Horizon, Host: Ted Simons

January 30, 2008


Host: Ted Simons

Legislature A to Z: State Budget Deficit


  • With a billion dollar budget shortfall in this year’s state budget and an even larger deficit projected for 2009, HORIZON examines the debate over financing new school construction and the other options on the table for dealing with the budget.
Guests:
  • Tom Boone - Representative, House Majority Leader, Arizona State Legislature
  • Phil Lopes - Representative, Leader of the House of Democrats, Arizona State Legislature
Category: Legislature

View Transcript
Ted Simons:
Tonight on Horizon, state lawmakers consider delaying school construction to help balance the budget. And Arizona Schools Chief Tom Horne talks about the state of education. Those stories, next on Horizon.

Announcer:
Horizon is made possible by contributions from the Friends of Eight, members of your Arizona PBS station. Thank you.

Ted Simons:
Good evening I'm Ted Simons. Welcome to Horizon. Tonight we continue our series about the State legislature with a look at what's being done to balance the budget. We'll hear from legislative leaders in a moment. But first, David Majure shows us one of the options they're considering.

David Majure:
At the Arizona state capital, the balancing act continues as lawmakers juggle a growing budget and shrinking financial resources.

Bob Burns:
Some people kind of shy away from the word "crisis," but I think we're definitely in a budget crisis. Because of our shortfall.

David Majure:
Senator Bob Burns, Chair of the Senate Appropriations Committee, says Arizona relies on sales and income taxes to meet expenses. But due to the sluggish economy, tax collections are coming up short. Arizona faces a billion dollar cash deficit this year, more than $1.5 billion in 2009. The state's $10 billion budget continues to grow, automatically driven by formulas tied to population growth.

Bob Burns:
Without the legislature doing anything at all, the spending authorization increases by $600 million.

David Majure:
Which leaves lawmakers with a couple of choices. Raise revenue or cut costs. Governor Janet Napolitano has suggested one way to save almost $400 million this year and nearly $500 million in 2009, is to lease purchase new schools instead of paying cash. Other states do it. In fact, Arizona did it from 2003-2005.

Chuck Essigs:
There's just nothing wrong with financing capital assets that are long-term assets.

David Majure:
Chuck Essigs is with the Arizona Association of School Business Officials. He says if interest rates are low and money is tight, it makes perfect sense to finance school construction.

Chuck Essigs:
Also I think it makes even more sense when that capital asset is being built to accommodate new people moving into the state, why not have them help pay for that asset and financing does that. So 10 years from now, the schools that we're building today that were financed today, there's going to be a lot of new people coming to Arizona, and they're going to help to pay for all the schools that were built during that 10-year period of time.

Bob Burns:
Right now we can't afford the interest costs.

David Majure:
Burns says the state can't afford to pile-on debt, to build an average of 20 to 30 new schools needed each and every year.

Bob Burns:
Well, not really, because it's an annual cost. It's not like if we borrowed to build a prison, we build a prison and it serves us and we don't build a new one every single year. With the schools it's the same cost, been running $300 to $400 million per year every year. So it has the look of an operating cost as opposed to a capital expenditure.

Chuck Essigs:
One of the arguments is, that people make is - well, we're going to build schools year after year after year. And we're going to build roads year after year after year, as long as this growth in this state. So financing the infrastructure for growth in this state and then having new people moving to the state help pay for it I think makes a lot of fiscal sense.

David Majure:
And the State of Arizona does in fact borrow money to build roads and freeways. However, it uses gas taxes and vehicle fees, not the general fund to make the finance payments.

Bob Burns:
I guess there's some similarities there. But I -- the borrowing situation, to me, is the slippery slope, and the dedicated funding that goes towards highways, now we've got dedicated funding here in this case too, but it's eating into the general fund, which it's eating into the general fund beyond our means.

Chuck Essigs:
The choice right now is not whether to finance schools and to build schools with cash. The legislature's proposed budget is not to build any schools for 18 months.

David Majure:
He says one problem with placing a moratorium on new schools is you can't place a moratorium on new students. On average, 25,000 new students enroll in Arizona schools each year. Delaying school construction, according to Essigs, is like going into debt, because what's not built today will have to be built in the future. In the meantime, kids might have to deal with crowded classrooms or double sessions.

