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March 27, 2013

Host: Ted Simons

Arizona Technology & Innovation: High Tech Tax Credit

  |   Video
  • The legislature is considering a bill that would give insurance companies tax credits for high tech investments in Arizona. Steve Zylstra, President and CEO of the Arizona Technology Council, will discuss the bill.
  • Steve Zylstra - President and CEO, Arizona Technology Council
Category: Technology   |   Keywords: AZ, Technology, Innovation, tax credit, ,

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Ted Simons: High-tech investment tax credits. Give us a better definition.

Steve Zylstra: What we're trying to do is create a venture capital fund that's focused on early stage investments in technology companies, and use sort of ingenious mechanism to capitalize the fund. Other states have done this. They've used insurance premium tax credits, in this case the insurance companies get a one-to-one tax credit for capitalizing the fund. Once the fund starts generating returns, first the state gets paid back in this case $50 million for the tax credits it put out, and then the insurance companies begin benefiting from the returns on the fund. And in addition to that, a percentage of the returns will be used to make the fund Evergreen.

Ted Simons: What kind of parameters are involved in terms of these investments?

Steve Zylstra: First of all, the legislation requires that the Arizona commerce authority, who administers this fund, hire an upper court fund manager to manage the fund and make the investments. That takes the politics out of this. So the state itself is not picking winners and losers. An experienced venture capitalist is doing that. Why would the state get involved in something like this? It turns out that while we do pretty well in the angel investment area, we have an angel investment tax credit, and we have a few venture funds in the later stage, this early stage capital issue is a problem. It's called the valley of death.

Ted Simons: Why? Why is it a problem?

Steve Zylstra: It's a problem all over the U.S. By the way, almost every other state in the country has created a fund like this. A state supported fund. Very often they simply appropriate the funds, sometimes they use the pension funds, and it's just one of the riskier phases of a company's continuum. And it's difficult to get investors to make investments at that stage. Yet that's exactly when the companies need it. They've already done the research, they've proven the science, they need funding to take that company forward.

Ted Simons: How much would this cost the state? In terms of revenue that might come into the state, what kind of projections?

Steve Zylstra: Initially it's a $50 million fund, it would be 10 million in 2014 , 20 million in 15' and 20 million in 16'. As I said, once the fund starts generating returns, the state gets paid back 100% for the investment it made.

Ted Simons: And this -- The idea is to prompt investment that would, wouldn't ordinarily happen?

Steve Zylstra: What's happening is I'll just give you a list, have you ever heard of soakie COM, view links, note haul?

Ted Simons: No.

Steve Zylstra: Probably not. Because those are companies that were born here but left because they couldn't get funding here. These are one of them, note haul won in shark tank. So these companies are moving out of Arizona, moving to California and Texas, Illinois, the East Coast, because they can't find early stage capital here. So we're losing the future income from those companies, as well as the job creation.

Ted Simons: OK. We had that high-tech investment tax credit bill over here. Let's talk about the high-tech sector in general. Still some traction? What's going on?

Steve Zylstra: I would say it's very healthy. There's been some indicators lately that Arizona has one of the hottest markets when it comes to tech jobs, according to dice. I see the industry picking up precipitously. I think that the economy is starting to improve overall, and the tech sector is always out in front of the rest of the economy. Even in the depths of the great recession-- In the depths of the great recession, unemployment in the tech sector was between 3-4%.

Ted Simons: You mentioned, a job search site, a Phoenix area, fourth in year-to-year job growth and listing and fourth in increased advertising. Salary, the a of Raj salary for the advertised jobs was $84,000.

That's more than double the average in Arizona. And in addition to that, you've seen a number of companies attracted here recently, you've seen GM is bringing an I.T. center here, ZAGdot was announced yesterday, bringing a couple here -- Expanding a company here from New York. Stealth software, thousand jobs, so things are picking up.

Ted Simons: It's one thing to say we're doing well, and they're picking up and we're gaining speed. But are we gaining speed and watching the San Franciscos, the San Diego, the newspapereds, the Charlottes, are they gaining as much speed are and still moving ahead of us?

Steve Zylstra: Well, California is struggling just because of the environment that it has there. Texas, the Austin is a very vibrant area, so we have plenty of competition around the country for tech companies and tech talent. But I would say that we've got the finest ecosystem for tech-based companies we've ever had in Arizona right now.

Ted Simons: Explain what that means.

