September 12, 2013
Host: Ted Simons
- A new report shows that Arizona had the third-highest state funding cuts per pupil since the recession started. The Center on Budget and Policy Priorities shows state funding for school districts has fallen an inflation-adjusted 17-percent since 2008. Education-funding expert Chuck Essigs of the Arizona Association of School Business Officials will talk about education funding in our state.
- Chuck Essigs - Education-Funding Expert, Arizona Association of School Business Officials
| Keywords: education
Ted Simons: Good evening, and well come to "Arizona Horizon." I'm Ted Simons. A new report puts Arizona as the third-ranked state in the country in terms of funding cuts per pupil since the beginning of the recession in 2008. Chuck Essigs of the Arizona Association of School Business Officials is here now to talk about the report and education funding in general. Good to see you again.
Chuck Essigs: Thanks for having me.
Ted Simons: National report, give us more information. What did this thing look at?
Chuck Essigs: This is a group that each year looks at a lot of monies that are spent in different states supporting children and students, and they've done this same report for a number of years, and it pretty much looks at how much spending authority is available in the different states.
Ted Simons: This is the Center on Budget and Policy Priorities. What do we know about this group?
Chuck Essigs: They're probably a group that would be looked at as being in support of more monies being spent and more services being available to children.
Ted Simons: So if they saw Arizona is ranked number three they would say that's not a good thing.
Chuck Essigs: It is not a good thing in their opinion.
Ted Simons: What did the report find, besides the third ranking? What’s happening here?
Chuck Essigs: What's interesting is that last year at this time if we would have been talking, we would have been number one in the percentage of cuts. And Alabama and Oklahoma have now moved ahead of us. At least we're starting to make progress. I think people need to put it in perspective. Arizona probably went through the most difficult economic times of any state. So cuts like this were probably inevitable or to be expected.
Ted Simons: I have to say, when I saw Alabama was higher than Arizona, I didn't know they had money, education money to cut in Alabama, much less more than Arizona did. But you're saying they spend more per pupil than we do.
Chuck Essigs: They do. The only two states that currently don't spend more than we do are Idaho and Utah.
Ted Simons: We were number one and now we’re number three because of the $82 million --
Chuck Essigs: Because the state legislature started to make some inroads, they put $82 million in inflation funding, they did put some money in for school safety, so they're starting to move back, but they have a long way to go.
Ted Simons: We talk about Arizona, the rankings state by state. Can you compare apples to apples here? Is this the kind of thing where a third ranking does mean something or is it amorphous?
Chuck Essigs: I think the ranking is very legitimate. If you look at the state reports from the joint legislative budget committee, they show if you take state, federal, and local monies and put them together we're down 17% from 2008. So it's almost identical percentage.
Ted Simons: As far as the JLBC numbers as well, 25% in direct state funding. Correct?
Chuck Essigs: I think it's better to look at state, federal, and local together. Because there is -- local districts have a qualifying tax rate and contribute some money, certainly the cuts to state were significant, but I think the best thing is to look at the total number of dollars available.
Ted Simons: Are we talking capital funds, administrative funds, bus drivers? What --
Chuck Essigs: When you talk to 17% at the state level, that includes capital, a lot of the larger cuts were in capital. It's capital, operational, bus drivers, teachers. But capital has been a major area.
Ted Simons: Is this something -- 17% down from 2008. Third worst as far as spending is concerned. Third best, regardless of how your perspective might be. But are we seeing correlating differences in student achievement and/or performance?
Chuck Essigs: I think what you're seeing is larger class size, because districts can't afford as many teachers, and on the technology side with the cuts in capital, you're seeing less equipment being available to students. So it's never the amount of money you spend, it's how you spend those monies. But with less dollars you have less monies to support your program, for example, capital in this state is really in trouble. The amount of capital funding per pupil is down, cut by $230 million. And districts on a per pupil basis have less money, about 50% of the formula money they had in 1998-1999. So capital is really taking a hit.
Ted Simons: How are districts handling that?
