Ted Simons: Good evening and welcome to "Arizona Horizon's" Journalists' Roundtable. I'm Ted Simons. Joining me tonight are Mary K. Reinhart of the Arizona Republic, Howard Fischer of capitol media services, and Jeremy Duda of the Arizona Capitol Times. The legislature is back in business, the governor delivers the state of the state address, and raises a few eyebrows, and the governor's office releases a proposed budget. What's going on?
Mary K. Reinhart: Nothing. Just kickin’ back! Haha but no, it has been a busy week at the legislature every year, we kick thing off, and we set the table with a, a speech from the Governor as we had on Monday, and then the budget released this following Friday, and we have plenty to argue about for the next few months.
Ted Simons: Well, let's start with the state of the state address because in that address I mentioned the raising of eyebrows, expanding Medicaid, certainly did that, and really, it took a lot of people by surprise.
Mary K. Reinhart: That was, I think, the big drama from Monday because when the press got an embargo copy of the Governor's speeches, we do nothing about it, Medicaid in that speech, which made us curious, that's the elephant in the room so we flew that there had to be something about Medicaid. And that was revealed, as she spoke from the house floor to the joint session it open the joint session of the legislature. Indeed, she is going to become the third Governor in the state to push for Medicaid expansion. Ten of her GOP colleagues have said no, but they have used multitude of, of arguments that have been building up as she is been lobbied over the last few months by business leaders and by health care officials. This is putting the state in economic disadvantage if we don't do this because we're surrounded by states, you except for Utah, that have expanded or have, are pushing to expand Medicaid, and we have sucked $2 billion out of our economy, and our health care industry, and over the last few years, as our cuts have taken hold and uncompensated care, charity care, and folks uninsured, has skyrocketed, and we are getting free money, if you will, from the Federal Government, and to, to cover another 300,000 people. And we are not in a place, really, in the Governor's view and in the view of a lot of folks who stepped up to support her on Wednesday, from the health care and business industry, to turn down this money. She's got two things built in to try to woo her Republican reluctant Republicans with a circuit breaker if the, if the Feds, the Congress doesn't come through with the percentage match. They say that they will, all these new people get kicked off. And she will fund the state's share with, with help from the hospitals in the form of provider assessment, otherwise known as a bed tax.
Howard Fischer: This is really the key here, this free money, if you will. The idea is right now, the state gets Federal money for disproportionate share. It's money for hospitals that are treating a large percentage of uninsured and such, that's going away in favor of affordable care act. The concern of the business community is over the last couple of years we have had a large increase in the number of uninsured. Some of them have been dropped, the adults, the kids who, who don't qualify for the kids' care, which was also was frozen, and they say that, that comes along as a hidden tax on individuals and businesses. They are claiming $2,000 per family per year, you know, and I'm not sure it's that, but, the extent that the hospitals are going to absorb that cost, so the hospitals, you know, if we tax ourselves, a couple of 100 million, we can bring in more for uncompensated care, and so they figure that in most cases, maybe a few exceptions like specialty things like Mayo and the cancer centers, they figure we're better off taxing ourselves, and with more money coming back.
Ted Simons: Spending one to make two. The fact that it wasn't in the speech, is that a way for the Governor's office and the Governor to keep this so that she is the first one that says it, or was this something, have you heard, the last-minute decision. Why was it not in the speech?
Jeremy Duda: They claim it was not last-minute decision. We've been dealing with this for weeks, months trying to figure out what they are going to do. Once they got word from the Federal Government, they were not going to give us these enhanced matching funds for -- they wanted to restore the access because we made in the past couple of years, and the Governor was hoping to get these enhanced matching funds that they said are only available if you do the full expansion under the affordable care act. Now, the Governor has a lot of support from the business community and the health care community, but the big question is how much support you can get from her own party down at the legislature.
Howard Fischer: And that's philosophical. I haven't found anybody who is, I won't say, I haven't found anybody who has come up with alternative figures to show it cost money. Now, you have got, you know, Americans for prosperity, which has a whole philosophical problem with Medicaid in particular, and Government-run insurance, and in particular. But, it comes down to the fact that there are people who say look, Obama care is bad. It's socialized medicine. It takes away individual choices, and to the extent that we're cooperating, now the Governor's response is, so we don't take our money. So, where do you think the Arizona tax money goes? Can you say New Mexico?