Steve Zylstra: We have incubators, we have some of the tools that Governor Brewer and Andy Tobin have created in the last couple years to lower corporate incomes taxes, lower business property taxes, improve the angel investment tax credit, improve job training programs. Extend the net operating loss carry forward period. One of the best business climates in the country and it makes it very attractive for tech companies.

Ted Simons: We're seeing result?

Steve Zylstra: We are.

Ted Simons: It's good to have you here.

Steve Zylstra: Thank you. Pleasure

Gay Marriage Cases

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  • The United States Supreme Court has oral arguments scheduled for Tuesday and Wednesday for cases that could lead to a landmark decision on gay marriage. ASU Law Professor Paul Bender will discuss the cases.
  • Paul Bender - Law Professor, ASU
Category: Law   |   Keywords: ASU, professors, law, Bender, Supreme court, gay marriage, ,

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Ted Simons: The U.S. Supreme Court this week heard oral arguments on two same-sex marriage cases that have the potential to result in landmark rulings. Here with analysis of what happened this week is ASU law professor Paul Bender. Always a pleasure. Good to see.

Paul Bender: You same here, Ted.

Ted Simons: Talk about, what happened this week with both of these bills, both of these cases and how they could impact Arizona.

Paul Bender: Well, yeah, I think that's worth talking about at the beginning. The only way these cases will impact Arizona is if the court were to hold that it is unconstitutional for any state to ban gay marriage. That is the broadest holding. And the attack on the California statute. That of course if the court did that, that would strike down the Arizona constitutional provision which says marriage in Arizona is between one man and one woman. If they don't do that, it will have no impact on Arizona at all. Because -- Well, because if they hold the California proposition unconstitutional, on narrow grounds, which is what the ninth circuit can, that is grounds only applied to call and maybe a couple other states that have very broad civil unions. So that wouldn't matter. If they uphold the California proposition, that won't have any impact on Arizona because the California proposition says you can't have gay marriage in Arizona. The New York case, the federal statute which was argued today has no impact on Arizona because the question there is in a state that legalizes gay marriage, is it constitutional for the federal government to treat Gay married people as unmarried for federal purposes? And so that doesn't impact Arizona because in Arizona gay marriage is not legal. And if the court in the California case should hold that gay marriage has to be made legal, then that will make marriage legal in Arizona and federal benefits go to those people anyway.

Ted Simons: Let's separate the cases quarterbackingly if we can. California's prop was the focus yesterday. It sounded like the arguments were interesting to the point to where some of the justices were wondering, what the heck they were arguing about.

Paul Bender: Well, yeah. I think what's going on there is the court does not -- The majority of the court does not want to issue a broad decision in that case. If forced to decide on the merits whether a state can ban gay marriage, I think that five people on the court would say no, they cannot. That Kennedy would join the liberals on the court to say that's a violation of the equal protection clause. He doesn't want to do that. He would rather not do that now. He would rather leave it up to the Democratic process. But if he's forced to do it, I cannot see him joining an opinion which says that it is constitutional to ban gay marriage. Because that would put it solidly in the constitution. For the foreseeable future. And I don't think he wants to do that, because I think he thinks the world is moving in that direction. So they're looking for a way to get out of it, having taken it, and he in fact suggested yesterday, why do we take this case? Maybe we ought to get rid of it, and they can dismiss it. The problem is, that if they do that, they leave the ninth circuit decision standing, which holds the California statute unconstitutional. And the conservatives on the court don't want to do that, because they don't like the ninth circuit, they don't like the opinion. They want to get rid of it. So if they do that, then they're going to -- They could hold there's no controversy in this case because the government of California thinks that the California proposition is unconstitutional, and the challengers think it's unconstitutional, so the people who are trying to push the constitutionality, there's a question whether they have standing to do that. So if you say, they don't have standing to do that, then do you back to the district court, which held the California proposition unconstitutional. So I don't think the conservatives on the court want to do that either. So they have a real dilemma as to what to do with the thing.

Ted Simons: Kennedy is the key here?

Paul Bender: Kennedy is the key, yeah. I think there are four people on the court who would vote to say that banning gay marriage violates the equal protection clause. And I think if he were forced to vote on that issue he would agree. He's been the leader on the court on Gay rights.

Ted Simons: An interesting quote, I'm not sure we should be doing this, was when he feared the court was entering, quote, uncharted waters. I think for those who are looking at this from a distance, they think that's what the court is supposed to do.