Chuck Essigs: They have equipment to last longer, they buy less equipment that's needed, they try and stretch the buses out so they last longer. Same thing you'd do in your house, and sometimes that's not good, especially in technology where you need to be state-of-the-art whenever possible.
Ted Simons: I asked if we were seeing correlating drops in student performance. Is this -- I think some see this as an opportunity -- All right, the dollars aren't there, they're not likely to be there in the near future, this is an opportunity to change structure, to change paradigms, logistics, whatever the word you want to use, and find a way to make it work better. Does that make sense?
Chuck Essigs: I think the idea of making things work better certainly makes sense, but the problem is Arizona has always been a very low-spending state. And to lock Arizona in at a level that's 17% below where it was a couple of years ago when we were near the bottom of the country is not going to provide adequate resources to compete. With common core, our students in Arizona are going to have to compete with students in just about all the other states that are above us. It's not fair to ask the districts and students to compete with less resources available.
Ted Simons: I was going to ask about common core. How does that change the dynamic?
Chuck Essigs: Hopefully the state will pay for the test, which is part of implementing the common core, but then districts really need to up their technology equipment and right now it's going to be very hard for them to do that with the resources they have.
Ted Simons: Is there a movement at the legislature to go in that direction? What are you seeing? Obviously the $82 million in inflation spending, we saw that it was helped along by court decisions, but we saw that. Are we going to see more of that?
Chuck Essigs: Last session Governor Brewer and her staff proposed monies to help districts implement common core. And the legislature decided not to fund that. They did fund inflation, which was a good thing, but she was requesting additional money beyond that to give districts the support they need to do a good job of getting common core off and running.
Ted Simons: What were the reasons for saying no?
Chuck Essigs: I don't know.
Ted Simons: Yeah. Just like that. From what I've heard, we don't have the money. We can't afford this. This is that a valid argument?
Chuck Essigs: Not when you start to look at Arizona and its economic recovery. We're starting to start to see surpluses in the state budget coming up in 2015 and 2016. And the legislature, they shouldn't be blamed for a lot of cuts they had to make during these terrible economic times, but they should be responsible to restore as much resources to districts as they can as the economy recovers.
Ted Simons: Are we seeing businesses, industry, are we seeing those folks come out and say -- Because we hear that a lot on this program. We're not -- We can't find people qualified or educated enough to do X, Y, and Z. Is that message getting to the legislature, and if so, how is that message being received?
Chuck Essigs: The message they should be providing to the legislature is that to balance out, we just don't need tax cuts. We need additional services, we need a more educated work force. And we want you to fund schools adequately so that work force is available to us. That should be important to them and they should express that to the legislators.
Ted Simons: Last question -- What do we all take from this report?
Chuck Essigs: That we are making some improvement. But we've got a long way to go to get back to where we need to be to be competitive.
Ted Simons: So we're not number one anymore.
Chuck Essigs: We're not number one, that's good that we're number three. We ought to -- It would be nice to see us each year drop down on that list farther and farther.
Ted Simons: Chuck, it's good to see you.
Chuck Essigs: Thank you. Thanks for having me.
- Pension spiking is the practice of adding sick leave, vacation pay and other benefits at the end of a worker’s career to increase their pension. The Goldwater Institute has sued to stop the practice in the city of Phoenix. Arizona Republic columnist Laurie Roberts will discuss the issue.
- Laurie Roberts - Columnist, Arizona Republic
| Keywords: pension
Ted Simons: Pension spiking is a retirement boosting perk that involves adding sick leave, vacation pay, and other benefits at the end of a worker's career to increase that worker's pension. Phoenix mayor Greg Stanton says pension spiking needs to end, and the Goldwater Institute has sued to stop the practice in the city of Phoenix. Laurie Roberts of "The Arizona Republic" has been following the issue and then some. Good to have you here.
Laurie Roberts: Great to be here.
Ted Simons: Always a pleasure. Give me a better definition, or is there a better definition of pension spiking?
Laurie Roberts: We're basically talking about public employees, at the end of their career, have saved up vacation time and sick leave and other sorts of perks, deferred compensation, travel allowances, anything they have they can cash out, they add it to their income, and then their -- The pensionable income and that income is what is used to determine their lifetime pension benefits. So basically they're taking unused sick time, getting paid for it, lumping it onto their income and spiking their pension, boosting it up artificially.