Chuck Essigs:
You're going to have to pay somewhere down the road, you're going to have to build those schools for the students who came during that period of time, plus you're going to have to build additional schools for the students who come after that. So under either case you're creating some debt.

David Majure:
It's just one of many complicated issues lawmakers are faced with as they search for ways to balance the budget.

Bob Burns:
When the situation gets critical, as it is with us, I think critical decisions need to be made.

Ted Simons:
Joining me to talk about the state budget is House Majority Leader Representative Tom Boone and Representative Phil Lopes, Leader of the House of Democrats. Gentlemen good to see you again. Thanks for joining us.

Ted Simons:
Bonding for schools. It is the biggie. Why is it a bad idea?

Tom Boone:
Well, in the segment that was just before we started, maybe I could address some of those points. It's a bad idea because ultimately all it does is increase the cost of schools to the taxpayers by two. It's not the same analogy to say all other states do it. All other states do it, or many other states do it, because we have a different financing system. In the state of Arizona, it's a line item in the general fund budget. Year after year after year. And I've used the analogy, and it's paramount to the discussion, that as an individual, if you had a million dollar a year salary, and you were going to buy a home for $40,000, would you finance it? Of course not, you'd pay cash. And now take that to the extreme. Buying a $40,000 home every year, would you finance it every year? Of course not. You should be able to afford it. If you can afford it one way, you certainly can afford it the other way. All it does is cost twice as much if you stretch it out.

Ted Simons:
Are they talking about every year?

Tom Boone:
Yes. We're talking about every year. In fact, the proposal by the governor says the minimum of five years. But quite honestly, once you start down the road it's very difficult to make up the revenues to go back to paying cash for schools. So once you start doing it, we don't see where it would ever end, and the governor has indicated that it's least five years that she would request full borrowing for schools. And can I make one other point?

Ted Simons:
Sure. Please.

Tom Boone:
One other point that was made in the segment before this is that it stretches it out for those who are not here, they can pay costs rather than those who are here if they pay cash. The fallacy in that is that when you add up the total cost in the end that a taxpayer here today would pay, and you count the financing, there's no way the state could ever grow fast enough to where a taxpayer here today would pay less by stretching out over time. They'd pay more when you add the debt service financing into that equation. So that just is not -- does not work out mathematically.

Ted Simons:
Sounds like -- can the state afford to take on this added debt?

Phil Lopes:
The state is charged with providing the classroom space for our students. And the question for us, what is the best way that we can do that, given the revenue situation? We simply do not have the cash to build those schools at this time. So the question before us, as was mentioned in the previous piece, the question before us is whether we capital finance for these schools, or whether we not build them. That's the choice. And as a growing state, as a state that continues to need classroom space, we simply cannot afford not to build those schools. Even though the cost is different between cash and bonding, it is stretched over, and I would disagree with Mr. Boone that it is in fact the cost is shared by those people who come later, those students who come later, those tax payers who come later. And I think that's a fair way to do it instead of saying to today's taxpayers, we want you to foot this entire bill, because we're going to pay cash, but we would prefer them to spread that out to others who come after you. And I think that's a fairness issue that I think the public would understand and make sense of.

Ted Simons:
Is it pragmatic to say -- that something's got to be done? The students are coming out here, the schools need to be built, is it not a perfect situation, but the only one we got?

Tom Boone:
I think there's a lot of other options. I think, again, the point I was making before is that those that are here today paying cash will pay less -- paying cash today than if you add up all the payments that are going to be responsible for debt financing. That's just a fact. We've already run those numbers. But, another point, to say that we cannot afford to pay cash, what happens is you continue to stack up that debt, is you'll reach a point in the future, five years, six years, depending on how much of an interest rate you have to pay, where your debt service cost, that principle interest you're paying on schools that you borrowed money for three years, four years, five years ago, equals and then begins to exceed the cash payment that you were paying back four, five, six years ago. So to say we can't afford them doesn't make sense. But one of the options we threw out, for example, was delaying construction on schools. And I think even the schools' Facilities Boards themselves are re-analyzing as we speak schools they've already approved that they anticipated we would be paying for next year and the year after and the year after. Because of the slow-down overall we've got in the state, with growth. And we anticipate a significant amount of money being saved just after we do that analysis. Which is basically delaying construction schools, but delayed on the basis of the students aren't here yet, we've got to slow down and grow and take advantage of it.