Paul Bender: Yes. But the court has -- This is not new. The court often lagging behind, and waits to see whether there is a groundswell going in a certain direction. And then will join in. The court did not hold segregated schools unconstitutional when it first realized they were unconstitutional. Which was certainly the beginning of the s. They decided to hold a series of cases specifically about, you can't could this, you can't do that, for particular reasons. And finally in they got around to it. When everybody by that time knew it was unconstitutional. The same thing with abortion. The court didn't jump in and say abortion statutes were unconstitutional early on. New York was changing its law, in fact in the case Roe v. Wade, Texas was changing it to make it easier to get an abortion and the court said, you had to make it a lot easier. So the court waits for things to develop. Maybe that's not principled of them, but that's what they do.

Ted Simons: It's interesting to hear that. You think of them sequestered and they're not supposed to be looking at public --

Paul Bender: you know they do look at that. And they don't want to lose the confidence of the public by seeming to go way out ahead. They would rather do it when it's generally acceptable. And so you say, why do they take that case? They took that case because the ninth circuit held California statute unconstitutional. And they thought we've got to take that because the ninth circuit has done something wrong, because it's always doing something wrong. If the ninth circuit had upheld the statute would it have taken the case. So they sort of trapped themselves.

Ted Simons: OK. So that's the California prop case. That was before the court yesterday. Now we've got this federal defense of marriage act before the court today. What kind of arguments did we hear?

Paul Bender: The statute says that federal benefits which go to married people, as you must know there's a whole range of them, I think somebody said a thousand federal statutes dealing with benefits or detriments married people have, the federal defense of marriage act says you're only married for the purposes of federal law if you're a one man and one woman couple. A Gay couples are not married for purposes of federal law. And the question is whether that's constitutional. The case involves a woman who lived with another woman and they were finally married in Canada, and they came back to New York and New York recognized their marriage and then one of them died, leaving a considerable estate to the other. If they're married for purposes of federal law, the estate tax deduction, exemption. And she would have to pay -- The surviving partner would pay no estate tax. If they're not married, then it's about $300,000 in estate tax that she has to owe. So she doesn't think she ought to have to pay that. That is complicated because she sued to get the money back. She had to pay it and she's suing for a refund. The federal government said, we're not going to defend this statute in court because we think it's unconstitutional. But we're going to continue to enforce it. So we're not going to give you your money back but if you sue us we'll tell everybody you're right. That creates a real problem for the court. Because they say the federal government is not defending its own statute. Why is there a case before it?

Ted Simons: Right.

Paul Bender: Why isn't the federal government just give her the money back, because they think she has a right to it? And that's a big problem. So the court could use that as an excuse, a reason not to decide that -- Not to decide that case.

Ted Simons: A couple of punts possible?

Paul Bender: At least a couple. Probably more than that. And so in these -- These are really interesting cases to show this point. You don't know whether these are important cases or not until you read the opinions. These could be bombshells, or they could be basically nothing. And it depends upon how the court -- How that goes depends on what they can get five people to agree on.

Ted Simons: Does it also, chief justice Roberts, how much of a factor -- We always hear how much of a legacy he wants to leave, he wants to be a uniter, is that a factor here at all? What he sees as the court's, I don't know --

Paul Bender: He does haven't any special power on the court as chief justice. The only powers he has are he can assign the cases when he's in the majority. Otherwise it's the senior justice in the majority who signs the case. That is something of power. But his vote isn't worth any more than anybody else's. I think people thought after he voted to uphold Obamacare last June that that was a statesman like thing, he was trying to avoid being caught in a controversy. These cases and a couple of other cases the court has this term are going to indicate to me whether he really is turning into a statesman or whether he isn’t -- This is a perfect example. He could try to maneuver things here by the way -- By the way he signs the cases to make sure the court is doing acceptable as possible to the public. Or he could vote to say it's perfectly constitutional to ban gay marriage. Which would be quite a strong revolutionary sort of thing which would cause a lot of controversy. So it will give him an opportunity to try to play the statesman's role if he wants to do that.

Ted Simons: How unusual to have these two cases back-to-back such big cases, California being challenged, and California's not even represented -- Doesn't even want to represent itself. The U.S. doesn't even want to represent -- that's got to be unusual.

Paul Bender: It is very unusual. You have the government of California disavowing a California constitutional provision, and you have the government of the United States disavowing a federal statute. That causes problems for a court.

