Ted Simons: Yesterday governor Jan Brewer outlined her priorities for the new year to a joint session of the legislature. Tonight we hear from the senate president and the speaker of the house. But first, here's what Governor Brewer had to say about rising to the challenge of a budget deficit of nearly $5 billion over the next 18 months.
Jan Brewer: Meeting this challenge will not be easy. I know this for a fact. Because if there's one thing I've learned in my years of public Service, it's doing the right thing almost always means doing the hard thing. I have great respect for everyone in this chamber and your contributions to our state. But there is no one here and no one elsewhere who has fought any longer or harder than I have for lowered taxes, job growth, and economic freedom in Arizona. So spare us the profiles and courage, it's time for a little less profile and a little more courage. [APPLAUSE]
Ted Simons: Joining me now to talk about the governor's speech and the new legislative session are senate president Bob Burns, a Republican from Peoria, and house speaker Kirk Adams, a Republican from Mesa. Good to see you both back again on "Horizon."
Kirk Adams: Good to be here.
Ted Simons: President, let's start with you, thoughts on the speech.
Bob Burns: Well, I agree that there's going to have to be some courage. That's for sure. And you know, she talked about revenue, talked about the fact that we need to make some reductions. I kind of rather refer to them as adjustments in what we've already done in the past in order to get our budget back in balance. It is going to take considerable courage on the members' part to get there.
Ted Simons: There were other comments, doing the right thing almost always means doing the hard thing. Don't act in self-interest, but in Service to others, let's be truth-tellers, there was a lot of that in the speech. Was that a message toward anyone in particular, do you think?
Bob Burns: Well, I'm not sure it is. I can't answer that question. I guess if it was, you'd have to ask the governor herself. But I don't see that that was a message to any individual.
Ted Simons: Was that something you think needed to be said to the body?
Bob Burns: Well, we need some Pep talk type of energizing language in getting us started. This is going to be one of the most difficult if not the most difficult budget sessions in the history of the state.
Ted Simons: Speaker, when you heard these things, basically, no self-service, and spare us the profile, all this business, it seemed as though she was saying, let's knock it off with some of the politics, let's get something done. Did you get that thought?
Kirk Adams: I thought it was a pretty matter of fact approach to our problem. I mean, when you look at the choices that we have to choose from, there's nothing in there that's going to be easy. All of it carries a high degree of political risk, whether you're a Republican or a democrat. What I think the governor was speaking to is, hey, this is beyond Republicans, this is not a Republican legislative problem, we need democrats' help, we need Republican help, we need to do this for Arizona. That’s really the point that we’re at now.
Ted Simons: The speech as a whole, your thoughts?
Kirk Adams: I thought the governor did a very good job of laying out in broad strokes the challenge that we face and the solutions set from which we had to choose from, and I also think her words of admonishment, if you will, to have courage and make the tough choices was appropriate for the times in which we find ourselves.
Ted Simons: You mentioned broad strokes. Were those broad strokes clear enough, do you think, for an agenda for a way to move forward?
Kirk Adams: I don't think the intent of her speech was to be detailed in what that agenda is. I think we'll see that detail later this week, specifically on Friday when she rolls out her budget. And that will have the appropriate detail that we need and give us the road map, if you will, of what we know what she's looking for in a final budget.
Ted Simons: Were you expecting more in terms of the clarity of vision, these sorts of things, or again, like speaker Adams, are you looking for something later on in that direction?
Bob Burns: We were aware that there would be a speech and then the rollout of the budget. So again, the budget is the document on paper that we can get into the details, and see how that works. And it's one of the things we need in order to move forward as well.
Ted Simons: When the governor said that we can't roll back the odometer in 2004, 2006, or whatever -- wherever you want to roll it back to, can we? Do you agree with that?
Bob Burns: Well, I guess I can't answer that as a solution to the problem without having further analysis of that. I mean, I've had a number of people tell me, look, we have revenue that is 2005 is the number that I've heard. We have -- we still have population growth. Even though it's dropped off considerably. But there are -- the variables we work with in developing a budget change every year, and so the variables that we had in 2005 are different than they are now. So it would be pretty difficult I think to do it that way.