Phil Lopes:
To construct schools that are not needed is silly. Nobody is proposing that. But we need to construct those schools for those students where those students are. It doesn't matter, for example, that we have excess capacity in one district, but need it in another district. The school needs to be constructed in the second district. So the idea of saying that we may not need these, I would hope we would not build any schools where they're not needed. However, where they are needed, we've got to be responsive and do it when we can't just simply delay that. Because if we delay it, then two years from now we've got all of that catching up to do, and as said in the earlier piece, you've got to build the ones that are needed then, and the ones you didn't build two years prior. So you're encumbering the state even further, and that doesn't seem to be responsible to us.

Tom Boone:
And I would agree with Mr. Lopes, that I think delaying construction of schools that are absolutely necessary would become problematic. So we actually share that concern. But overall, I mean, the borrowing piece is a big contentious area, but it's only one part of what the governor has proposed. What our position has been is borrowing is just one piece of the puzzle. If you look at the other things she's proposing, she's proposing revenue enhancement issues, she's proposing that we not pay the final payment of K-12 for state aid, and postpone that into the next year. She has more than optimistic revenue projections to the tune of $500 million plus more than what the legislature -- by consensus I should say, projections are into the future. She has fund sweeps. The point is that the more we do those one-time kinds of things, the K-12, the rollover, the borrowing, the fund sweeps, and all the other things that are being proposed by the governor, it's postponing the inevitable, and that is we have to make reductions in spending because we're not taking in enough revenue for the expenditures that we're making this year and next year and beyond.

Ted Simons:
Is the governor being overly optimistic regarding the future and how long this particular slump, economic slump, is going to last?

Phil Lopes:
There's no question that the state's economy ebbs and flows. There's always debate about exactly when the ebb will stop and the flow will begin or vice versa. And there is some disagreement about that. But there is no disagreement I don't think that sooner or later the state will come out of this. So our view is this is a shortfall that we've got to manage, we've got to manage it prudently, we've got to manage it wisely, we can't rob our children, or rob our elderly, as we do this. We've got to manage it. So what the governor is proposing are mechanisms so we can manage this thing and not take some sledgehammer approach to something that ought to be done much more carefully with a surgeon's scalpel.

Tom Boone:
We would concur that you should manage your way out. However, we want to make sure that in managing our way out of these problems, we don't create a future whereby we're faced with one option, and that is increasing taxes significantly for taxpayers in the state.

Ted Simons:
Before you both go, a story in this morning's paper regarding the process, appropriations committee folks just basically saying, what are we doing here? Quickly comment on that. The idea of public hearings, public input, and these sorts of things, on one side, and yet leadership and the governor and very few others involved on the other. Talk about that if you would.

Tom Boone:
Sure. I understand the concern by some of the members that have been expressed. However, I do feel the appropriations process, even the way it's happening right now, is a vital piece of the process overall that we've got going, because the public comments, the agencies coming in and discussing the proposals and how it would affect them, members of the public being able to address individual members, I think that's all valuable and necessary, and a part of the process. And that will come into the process in negotiations directly into our process, because we view that. Mr. Lopes actually sits on appropriations committee. I did before, but I don't this year.

Ted Simons:
Do you feel like it's a waste of time sitting on that committee?

Phil Lopes:
The question is not whether or not it's a waste of time. The question is, "Where is it in our institution that's the best place for the budget building to begin?" And it's my feeling that the best places for the budget building to begin is in the appropriations committee. However -- however, I've been on the appropriations committee now for four years now, and the way it's been built in the past has not been efficient. Has not been good enough for the institution. So as a result of that, that building has moved to the leadership, and that's where it is now. I would like for us to get back to the appropriations committee, building -- beginning to build the budget, but I'm not sure the mechanisms, the institutional mechanisms, are there to make that happen at this point.

Ted Simons:
All right. Gentlemen, we'll stop it there. Thank you so much for joining us.

Ted Simons:
Arizona school administrators put a price tag on what it costs to teach English learners using the state's new structured English immersion model. The state superintendent of schools is here to tell us what he thinks about this latest dollar amount, but first a clip from the news conference where school administrators made their announcement.