Ted Simons: I'll bet it does. That makes for a good for us having you on to explain it. Thanks so much for joining us.

Ted Simons: State lawmakers are considering a bill that would give tax credits to insurance companies that invest in certain Arizona high-tech ventures. Here to talk about the bill and the state of Arizona's high-tech sector is Steve Zylstra, president and CEO of the Arizona technology council. Good to see you again.

Steve Zylstra: Thanks, Ted.

Legislative Update

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  • Join a reporter from the Arizona Capitol Times for a weekly update on the legislature.
  • Luige del Puerto of the Arizona Capitol Times
Category: Legislature   |   Keywords: legislative, update, legislature, ,

View Transcript
Ted Simons: Good evening, and welcome to "Arizona Horizon." I'm Ted Simons. State lawmakers react to the death of legendary businessman and education advocate Eddie basha. That begins our weekly legislative update with Luige Del Puerto, of "The Arizona Capitol Times." Good to see you. What are you hearing down there? Eddie basha is a legendary name.

Luige del Puerto: That's true. And it is one guy who has made a lot of money and shared much of that back to the state. And so you saw the kind of admiration, outpouring right away when news about him passing away hit the news yesterday. And even today we would see, we're still seeing those tributes to him. And today lawmakers also paid their tribute to Eddie Basha, and it's one of those rare occasions when you have lawmakers from both sides of the aisle united on something and reflecting on what's important, which is the fact that we do have to face death and this is a guy who's earned a lot and given a lot.

Ted Simons: And indeed a champion of education, and did work with Republicans and democrats, which is refreshing to think about it back in the day.

Luige del Puerto: Right. I was just looking at some of his contributions in the last couple election cycles. I wanted to see where he was contributing. He did contribute both to Republicans and to democrats. And this is a guy, you off yep hear about liberally call references in the bible, how to live your life. This is a guy who -- I'm not sure about his religious background, but it appeared like he truly lived by the biblical code, much of given, of is also required.

Ted Simons: So many of the charities he gave to, individuals, no one ever knew about it, no one probably will know the extent of how much that went on. Yet that sense of compassion does seem to be his legacy.

Luige del Puerto: We heard some of that even today. T.J -- Someone recounted a story about how there's a consortium of small groceries, and one point their supplier went out of business. I think of them didn't have a supplier and Eddie Basha rescued them, opened his warehouse and said, here's my warehouse, whatever you guys need. And that helped them out.

Ted Simons: Indeed. Champion of education, lost the 94' governor's race, served on the board of regents and was involved in a lot of things. Thanks for that. Before we let you go, we want to get to some legislative issues. Medicaid talks, what's going on with that? Especially, I'm curious, the governor had that pro-life, that's why I'm for Medicaid -- How is that playing down there?

Luige del Puerto: When the governor unveiled her -- The details of her expansion plan, the one thing that stood out was when she said this is a pro-life position. I'm for saving the unborn, but also saving those who are already born. And she made that pitch I think to many people's minds to try and attract and persuade lawmakers who are candidly pro-life. But it seems like she's not really getting a lot of traction using this argument. In fact, the center for Arizona policy, the biggest lobby group of the Evangelical Christian community in the state has taken a neutral position and has sent a letter to the governor, Mr. Biggs and Mr. Tobin, this week saying that while we're neutral on this Medicaid expansion plan we're concerned that expanding Medicaid may provide more funds to groups that do provide for an abortion. Sort of an indirect way of subsidizing their abortion services. So that's an interesting argument. It's not new, we've heard that from the floor this week as well, but I'm curious to know like you, how that's going to play out with a Republican base.

Ted Simons: I was going to say, when CAP says they're neutral, that's a very different than we're lining up and we're going to amass forces against this.

Luige del Puerto: Yes, that's true. And in fact if you recall during the debate on prop , this is a debate last year whether to extend the sales tax. They came out sort of from the left field out of the blue and basically said, yes concerned about some of this money going to provide -- To be used in -- To subsidize abortion or directly for abortion procedures. And we know what happened to that proposition.

Ted Simons: Otherwise everything kind of budget talks, everything slow right now?

Luige del Puerto: Everything is kind of slow. They're passing bills in a trickle, we asked our reporter asked the governor today whether she has taken out her veto hammer out of the box and the governor said no, we're not doing that yet.

Ted Simons: Not yet. Good to have you here.

Luige del Puerto: Thank you.