Ted Simons: And you wrote about the fact that there was some conservative magazine or online magazine back east, took the Governor to task for being a pseudo-socialist here.
Jeremy Duda: A national review online, you know, basically, criticized position, I hate it, give me the money. That she lacked the political courage and convictions of a lot of other Governors, and she's going to have to go in the legislature, she's going to have to go to the Democrats for a lot of these votes because most of the Republicans, not too many have come out and said, you know, heck no, we're not doing this. But, a lot of them sound very hesitant and tentative saying we have not seen the details.
Howard Fischer: And let's remember one other thing about this Governor. We saw this in 2010. She is a pragmatist. She did this with the tax. She went against her party with that, and she said, I'm willing to, to cut a billion dollars, and I'm willing to borrow a billion, but we need a billion in new revenue, so, she looks at it from a bottom line pragmatic perspective.
Mary K. Reinhart: I don't think that, that, I think that's part of the calculus, you know, is that, do I have a chance of getting 16-31 with this new legislature. Given leadership, in Senator Biggs and house speaker Andy Tobin that have said they don't want anything to do with expanding this affordable care act. Expanding Medicaid. So, clearly, she hasn't, I don't think, counted noses but her staff has sense that they can pull together enough Democrats and moderate Republicans, and a lot of people are saying it does remind them of this sales tax battle. She won that battle in the end. They went to the ballot, but at the end of the day she won --
Ted Simons: You mentioned a circuit breaker. When we first described what was going on there, the idea that if the Feds limit the funds, all bets are off, that sort of thing. Is that something that could mess up the agreement with the Feds? Could they say, circuit breaker? What's that all about?
Mary K. Reinhart: It's possible. That it could mess up the agreement with the Feds, you know, the Feds, the whole idea is to ensure the most possible number of people in this country. That's what the affordable care act is about, and if Arizona and our Governor have said, let's do it, I think that there could be -- there will be back and forth, there always is, between the centers for Medicare, the Federal health care officials and Arizona on access on our Medicaid program. We need approval for this tax. We need approval for all of this stuff. We are a waiver state. But, I think that at the end of the day, if the Federal Government believes that, that we're expanding Medicaid and adding more people to the health care roles, they will figure out a way to let us do it.
Howard Fischer: And that's the key. The fact is what the Supreme Court said when, they had the challenge, is you cannot force states to go along. You cannot blackmail them by taking away their money, and so, it's always an option of the state to pull out of Medicaid programs. And, and we could do that at any time.
Mary K. Reinhart: It depends on how the circuit breaker is crafted, where it is, and, I mean, it was clearly intended to bring on the likes of an Andy Tobin and folks who said we don't trust the Federal Government, and the future Congress to not reduce the amount of -- and plus we cannot afford, the Federal Government doesn't have enough money. This is intended to bring those Republicans onboard. Will it be -- if it's a barrier, I think there will be a work-around.
Jeremy Duda: They have given us leeway when, we wanted to cut access, nobody thought the Feds would sign off on that. Those were steep cuts, and they have to agree to it. They found back door around it by saying, we don't really have to agree to it. So, you know, go ahead and do whatever you want. But, in the end they let us do it, which surprised a lot of people.
Ted Simons: At the legislature, who will lead the charge for this?
Mary K. Reinhart: Well, when the speech was over, it was Heather Carter was this, this -- right there for everyone to talk to, so the new house healthy committee chair, she's an advocate for this expansion, and I think that she will be up front, and other like-minded Republicans.
Howard Fischer: What the Governor has done, she did this in 2010, is she has lined up the business community, the folks who, the Republicans normally count as their allies, you know, the Glenn Hamers of the state chamber and Todd Sanders of the Phoenix chamber and the hospital officials, and the Yuma Economic Development Corporation to, to lobby these folks and say look, from a business perspective, this will help us. Now, unsaid is the fact that a lot of the businesses don't offer health insurance, which is part of the reason that they have liked access expansion. But, the business backing really does buy votes.