Arizona School Administrators:
The reason why superintendents are here today is we have a real concern with the cost associated with this new program, and we're respectfully asking the legislature to fund the program. The legislature developed this law, and provided this task force to come up with a plan, and we are determined to implement the plan, but the funding needs to follow. Our concern is we've done the cost studies that the cost is going to be approximately 2,741 dollars per child, to give you a perspective, currently we get funded about $355 per child. The total cost statewide will be in excess of $300 million, $304 million. And so again, this program has been designed by the state legislature. We are committed to implementing the program, but we respectfully ask that the program be funded.

Ted Simons:
And joining me now to talk about E.L.L. and other education issues is State Superintendent of Public Instruction, Tom Horne. Tom, good to see you, thanks for joining us. 300-plus-odd million dollars a year. Was it 54 million before, now up to 300. Talk to me about these numbers and how you see them.

Tom Horne:
We'll have exact numbers at the end of February. We're getting the details now, and it's hard to make predictions, but I will go out on a limb and I will make a prediction, the number will be much less.

Ted Simons:
Ok. Why do you say that?

Tom Horne:
Let's say you have 100 kids and half of them are E.L.L. learners, and they're divided among four teachers, 25 in a class and they're all mixed up now, so the kids who are trying to learn English don't know what's going on. We say put them in a class for a year and teach them English. So some schools say, "Well, that's 50 kids, we need two more teachers." Well, no you don't, because you can give them to two teachers, but then the other two teachers can handle the other 50 kids. So it's a matter of how you divide the kids up. And there's a lot of ways to deal with that. If you manage it correctly, that only in some cases will you need more money. I mean, in the situation I described it's free, it doesn't cost anything. If the leftover number of kids is relatively small, you might need another teacher because the other three teachers can't handle all the kids they have leftover. But that has to be managed efficiently, and I think we're going to find more efficient ways to manage it than when you say to people how much would you like and they come with as large numbers as they can.

Ted Simons:
And the local superintendents and administrators came up with these numbers. Are they wrong?

Tom Horne:
Yes. They're wrong. And the person who's handling this for us was a principal for many years, and he said, you know, if you ask me how much something is going to cost I'm going to come up with a big number too. Our job is to be fiduciaries, to be responsible, to manage it properly. We're going to come up with a much lower number that we think the legislature can handle.

Ted Simons:
$14 million was a number a couple years ago. I'm guessing, not that low?

Tom Horne:
It will be more than 14, but it'll be a lot less than 300.

Ted Simons:
It's good to have you here, because there's a lot of concern right now over the state taking over failing districts. And there's legislation to that end for the state to take over districts that are failing academically as opposed to financially, which is already in place. Your ideas along these lines?

Tom Horne:
I've been arguing for the ability to take over districts for about four years now. Two years it passed the house, but got stuck in Senate Education Committee. This year we think we have a much better chance because Republicans generally had been supportive and Democrats had not. But now the sponsors are three Democrats from the Roosevelt District, the Roosevelt District is the largest district, has 20 schools that is in deep trouble. When I say deep trouble, the test scores are showing that many, many of the kids are not learning. And these are the kids that need the help the most because they come from poor families, where they may have less help at home and they need really good schools. The three Democratic Legislators from that district realize that we need to do something radical there. I went to the Roosevelt District about a year ago, and I said, you need to get a professional superintendent to run your district. It's much too political, much too racial. The wrong motives, you need to have a professional superintendent who only wants to have the kids learn more and get higher test scores. They agreed, they agreed to give him hiring and firing power. But the first time a disagreement came they reneged on it, and it's become clear that only way to get those kids' test scores up is to have somebody from the outside who doesn't have connections with the existing political factions and the racial fights that are going on there, and look at academic achievement and nothing but academic achievement.

Ted Simons:
And yet the argument could be that someone from the outside may be so far from the outside, they don't understand some of the undercurrents and ramifications that go into a massive district like Roosevelt.

