years. And here now to tell us how that plays in state budget negotiations is john Arnold, director of the governor's office of strategic planning and budgeting. Good to see you again. Thanks for being here. The latest assessment of the state's economy, A, and B, how that's playing into negotiations.
John Arnold: All right. Thank you. As you mentioned, we met with the legislature puts together a team of economists, and they review the state of the economy and come back and advise the legislature on revenue projections. And we had that meeting earlier late last week, and it was one of the most positive meetings we've had in years. A number of very positive signs about the economy, housing is stabilized, the employment market is getting stronger, it's not where it needs to be yet. But it getting stronger. We’re adding jobs back. And revenue growth at the state level, our tax collections have reflected that. We're up over 8% year to date, coming off a year last year, revenues grew over 12%. And so overall it was a very positive report. In fact, two of the economists put the risk of a double dip recession at zero at this point. That all signs point towards not a fast recovery, but steady recovery over the next few years.
Ted Simons: And yet it sounds as though the report downgrades growth for FY-13. I think they had a five something and now they've downgraded to three something. So you're saying positive but they're downgrading?
John Arnold: You know, I'll be honest, I don't quite follow the logic. Again, all signs point positive, they came in and said, we want to be more cautious than that. And one thing they do, the way the legislature develops their revenue projection is they do four revenue projections and then average them. And they purposely take one of those four and assume a recession. And so the recession they assumed for this forecast was much worse than the recession they assumed for the last forecast. And I don't know why, I asked that projection comes out of the U of A and I asked the professor that does that and he said, well, it's just a scenario. It doesn't really mean anything. And quite frankly, if you remove that one quarter of their projection, the recession quarter, their projections are really in line with what the governor has been projecting.
Ted Simons: Legislature though says with these -- with the downgrade, 160-some-odd million lost, they're saying you need to be cautious. This is an indication that the economy is not necessarily -- can't necessarily be counted on, I know the double dip somewhere, looking at that regardless of what the experts are saying, how do you work past that, how do you work with that and get some sort of agreement?
John Arnold: It has been difficult to look at those competing priorities. What we're looking at is a few things. We're in fiscal '12 right now, so we're setting a budget for fiscal '13. We want to be cognizant of the upcoming years, fiscal '14 and '15 because of the major law changes that will come into being over the next couple years. The one cent sales tax expired at the end of '13, so we have that revenue loss in fiscal '14. I think we've shown a budget that takes us through fiscal '14 with a loss of that one cent, and yet keeps the state's budget balanced. You look into fiscal '15, you have federal health care reform. And the vast expansion of Medicaid. Which also costs the state money. But again, I think we've shown with conservative revenue projections that we're going to be OK through fiscal '15. But that's the concern. You look out two or three years from now, and subtle changes in revenue projections and subtle changes in expenditure projections leave -- make large changes out in fiscal '15 because it's cumulative year after year. And that's really where we're divided from the legislature, is how serious are our problems in '15 and what does that mean for spending decisions today? And the governor's position has been, yes, she's here through fiscal '15, she wants to leave the state with a balanced budget. We need to be cognizant of that but we have real problems today that we need to address.
Ted Simons: What are some of those -- you mentioned fiscal year '14 and '15. I've seen $134 million needed to be made up, I've seen up to $500 million for '15 because of affordable health care and the loss of the one cent sales tax. Legislature says let's put this money, let's put 400 and some odd million into a rainy day fund, there's no need to spend now, save it, have it at the ready. Is that wise?