Ted Simons: This is not the kind of thing where vacation or sick time ends at the end of the year, this adds and adds and at the end of your career you go, ba-boom.
Laurie Roberts: Public employees don't have a use it or lose it policy, generally speaking. They can save up. In the city of Phoenix, an entry level employee gets 40.5 days off a year. Some of those are holidays so that doesn't count. And some of it is vacation. A good deal of it is sick time. You can save those days, bank them every year and instead of like in the private sector, where you would lose it at the end of the year, they just keep it. And at the end of their career, they are paid for that time. Interestingly, time they may bank at the beginning of their career when they make $10 an hour, and at the end of the career, if you’re like David Cavazos you're making $157 an hour, all the time you've made at $10 an hour is paid at $157 an hour and on top of that you use it to artificially bump up your pension.
Ted Simons: Let's mention David Cavazos. Who is this gentleman and why is he so much in the headlines? How did he get that gig?
Laurie Roberts: David Cavazos has been a lifetime city employee. He's been there for virtually his whole career, started as a management intern making $9.47 an hour, worked his way up in to become the city manager. David has been in the news a lot, and he's done a number of good things for the city. But where he got in the crosshairs is in November when the city council gave him a 33% pay raise. I don't know how much of a pay raise channel eight gives you, but I haven't seen a 33% pay raise. It was also retroactive to last July 1st. And it was billed as a way, we need to pay our employees better. This is at a time when other city employees still not had full restoration of the pay and benefit cuts they voluntarily gave when the budget was so tight.
Ted Simons: What was the reasoning? He did such a swell job?
Laurie Roberts: Here's the thing. They won't really say what happened or who initiated this thing. This was done behind closed doors in an executive session, I've asked both the mayor and Sal DiCiccio. It was a 6-1 vote, by the way, so most of the city council went along with it. And they all say, “He's done such a good job, and he's underpaid, so we had to give him this raise.” So great, give him the raise, now he uses that to leverage a new deal in a new city because he's now at 52 years old, old enough to retire here, collect his pension here and go get another shot at it in California.
Ted Simons: The Republic reported $220,000 a year in retirement only?
Laurie Roberts: Oh, sure. Because he's used pension spiking and other things to be able to boost that pay. His sick leave and retirement leave I believe thathe's going to be able to artificially add on to his salary that he's being paid for will boost his pension to well over $200,000. He may even get where to Frank Fairbanks, the former city manager, was, and his pension is $46,000 greater than the pension of retired United States presidents.
Ted Simons: And back to Cavazos, and he's got a new job.
Laurie Roberts: Got a new job. He was able to go to California, the city of Santa Ana and leverage the pay raise he got here to give him the same raise there plus other perks, plus he'll be collecting his pension, which will be well over $220,000, probably closer to $250,000.
Ted Simons: I need to know where I can get this gig. This is real money here. This isn't fooling around.
Laurie Roberts: And the thing is, you're going to see the Goldwater Institute is suing the city, saying pension spiking is illegal. And I have checked with the state pension systems, ASRS, PSPRS, it's illegal for them. The question is, is it illegal for the city to do it? And that's what we'll find out in the courts.
Ted Simons: Now, is the city of Phoenix the only municipality doing this? Are other cities doing this?
Laurie Roberts: I'm not aware of any other cities doing pension spiking. There may be some, I'm not aware of it. And the other thing I think you need to mention is, Greg Stanton now says pension spiking needs to end. But he -- And he's talking about for the police and firefighters, and for whoever takes over Cavazos's job. Remember two things. Number one, that's what he said during his 2011 campaign for mayor. And now we're into 2013 and he hasn't done it yet. So I would question if it needs to end, why didn't it end two years ago? Secondly, he's not talking about ending it for other city employees. The city last year did cap the amount of sick leave that city employee can use to spike with, but they haven't ended the practice. Sal DiCiccio and some of the councilmen want to have a vote pretty soon to end all pension spiking for all employees when this next contract -- When their current contract ends on June 30th. So look for that in the next few weeks to see if they can get that to a vote before the city council.