Tom Horne:
Well, you get someone from the outside who is an experienced superintendent, who understands how you raise students' academic achievement. To me, this is the most compelling moral issue that we have in education. These kids need the help. They're being denied good teaching because there's so much going on of adult issues, not focusing on what the kids need, but what adult fights are going on. We need someone to come in from the outside and say, we're going to focus on raising the students' academic achievement. I showed them when I went there a year ago that it's not their demographics. There are other districts, like Alhambra, that has poor kids, but they're doing well because they have good leadership in the district. In the Roosevelt District they have a history of toxic politics that interferes with them having the kind of leadership you need to be sure that every teacher in the classroom has that sense of urgency. We can't have complacency anymore. We must have a sense of urgency. The kids have got to learn.

Ted Simons:
You mentioned the kids being denied good teaching. I think, some teachers will say, we're doing the best we can, especially with an environment where some of the parents, many of the parents even arguably, a lot of the kids, simply don't value education. How does the state come in? An outsider come in and instill that value?

Tom Horne:
That was the point of my speech last year. I showed other districts that also had poor kids that they were doing much better because they had proper leadership. I spoke to an individual teacher who was a teacher for America coming in from the outside. And she moved the kids two years in one year in fifth grade. And I praised her for that, it's a tremendous achievement, and she said, I had, to because in fourth grade they had a teacher who was barely literate and had them coloring all year. Now, in a properly run school district you have good instructional leadership, you don't allow that to happen. But in a district where the leadership is all caught up in the politics and nobody is paying attention to raising the academics, that's the kind of thing that happens. We've got to put a stop to it, and I hope very much the legislature this year will authorize us to do that and make sure these kids get a good education.

Ted Simons:
What kind of reaction are you getting - are you hearing from folks in the Roosevelt District regarding this particular issue?

Tom Horne:
Many, many people in the Roosevelt District want us to come in. In fact, in the report that I issued, we quote from the focus groups that we held, and the public meetings we held. Because we've been involved in individual schools, we've put a lot of effort into trying to help the district improve, and a lot of people say to us, you've got to come in and take over because a lot of these decisions that are being made are vendettas, and they're racial issues and they're just the wrong kinds of issues.

Ted Simons:
I've heard some folks say that in the past and in other areas where the state comes in especially on academic kind of situations, the results are somewhat mixed. You're saying that's not true?

Tom Horne:
No. The first time we took over individual schools, we have authority to take over individual schools. We intervened into 11 failing schools. Nine of those are now performing schools. So we have demonstrated that we can help schools improve their academics and we can have kids learning.

Ted Simons:
Is it a battle ship though, where it just takes time to get that ship moved around? Or is it something that you see results pretty quickly?

Tom Horne:
It probably would take three to five years. You have to change the culture of that whole district. Because the culture right now is that it's the biggest employer in the area, and it's used as a place to run for the school board, get your friends and your political supporters into positions, where the proper way to run a school district is find the best instructional leaders you can and focus only on raising those kids' education and their test scores.

Ted Simons:
Are you surprised that the attitudes and the moods out there have changed a little bit from the past, where it was, let's not get the state involved-- has it just gotten so bad over there that it's time for something to happen?

Tom Horne:
Yes. Two years in a row we got authorization from this through the House, and it got stuck in the Senate Education Committee, it was basically supported by Republicans, opposed by Democrats. Now you've got the three Democrats that represent that area so knowledgeable about how bad the situation is in those schools, that the sponsors of the bill of those three Democrats. So now it will be a bipartisan effort, and I have much more hope it will be able to pass.

Ted Simons:
Boy, there's so many things I want to talk to you as well about. I know down in Tucson, I know - really quickly, we have 30 seconds. Ethic studies program, do you know more about it now than you did before?

Tom Horne:
I've called on them to eliminate it. They waste over $2 million a year on the administration, my belief is what's important is the individuals we teach kids to value each other for what they know, what they can do, what their ability to evaluate beauty, their character, not what race they happen to be born into. They're dividing kids up by race and teaching them separate races according to their ethnicity. That's totally un-American, and totally wrong. I want them to teach kids to treat each other as individuals, not according to what race they were born into.

Ted Simons:
Thank you so much for joining us. Good to see you again.

Tom Horne:
Good to see you.

Ted Simons:
Tomorrow on Horizon, lawmakers are dealing with many issues beyond the budget and immigration. Join us as we look at a variety of bills dealing with everything from health care and cell phones, to the protection of children.

Ted Simons:
Thank you for joining us. That's it for now. I'm Ted Simons. You have a good evening.

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