Ted Simons: Ok. That's expanding Medicaid, and that, obviously, we'll be talking much more about that as the session goes on. Let's talk about CPS, that's not quite as decisive, it looks like the Governor is looking for 66 million odd some dollars for more caseworkers, correct?
Mary K. Reinhart: When I did the math, I didn't get to 60, but it's in the ballpark. It's roughly 15% of her budget increase overall, which is a significant amount of money. Clearly.
Ted Simons: And that is not the decisive issue. Everyone seems to be that CPS needs some help somehow.
Mary K. Reinhart: As the chairman said, everybody knows the story. They know that, that this is an overburdened agency, that the numbers of, of children, abuse and neglect reports, the number of children in foster care has skyrocketed, historic proportions, 14,00 in foster care, and shortage of homes, more kids living in group homes turn over at 30% of caseworkers, and all kinds of problems. So, the comment was, everybody knows the story, everybody knows, needs more money but the question is how much. We're talking about numbers, and I think that there is support to, to give the Governor what she has asked for, which is 50 staff, at least 34 of them will be caseworkers up front right away as soon as that, that emergency appropriation can be approved. She'll sign that and get those people to work as fast as they can, another 150 would come in the fiscal year that begins July 1st, and there is a bunch of money around that, that helps to support the increases in foster care, and adoption, and in congregate got care. There is also 10.6 million, which was in the budget for additional services. They have been struggling with budget shortfall within that agency almost since the beginning of the fiscal year. So, what this does, though is, tread water. It really -- it's welcomed, you know, but, you still have folks who are saying it's not enough. It does not do anything about the front end. It does not slow this flood of children coming in the door. And, and there is still concern that, that it's still, a year from now, we may be may be in the same place?
Ted Simons: Anyone vocal in opposition to this?
Howard Fischer: No. I think that as Mary K points out, we are debating the numbers. We are debate, the phase-in. That doesn't mean someone will try to use it to his or her advantage and say they want to change the system in terms of preserving the family versus going in at the first sign of trouble. That's a political opportunity and that will happen.
Ted Simons: Ok. And we'll move on now to education. Jeremy, education, seems like it's, it's a massive part of this bill. 100 some odd, ten something like this, more in spending, including what is called a performance-based funding formula the Governor mentioned this, what are we talking about here?
Jeremy Duda: That's the most interesting part of what the Governor is trying to do with education, because, the performance funding, this is a conservative -- very popular among conservatives, you tied funding to how well of the schools perform, and this is really broken down into two categories. You have schools are all, all graded on letter grades, and the ones who perform highest or higher, they get achievement funding. Now, the other school, you need to be at the base level, like a low c to get that funding, but other schools, even if you are below, if you improve the grade, you get, you know, improvement funding, and so ultimately, they want this to be about 5% of the funding the schools are getting, and you know, like the, the teacher's union, Arizona education association, some of these folks, they are going to come out, you know, real hard against this. They don't like these proposals, but, you know, being a conservative legislator, they will get a lot of support.
Howard Fischer: Part of the problem, and part of the point that Andy has mentioned of the AEA, basic state aid to schools, we have declined. We keep wanting more, we keep adding things, you know, in terms of reading and, and math and everything else. And so, we reduced that, and now we say, oh, if we hold this carrot out in front of you, now, you will do better. Now, that's, that's -- you are making an assumption that an inner city school is having enough trouble now getting kids to achieve, getting the parents interested, that if you promise them another $350 a child, they will be able to do something else. I think they are confusing cause and effect here. That somehow, that the money will somehow do an achievement that some of the schools don't want to do now.
Jeremy Duda: And remember, this is the biggest part of the Governor's, you know, the increased spend, in the budget but there does not come anywhere close to restoring the, you know, the $2 billion cut from K-12 in the past few years, or it's nowhere close to what that ballot measure would have brought in.