Ted Simons: How do you do that if you've got a bunch of employees right now banking, expecting X because they were promised X and all of a sudden X is pulled out from under them?
Laurie Roberts: Here's the way you do it. It's a contract. It's a two-year contract. The contract ends January -- June 30th, 2014. So you give them notice now, if you want that to happen, it's going to -- You better retire between now and then. I think most of us in the private sector, we went into the private sector knowing certain things were going to be there for us and they were all yanked. I think it's the same thing. But anything they've banked to date I think they would get to keep, but if they're still on the payroll July 1st of 2014, under DiCiccio’s plan, it goes away.
Ted Simons: That would suggest to me from a distance here, a mass exodus of folks retiring and getting that payout.
Laurie Roberts: I would think if you were close to retirement that would certainly be what you would want to do. We'll see if it passes. First of all you've got get it onto an agenda, and I don't it this mayor has thus far been willing to do that. But I am led to believe the votes are there to do this, because it's just a fundamental feeling among taxpayers of not a fair deal. We want -- We should pay our public employees well, but nobody expected this sort of huge windfall at the end of their careers.
Ted Simons: Last question, with this, with compensation in general, we keep hearing that we have -- The municipalities, Phoenix in particular, has to go in this direction, pay these things, work these contracts, allow these benefits to attract the best and to attract the brightest. Valid?
Laurie Roberts: I think you have to give a fair wage, and we should. Our public employees are important. But I think they carry that too far. And remember, too, whatever they give, people that are negotiating these contracts also get. Say David Cavazos is negotiating the contract for the rank and file employees, whatever they get, he's going to get too. So they're not a taxpayer balance in that thing for the push and the tug. That's what the city council is supposed to do. They're supposed to be there representing the taxpayers. And I don't think that's happened in the area of pay.
Ted Simons: All right. Well, it's fascinating stuff, it's kind of like as the world turns at city hall. It's good to have you here. Thanks for joining us.
Laurie Roberts: Thank you.
Same-Sex Couples Tax Filing Status
- The U.S. Treasury and Internal Revenue Service have issued new rules that say all legally married same-sex couples are entitled to the same tax benefits as married heterosexual couples. That new rule resulted from the U.S. Supreme Court’s ruling striking down the Defense of Marriage Act, which defined marriage as between a man and a woman. It means same-sex couples can now file joint tax returns. Certified Public Accountants, Jared Van Arsdale and David Walser, discuss what the new rule means for Arizona same-sex couples who are legally married.
- Jared Van Arsdale - Certified Public Accountant
- David Walser - Certified Public Accountant
| Keywords: economy
, tax benefits
, tax returns
Ted Simons: The U.S. Treasury and the IRS have issued new tax filing rules and guidelines for legally married same-sex couples. This after the U.S. Supreme Court struck down part of the Defense of Marriage Act which defined marriage as between a man and a woman. Joining us now are certified public accountants Jared Van Arsdale and David Walser. Good to have you both here. Thanks for joining us. Let's talk about what has exactly changed for Arizona, same-sex couples. What's different?
Jared Van Arsdale: Well, what's different originally is the recent passing of the IRS guidance that allows current same-sex couples that were legally entered into a marriage in another state, one of the current 13 states that allow same-sex marriage, that currently reside in Arizona, to file a joint return or married filing separate return.
Ted Simons: If you were married in that state legally, you come to Arizona, we don't do that sort of thing here in Arizona, but federally speaking you can file a joint return.
Jared Van Arsdale: For federal purposes, correct.
Ted Simons: OK.
David Walser: For federal purposes they will be going forward, required to file either married filing jointly, or married filing separately. They will not have the option of filing as a single or a head of household. But for Arizona purposes, since Arizona has a Constitutional Amendment that does not allow the state to recognize same-sex marriages, for Arizona purposes, the law is that they will still be treated as single individuals for their income tax returns for Arizona returns. Not for the federal returns.
Ted Simons: You mentioned they can file jointly or filing separately as a married couple. What difference does it make?