John Arnold: You know, to a degree. And the governor agreed with that. We need to reserve some funds because there are some unknowns out there, and the economy while strengthening still isn't strong. And so we're in agreement, we should put some money in a reserve fund. We should be cautious as we move forward in our revenue projections, but we also have to be realistic in the problems that we have today and how we face those. So for a couple of examples. The state is almost out of maximum security beds. While our general prison population is stabilized, we're not really growing in new prisoners. We continue to grow in maximum security prisoners. And so we're out of beds. That's one area where the governor says we don't have a choice here, we need to add more maximum security beds. That's expensive to do. We're understaffed inside our DOC, our department of corrections. Part of that, we did have growth in our prison population, but weren't able to fund new officers because of our budget situation. So we actually have less correctional officers today than we had in 2005. And we've added about 6,000 inmates over that time period. So it's to a point where it's getting a little bit unsafe. Other areas, the state's accounting system, and I know this is not exciting or sexy, but it's failing. And it's the system that makes the state go. We haven't upgraded it for over 20 years, and it's dying. Then let me touch on K-12 for a second. Last year -- two years ago we passed a law that said if you can't pass the reading portion of the aims exam in the third grade, you can no longer be promoted to the fourth grade. We had 4500 students fail that section of the aims test last year. And starting next year, they will no longer be able to move forward into fourth grade. And so the governor has proposed some intervention dollars to be used in kindergarten, first, and second grade to make sure all of our students are prepared for that test, and are able to read in the fourth grade. So these aren't major spending items, a lot of them are one-time in nature, capital improvements, that the governor feels we need to do now, but they don't really jeopardize our fiscal '15 situation.
Ted Simons: With that in mind, how far apart is what you're looking at, and what the legislature is looking at? I get the feeling from afar that sometimes the goalposts seem to be moving. How steady is this particular contest?
John Arnold: You know, we're all on the same team down here at the capitol, and we're working together. We have some competing priorities. But we're working through that. I think we'll have a budget deal done here in fairly short order. Just everybody needs to compromise a little bit, and the governor has the items she needs to get done, and they do too. So we'll get that done.
All right. We'll see when you get that done. Good to have you here.
Ted Simons: And we'll have more on the budget tomorrow with the vice chairman of the house Oprah Winfrey rations committee. Coming up in just a moment, we'll take a lock at the ongoing parade of scandals involving Arizona politicians.
- In recent months a startling number of Arizona’s elected officials have been the subject of ethics complaints and criminal investigations. Is this an unfortunate coincidence or a culture of corruption? We’ll examine the issue.
- Bob Robb - Arizona Republic Columnist
- Chris Herstam - Political Observer-Former AZ Lawmaker
- Bruce Merrill - ASU Morrison Institute Pollster
| Keywords: scandalous
Announcer: Along state route 80 in southeast Arizona is the town of tombstone. Two miles west at the end of a dusty road stand as monument to its founder, Prospector Ed Shefflin. In 1878, he sought riches in the untamed mule mountains, despite being warned that the only thing he'd find there was his tombstone. He cheated death, and discovered several rich silver strikes that launched a boom and established the town. By the 1880s, tombstone was the county seat, filled with wild and colorful characters whose escapades were chronicled in what is now Arizona's oldest continuously published newspaper, the tombstone epitaph. The boom had inned by the mid 1890s. Over the following decades, tombstone transformed itself to a town Ed wouldn't recognize by turning legends of its past into tourist gold. And billing itself as the town too tough to die.
Ted Simons: When Mesa voters removed senate president Russell Pearce from office last November, it was just the start of what's become a season of scandal for Arizona politicians. So far this year, three state lawmakers have resigned. Two were facing expulsion for ethics violations. The third has since pleaded guilty to federal charges of wire fraud and tax evasion. Last week former Maricopa County attorney Andrew Thomas was disbarred for mis-using his powers. Sheriff Joe Arpaio was the subject of federal investigations. The Pinal county sheriff is accused of a variety of indiscretions and the FBI is investigating allegations that attorney general Tom Horne violated campaign laws. Here to talk about all of this is Former Republican columnist Bob Robb, Chris Herstam, who has served in the state legislature and as chief of staff for former governor Fife Symington, and Dr. Bruce Merrill, who directs a statewide public opinion poll for ASU's Morrison Institute. Good to have you all here. Thanks for joining us. We appreciate it. Bob, we'll start with you. What is going on? [laughter]
Bob Robb: I'm inclined to believe it's nothing in the water or the air. I think it's just a confluence of events. In reality, we have a lot of accusations, you have some things proven, have you some things decided. In terms of something that stands out, I think the Andrew Thomas sheriff Joe Arpaio grand conspiracy theory about county government kind of stands out. With everything else there's been regretfully to say, larger instances of acts of banality in the state, even in recent history.
Ted Simons: You think the Arpaio-Thomas situation is perhaps more important in that the message it sends?