Howard Fischer: And that's really -- that's the wild considered in all of this. Court of appeals. This week. Said, remember the part where the voters told you to increase state aid? Remember how you played cutesy with it and said the voters didn't mean that. They meant it. The court said we'll not make you fund the last three years. Next year, 82 million. Now, if you are increasing basic funding by 300 some, 82 million blows a hole in all of this if they cannot get the Supreme Court to turn it around.
Mary K. Reinhart: Can they delay long enough to, to --
Howard Fischer: I think that's what they are going to do. They will ask the Supreme Court, the court of appeals, Supreme Court for stay while they appeal it.
Ted Simons: But how does it impact the budgeted scenarios? You had the Governor coming out here with her ideas, the budget, I think, has been presented now with the idea that, that we'll figure out this court decision at a later date. But, I mean, I have heard some lawmakers, basically, saying well, there is the education spending.
Howard Fischer: That's it. It really is. You are talking about 110, 112 million or something like that. If, in fact, the 36 million first year for, for this performance plan, you have got, you have got, you know, a few million in there for the, for the school resource officers, you have got capital funding, they are changing the soft capital, which is the books and computers, the different formula, it's gone. It's all gone unless you take it from somewhere else. The balloon only be stretched so far.
Ted Simons: You mentioned the school resource officers, and there are plans floating around regarding security on campus and these things. Weren't school resource -- wasn't that cut from the budget couple of years ago, and now, now it's back? Is that, is that -- am I correct?
Mary K. Reinhart: That's right, I think that they have gone down, there is maybe a couple of hundred around the state, I believe, and a lot of them funded with joint governmental agreements with cities and towns and counties, so, clearly, you know, that's one way, of, and I think the Governor is asking the schools, she's asking the districts to, to come to her and bring her some proposals, too, and how they would like to see the school safety improved.
Ted Simons: But there is some odd million dollars for this thing? Does that sound right?
Jeremy Duda: Which is cheaper than the other plans, after the shooting in Connecticut, everybody has their plan for, for more resources. Chad Campbell, the leader of the house Democrats, wants 261 million for a lot of different things.
Howard Fischer: And the problem becomes, that even if, if you take the 7.5 million that's in there, which is money that the legislature couldn't cut, it came from front 301, and you add the, the 3.5 million, the Governor wants, plus 3.5 million in local match, you get 200 school resource officers, and there are over 2,000 schools in the state. So, help me, tell me how that fits.
Mary K. Reinhart: And unfortunately, I think that that's an issue that, unless, it works for Congress, unless you move on it now, I think that by April, people, the interest in this whole issue is going to have decline.
Ted Simons: And it's interesting because the Governor mentioned that she wanted to resist the urge to turn a school into a fortress. Understand that, and now, let's compare with what we're hearing from, from Senator Crandall, and we have got Campbell, ideas, from both sides of the aisle, we have got ideas regarding school security and/or guns on campus.
Howard Fischer: Right, and it spans the gambit, to the extent that on one extreme, you say, let's arm every teacher, every principle, who wants a gun, and the best defense against a bad person with a gun is a good person with a gun. Then you have the other extreme, which suggests that, that you are going to go ahead and either put police officers in schools, whether it's one per school, the NRA plan, but, but, still allow for, for certain gun rights. And the Governor is, is sort stuck in the middle. She does not favor new restrictions on the second amendment. By the same token she has a rift of vetoing bills to expand where people can carry guns, and that's going to be -- where's the ideal meet on that? I don't know.
Jeremy Duda: It sounds like, you know, in the governor's budget it, sounds like a signal that everyone can put their plans in a drawer if they want to get their support on something because, that's probably not going to fly now that she has her plan out there.
Mary K. Reinhart: And I think all the competing plans, you know, perhaps argue more for the likelihood that nothing will come out of the session at all.
Ted Simons: Interesting, nothing at all? And mental health spending, services 4.5 million. These sorts of things also in the budget. Grand overview of what the Governor presented today, and really, what can we expect as far as pushback from the legislature?