Jared Van Arsdale: Well, it makes a pretty significant difference in regards to individuals with different levels of income. Higher incomes might be affected by the so-called marriage penalty, whereas lower income individuals may not necessarily see too much of an individual difference except for the complexities and the filings at different purposes for federal versus state.
Ted Simons: That's I guess on an individual basis. You look at the couple, you look at the situation and you decide which probably works better for them. Correct?
David Walser: Correct. And we've been doing that for years for traditional married couples. We've been looking at whether or not married filing jointly was better than filing separately. Usually married filing jointly is better, but as my colleague said, there is a marriage penalty, particularly for individuals who are both couples -- Both individuals in a couple are employed, they will probably be paying higher federal taxes filing a joint return than they would have filing two single returns.
Ted Simons: We're talking federal taxes, gift taxes included, estate taxes all that sort of thing?
David Walser: Gift and estate taxes, all tax purposes, a couple that is validly married, whether they're same-sex or not, will be treat as married for federal tax purposes.
Ted Simons: What about legally married same-sex couples now filing -- Is this retroactive? What about the past year, the past two years?
Jared Van Arsdale: Well, the current guidance they've provided puts a date in purpose September 15th in regards to any individual who is currently in a same-sex marriage recognized for federal purposes could still file a single individual return prior to September 15th, and after September 16th forward, they are required to file married joint. The question is can they go back and file amendments for previous filed federal tax returns. The answer is they can up to the point in which the statute of limitations is still open for those years, which in this case is 2010 forward.
Ted Simons: Married 2010, no big deal until now, big deal.
David Walser: Big deal. Yeah.
Ted Simons: Changes.
David Walser: It makes a big difference.
Ted Simons: As far as the state is concerned, aren't -- I'm lost sometimes when it comes to this sort of thing. Aren't state returns tied somehow to federal returns, and if so, how does that whole thing change?
David Walser: The Arizona return starts with the gross income from the federal return. But the filing status as a married individual or as a single individual is not tied to the Arizona return. Some states that's not the case. Some states you're required to use the same filing status that you did on the federal return. And I don't know how the states are going to resolve that. In Arizona since we have a constitutional amendment, the legislature and the department of revenue have very limited freedom to address this issue.
Ted Simons: What about income reported differently between state and federal returns? How is that impacted?
Jared Van Arsdale: In regards -- Well, like David said, the Arizona state return starts with federal gross income as your beginning basis. So as -- The Arizona state return does have increases and decreases for certain additions and subtractions that are not allowed or included for state purposes. But the total adjusted gross income will be reported similarly at the federal level, but may have to be separated at the individual state level, which is still to be determined.
Ted Simons: With that in mind, are we talking two versions of the federal return, maybe one is married --
David Walser: The answer is we don't know. Clearly this just came up, the software hasn't been written yet, we don't know how we're going to do that. I imagine because they're going to be treated as single individuals for state purposes, we would end up having to prepare a single return for them on federal purposes, a dummy return that would then be used to populate that state return.
Ted Simons: OK. I love that answer. It seems like this is a very vague kind of new area. With that in mind, this is your livelihood, this is what you do. How many question do you have, what kind of challenge is this for you?
Jared Van Arsdale: My particular concern is the dealing with same-sex couples that might be married for federal purpose, but filing in multiple states. Not only are they dealing with their current residency, but they might have nonresident returns due in other states in which they have to determine whether or not they are B, allowed to file a joint married filing joint or whether they're single filings at the state levels.
Ted Simons: Same challenges for you.
David Walser: Absolutely. We're a national firm, so we have to track this across all of the states. Something that we haven't talked about yet, but might be important to a lot of the employers here in Arizona, one of the changes that is brought about, deals with the way fringe benefits are taxed. A same-sex couple that is validly married, if the employer was picking up a portion of the spouse's health care, for example, that now is going to be treated as tax-exempt income for federal purposes. It wasn't before. So now there's a refund opportunity, those employers should be looking to file for refunds.
Ted Simons: We've got to stop right there. Thank you both for joining us. We appreciate it. That's it for now. Thank you for joining us. You have a great evening.