Chris Herstam: Absolutely. I believe that sheriff Arpaio and his former deputy Hendershott, converted the county attorney, Andy Thomas, into a political monster a few years ago. And the abuse of power and recklessness that we've seen from the prosecutor of Maricopa County and in tandem in my opinion with the sheriff and also the opinion of the disciplinary committee, they're basically stating that it was a criminal conspiracy and that Arpaio and Hendershott were involved, you can't hardly top that. That's as bad as it gets. That's an abuse of power that is gigantic, and to use that for political purpose and raw intimidation, it's sort of on a silver platter for the justice department and it will be interesting to see if they pull the trigger.
Ted Simons: And yet, Bruce, these are popular politicians. Certainly Joe Arpaio is popular. What is going on?
Bruce Merrill: They certainly have their own constituencies. Sheriff Joe is still pretty popular and he's got a lot of money in the bank to run a campaign again. I think Arizona has had a history of this. Going clear back to AZscam, we've just had Evan Meekam, a number of things. I'm more interested into why that's the case, and I think part of it is the tremendous growth that we've had in Arizona, we have growth spurts and then we collapse, we had one of the strongest economies in the country, we had one of the biggest falls. And so in the work I do, there's just been a tremendous in-migration and out-migration in Arizona which has left us with a population that isn't really very well grounded, and I think creates an environment where these kinds of things are more likely to happen.
Ted Simons: Do you see this as well? You look at someone like sheriff Paul Babeu, from the East Coast, comes out here in some ways reinvents himself as so many people do when they come out to Arizona. And then we find out about his past, about what's going on now, is that true to the people we're talking about? Or to the electorate that isn't as Bruce said as well grounded as maybe some other areas?
Bob Robb: The underlying premise of Bruce's argument is that things are worse here than other places. And I don't agree with that analysis. If you go other place and read their newspapers, they think they've got the most corrupt politicians. And in reality, I think Arizona politics is relatively clean. I think there's less paid for -- pay to play that occurs here in this state than in most other states. You can go down the list. Certainly the fact that we're an open society allows someone like a Babeu to come and reach a position of prominence perhaps less vetted than would occur in other places. But I just don't accept the premise that Arizona's a dirtier place than other places.
Chris Herstam: I would agree with you on -- with regards to the legislature and so forth. I think there's a pay to play exists in greater -- in other states. But I think the Arpaio-Thomas situation and the criminal conspiracy and so forth that may have existed, I think that's historical. That tops other states.
Bob Robb: It competes with other states. And it is the -- there have been other exampling of prosecutors run amok. But the extent of this one, I agree, is huge.
Chris Herstam: You have Joe Arpaio, that is, the most dominant political figure in the last two decades probably, and -- for the bar association disciplinary committee to say he's involved in a criminal conspiracy with the county attorney, that's gigantic. I will also say that I'm extremely disappointed with -- and I say this as a lifelong registered Republican and a former Republican majority whip at the state house, I'm extremely disappointed at the lack of Republican elected officials at the highest level, McCain, Kyle, etc., nobody comes forward and says a negative word about sheriff Arpaio. Or the county attorney. And this stuff has been on the radar for a couple of years. People are intimidated by this individual, and the $6 million he sits within a campaign fund that he can do independent expenditures like he did against Rick Romley. I think that's appalling, and I'm really disappointed in the Republican Party for not standing up and trying to denounce this. And I still haven't.
Ted Simons: Back to a broader picture, the idea -- you've talked about this, the changing nature of the Republican party. Right now it is the majority party with the capital M. Is that playing a factor in what we're seeing?
Bruce Merrill: Well, I think it is. But I'm dumbfounded that somehow Bob thinks that I said that the politics in Arizona were worse than other places. I was simply trying to point out why it may be that we're having the problems that we're having. Because we do have a very mobile population, but I tend to agree with Chris a lot. I think another factor is leadership itself. Leadership has changed so dramatically in Arizona, I mean -- And in other places also. But years ago when I first came here, the people that owned businesses here lived here. And there weren't many outside corporations. If you wanted something done, you went to western savings or you went to valley bank or you went to these places, and they were people that had real investment in the community. A lot of the leadership now, some of the boards I'm on, if we try to get money, we've got to go to Cincinnati or we've got to go to New York or some place. And frankly, I think it does tie in with not only party leadership, but I don't know, maybe we need a small business organization of people that own businesses in Arizona that have an investment in Arizona. So I do think that leadership has changed, and like Chris says, where have some of these key people been in terms of criticizing some of the events that have happened?
