Horizon, Host: Ted Simons

March 27, 2008


Host: Ted Simons

state Budget


  • state Treasurer Dean Martin says the state will be out of money soon unless lawmakers and the governor act to end the current year budget shortfall. Martin will talk about the issue.
Guests:
  • Dean Martin - State Treasurer
Category: Business/Economy

View Transcript
Ted Simons:
State Treasurer Dean Martin says the budget is falling, but Governor Janet Napolitano thought at first he was just being a Chicken Little. But Martin says the state will be out of money by no later than May 5th unless lawmakers and the governor act. Earlier I talked to Martin about the state's budget mess.

Ted Simons:
State treasurer, Dean Martin, thank you for joining us.

Dean Martin:
Thank you for having me.

Ted Simons:
Governor compares you to Chicken Little. Interesting. Why is she wrong?

Dean Martin:
If the governor didn't like the reports on the numbers of spending that we have seen so far, and we're the bank. Every dollar that the state collects, no matter where it comes from, has to be deposited with us, every dollar that goes out the door comes from us. We see the money coming and going much we are trying to warn the legislature that they have a problem and the governor if they don't pass a budget pretty soon.

Ted Simons:
She said that your comments didn't help solve the problem.

Dean Martin:
We were asked, by law, by statute, if a member of the legislature asks for information about where the state is, finances are, we have to answer that question. I also do it for members of the public as well, it is their money, not mine. We were asked at the legislature, the current revenue estimates, which are less than they originally appropriated, they're looking 9.2 to as little as $8.9 billion in revenue. The state appropriated 10.6, at the rate they have been spending, how long will it last before they run out of that 9.2 billion? We did the numbers back in January. Obviously, the economy has gotten worse. They asked can you revise those numbers? We did so. That's where we came up with this estimate of somewhere between the 22nd and the 5th of May, the state will have overdrawn the general fund account.

Ted Simons:
Is that why you decided then to make that particular announcement?

Dean Martin:
Yes, I mean, we're the bank. Most normal banks, if you overdraw your account, they don't tell you in advance, they just take money out of the savings account and charge you a big fee. We are a little bit different. The state has a savings account money in other accounts, but legally I can't touch that without a bill being passed by the legislature, signed by the governor. I can't take out of our savings to cover the general fund. I need a bill. We were trying to tell them in advance with enough warning that they would still have time to fix this before that day comes down.

Ted Simons:
I know the governor had problems with the timing of your announcement. Press conference, half hour before her weekly briefing.

Dean Martin:
It was chosen because I have my monthly board of investment, our oversight board is at 10:30, and we chose to go -- we couldn't go at the same time as the governor. I didn't know the governor's meeting was at 10:00. We scheduled for 9:30, so we had everything ready to go for our meeting at 10:30. I didn't know until after the release was out that the governor was at 10:00. It was a happy coincidence or an unhappy coincidence depending on where you are.

Ted Simons:
Is the state spending money now as much, as quickly as it did before the governor directed her agency heads to curb spending?

Dean Martin:
We have not seen a slow down in spending and that's what surprised us. As of march when we did the analysis, the state had spent $6.668 billion out of the -- 7.668 out of the general fund, on a path to spend as much, or a little more than the $10.6 billion that was originally appropriated. We had not seen a slowing down. That surprised us. We expected to see some slow down. That was one of the reasons that we were warning the legislature, without action, there is no way to force agencies to stop spending without changing the appropriations law.

Ted Simons:
That night we had the governor on the show for her monthly appearance here, and we talked a bit about this, and one of the quotes from the show, that he, you, "not correct. He is making presumptions about what state agencies are doing, he doesn't have that kind of information." Is she wrong?

Dean Martin:
We know everything about where the money is and where it is going. We have to, by law. State agent is A.R.S. 3515 they can't have a bank account outside the treasures office without us knowing about it and giving permission. Since then the governor has since backed away from that statement. I was referring to the rainy day fund. We were always saying the rainy day fund is there. We need statutory changes to tap into it in this crisis. Without that we are going to have potentially a big problem. We don't know when we run to the $9.2 billion of revenue, whatever it is, whether or not they can still issue warrants at that point. We have never had this problem in state history. Every time before a budget shortfall, we have always fixed it before we have gotten this close. We are essentially trying to sound the clarion call. I wouldn't have done it if we hadn't been this close. I have been to the legislature, we need to know how much time do we have left before we need to pass a '08 budget, we said five to seven weeks and it is four to six weeks now.

Ted Simons:
What happens if there is no budget deal when the cash runs out?

Dean Martin:
That is a very good question. Balanced budget requirement in the constitution. Can they continue to issue -- it is not a problem for us at the bank. A warrant that is valid, we will cover it, we have $5.2 billion of state money in the bank, it is not an issue of the state not having money, it is just the general fund account. Is it a valid warrant if the account is at zero? We don't know that. We've asked the attorney general, can they continue to issue warrants once they spend all of the money they expect to receive that day, essentially deficit spending. We don't have an answer yet. I would rather avoid that. The reason why we had the press conference, we are releasing this to the public is it is a lot simpler to just fix the budget than it is to try to go down these untested legal waters.

Ted Simons:
Real quickly, during her press briefing, the governor said something about he doesn't know what is being held in reserve. I think that that has been somewhat modified a little bit since then, but are their agencies with reserve accounts that you are unaware of?

Dean Martin:
No, literally every dime has to be with us. Money from a vending machine in the state capitol is deposited with us. They cannot open a bank account and squirrel away money, that would be violating the law and I don't think anybody is doing that.

Ted Simons:
What did your announcement, the information you decided to go public with, what did it accomplish?

Dean Martin:
It got the public and legislature's attention that this is a problem that needs to be addressed sooner rather than later. A lot who hadn't focused on it as much. One of the reasons why the appropriations chairman asked us to do this, how much time do we have left to fix the problem? Legislature is a busy place. A lot of things they're wanting to do. They've got to prioritize, you have five weeks to seven, you need to figure out what you need to do to get that done that quickly.

Ted Simons:
Last question, would you have handled this differently if given the opportunity?

Dean Martin:
No, absolutely not. This is not my money. This is not the legislature's money, the governor's money, it is the public's money. We're getting to a point where this is of concern. We are not in a situation where we're worried about not getting paid. When we get to April 15th, and we have to make that last double school payment that we have resources for in the account and we don't have a new budget, then I would get worried that we may have a problem. I don't want to wait. I was there at the legislature when we had the problem in 2001, 2002, 2003, and we weren't told where we were until it was too late. Always trying to play catch up to the recession. I'm trying to give them warning and enough time to fix it before it catches up with them, and I would do the same thing all over again. I was surprised at how much attention it received, as much as anybody else, we didn't expect it to get this much interest.

Ted Simons:
Thank you for joining us.

Dean Martin:
Thank you for having me.

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