Howard Fischer: This is in some ways -- I won't call it a zero growth budget. But, it's bringing us back to the kind of growth that -- it's post-recession budget, maybe 2%, 3% increase in spending, you know, we're going up to, to about 8.9 billion, you know, which is still below where we were in the Napolitano administration. And I think the Governor is saying look, we need to invest in certain things. We need to invest in education; we need to invest in CPS. We need, you know, to invest in community colleges and universities. The big fight is going to be over, over whether we need to bankroll some of this. A lot of lawmakers who say, there is a fiscal cliff coming. With or without medicate.
Ted Simons: With that in mind, I noticed the rainy day fund. There is nothing to put into the rainy day fund.
Jeremy Duda: The fact that nothing is put into the rainy day fund I don't think will sit well with the legislative Republicans, especially Andy Biggs, that was big issue for him. The fund was a big fight, the governor had last year with the legislature, and she ended up having to put more money in there than she wanted. Biggs and Tobin had a temped response to the budget. They did not say if it was good or bad, just we have some conservative principles in our last few budgets and we hope the Governor abides by that again, and also, a mentioned of just because there is extra money doesn't mean that everybody gets more money.
Mary K. Reinhart: Right, we got here by the strong fiscal conservative policies, and so I think that that was a, that was a signal from Andy Biggs and Tobin that this may be a bit -- maybe a lot too much for them to, to go along with.
Ted Simons: But this is not like folks walking out of the state of the state or coming out with the fire and brimstone here, talk about that response from leadership.
Howard Fischer: Well, leaving aside the Medicaid response, it's fun to sit on the house floor and watch a couple of Democrats stand up, and couple of Republicans going, did she just say what I thought that she said? [Laughter] Beyond that, this is, this is -- I think that, that most of the Republicans like the fact that she is a slow growth person. She's for less regulation. She's a responsible person. And I think that we can accept a lot of what she wants, but what are the numbers? $450 million on a $9 billion budget is not a lot in a bank. You would not run a business that way, and the effect is the law, the statutory cap is 7%, and we're nowhere near that, so the question becomes, what's prudent, or can we afford -- or are the needs so great that we cannot afford to put put the money away?
Jeremy Duda: I remember how quickly we burned through that rainy day fund a few years ago when things went bad, too.
Ted Simons: So with that in mind, the state of the state address, we'll finish with how the week started. Overall impressions here, statesman-like, a little less -- more gravitas, perhaps. Everyone seemed to think that this was not an excitable speech. It was more on substance than in previous state of the state addresses by the Governor. What are you hearing?
Mary K. Reinhart: I think that she had an audience of a lot of freshmen lawmakers that she wanted to get to know through this speech. I thought that it was, was -- almost collegial in a way. It was not -- there was, there was not a lot of, you know, our hair is not on fire this year, right. We have got some, some wiggle room. We have got leeway, and we have got time to think things through, and not fix a lot of problems, but, you know, to really kind of make some progress, and at the end of the day, she's asking for, the programs for state's most vulnerable, that's the lion's share of this. Children, and CPS care, education, and it's, it's the uninsured.
Howard Fischer: And she is looking ahead towards 2016. I don't think that she is running for the third term. She's starting to look towards legacy. By the time she leaves office at the end of 2016, you know, or 2014, I'm sorry my math has been bad all day with the budget. Who knows, but when she leaves office she wants the state to be on more of a south fiscal footing than when she took it in January.
Jeremy Duda: And that was a big theme, and she's been hitting that for a couple years. We were in recovery and this reflects that modest recovery, increasing the most critical areas, putting more money into in that.
Ted Simons: And the question now is to see how far the proposals go, and we'll keep an eye on that. Good stuff. Thank you for joining us. We appreciate it.
Ted Simons: Monday on "Arizona Horizon," we will visit a unique Phoenix gym designed for people with disabilities. And we'll learn about a valley nonprofit dedicated to improving the health and welfare of Veterans. That's 5:30 and 10:00 on "Arizona Horizon." Tuesday, we'll hear from two state lawmakers, with two different ideas about guns and school safety. And Wednesday, a legislative update with the Arizona capital times, and Thursday, the center for the future of Arizona, and updates the study titled the Arizona we want, and Friday, we are back with another edition of the Journalists' Roundtable. That is it for now. I'm Ted Simons. Thank you very much for joining us. You have a great weekend.