Ted Simons: What do you say, vacuum of leadership, politically, civically?
Bob Robb: Yes. I have written on many occasions that I think Thomas and Arpaio were undermining the rule of law in Maricopa County, and that's the sort of thing that people need to stand up against. I will say that I think that when you ask politicians to take risks, you need to set up the environment where those risks can pay off. And so far with respect to sheriff Joe Arpaio, it's not been there. So you have -- he has two opponents, one a democrat, one an independent, neither of them have a lot of money. The business community hasn't stepped up to fund the kind of independent expenditure campaign that would be necessary to topple him, and until there's a consolidation of opposition and some money that's willing to be committed to make the case, I think it's kind of premature to ask the political leadership to step forward.
Chris Herstam: I think it's called integrity and courage. And when your two U.S. senators, one is retiring, doesn't have another election, and the other McCain, does haven't to worry about anything, for them not to stand up is I think appalling.
Ted Simons: Why are they not standing up?
Chris Herstam: I don't know. I think nobody wants to get in the way of a county prosecutor at the time, or a sheriff, but now with all this laid out in this disciplinary hearing, we still can't come up with one Republican that is going to challenge Arpaio in the primary? I mean, what does that say about the Republican Party in Maricopa County?
Ted Simons: What does that say about the Republican Party in Maricopa County?
Bruce Merrill: It says that the Republican party in the state of Arizona has been going through a change for about 10 or 15 years and is heavily divided between the so-called Goldwater Republicans, which ironically are the moderates, and the Tea Party evangelical right wing of the party. And they don't like each other very much. There is a real division there. And that makes sometimes political leadership difficult.
Ted Simions: Does that make for politicians who wind up getting accused of beating people on the side of the roadway, or down in Tucson, not only beating their campaign manager, live-in girlfriend, but threatening people -- and the whole Paul Babeu saga, granted, it's not fundamental underground nasty monster politics like you might get in Chicago or something along those lines, but goodness gracious. You can't write a script for some of this stuff.
Bob Robb: You can't, but those are louts. I don't think louts are caused by larger political forces. They just find themselves in public offices so they're their loutness --
Ted Simons: How do you get these sorts of folks where they are?
Bob Robb: Politics attracts people for a variety of reasons. Some of them unhealthy. And so some unhealthy people run for office and every once in a while they get elected, and every once in a while they do things that are -- constitute being a LOUT and it gets covered. I think you put those two aside, and I do agree with Chris, that the Arpaio-Thomas deal is just an entirely different border of problem. The rest of it are either louts or accusations that -- like with Tom Horne, we don't know whether they're going to constitute anything. And the painstaking exposition in the bar disciplinary hearing decision about what was done with respect to judge Donohoe, may if people take the time to read it, it's chilling. May begin to instill the kind of courage that you want. But again, you gotta have, if you're going to take on Arpaio, maybe for some politicians they would do it as an act of integrity or to feel good about themselves, but you need to be able to set up the circumstance to maximize the chances that that's going to happen, of having something happen as a result of them stepping forward. And right now that hasn't been set up.
Ted Simons: Bruce, real quickly, as far as your polling, what are you seeing in terms of public confidence with all these stories, whether they're louts, what's the reaction?
Bruce Merrill: Well, there's a couple. I think the disconnect between the legislature in many of the bills that they're proposing and the average voter in Arizona, again, I have no idea how it compares with other states, but it's pretty intense. I'm going to be releasing a poll tomorrow or the next day where we looked at five of these very controversial issues. Taking guns to public building and schools, and the abortion bill and these things. On all of except one, 65, 70, 75% of the people in Arizona disagree with those decisions. And I think that we end up with a legislature that is very disconnected from the average voter out there. Just one quick thing. I'm more concerned with the impact this is having outside of Arizona. We asked people what they -- family, friends they talk to outside of Arizona, do they think this has had an impact on our image. It's chilling. 75% of the people say they have a very unfavorable or unfavorable opinion of Arizona.
Ted Simons: We have to stop it there. Gentlemen, thank you so much for joining us. We appreciate it. And that is it for now. I'm Ted Simons. Thank you for joining us. You have a great evening.