Kirk Adams: I think what she was speaking more to is that there are no simplistic solutions. You know, it's not just a matter of rolling revenues back to X year and moving on from there. That there's a lot of complications, whether it's access enrollments, schools, children in our school system, so there are -- we have to avoid this desire to find a silver bullet solution, or simplistic way to solve this problem. The fact of the matter is, it's a historic deficit, and it's extremely complicated to solve.
Ted Simons: With that in mind, with the complication in mind, what has to be done? More cuts? Borrowing? More revenue? All of the above? Do we put it into a different -- what needs to be done?
Kirk Adams: Well, the answer is all of the above, and more. It's going to take significant new reductions in spending. There's no way that you can balance the budget without reducing state spending in a significant way, even further from what we've already done. But at the same time, you're not going to be able to balance the budget with cuts alone. So it's going to have to be one-time solutions, and that includes some borrowing, and there also going to have to be additional revenues.
Ted Simons: Do you agree with that?
Bob Burns: Well, yeah, but I would state it slightly different. I have been telling people that I don't know that the legislature is in a position to cut. We can't cut what doesn't exist. And what doesn't exist is money. Revenue. We are drastically short of revenue, and so it's like we have issued checks for $10 billion, and we have $6.4 billion in the checking account. We have to recall those promises to pay and make adjustments that fit the revenue.
Ted Simons: Democrats are saying, why not reform what doesn't work and fund what does? Again, a simple statement there, and you could argue it's too simplistic, but in terms of a template, good idea?
Bob Burns: Well, that's a very positive statement. But I imagine you could debate for many hours what works and what doesn't work in individuals' minds. I mean, I believe that school choice works. I believe it provides a higher quality of education at a lower cost. I would suspect that I might be hard-pressed to find very many democrats in the caucus -- in their caucus that would support that. So it just depends, it's all in the eye of the beholder exactly what might work real well, and what might not.
Kirk Adams: From my perspective, that's the type of platitude that is passed its time. We're down to real solutions and real decisions now, and sort of the political rhetoric of the likes of which you just quoted doesn't actually produce a budget bill, doesn't actually get 31 in the votes and 16 in the senate and the governor's signature. So we're to the point where we need to see it in writing, see the details in the using the legislative process as it exists today.
Ted Simons: I know that you have an idea as far as a plan for growth in Arizona, and changing structural aspects of the tax base and the economy. I want to get to that in a second. Back to the idea of taxes, we were at the capitol yesterday for the governor's state of the state address, and talking to folks, lawmakers, regarding tax increases and tax cuts, and here's what they had to say.
David Lujan: Democrats have been saying since last January that we need more revenue. We need a comprehensive solution. We need cuts, and we need revenue. And when we have not to this date seen a proposal on additional revenue where they have asked democrats to vote on it, that did not come with millions of dollars of corporate tax giveaways attached to it. So when the Republicans are willing to talk to us on real solutions that are going to get us out of this economic crisis, rather than giving away more corporate tax giveaways, democrats are ready to sit down in a bipartisan fashion and work with them.
Russell Pearce: I'm not willing to vote for a tax increase today or tomorrow. I mean, I'm willing to put to it the ballot, if written right, with the right tax structure and some reforms in there, I've told them that before. I'm willing to do that. Because I think the voters will turn it down, I think they're already overtaxed, overregulated. I can't imagine them passing this.
Ted Simons: Seeing very familiar sound bytes there from what we've had the last session and the special sessions, and up to now, how do you break that impasse there?
Kirk Adams: Well, you know, we hope to engage the democrats and do frankly a better job than we did last session, of engaging them in bringing forward legislative proposals. It's not enough to have a few bullet points on a website or hold a press conference saying you have a plan. We actually need to see those bills. Because it's only when you have it in writing and it's only when it's in bill form that the real debate begins. And the true vetting process starts. So we're willing to provide them the agenda time they need, the floor time they need to advance their proposals, and we're hopeful in that process we can find some things that we can incorporate and bring them along and solving not only the state's fiscal crisis, but also providing a better environment for the economic crisis we face.
Ted Simons: And you're talking about parallel tracks in the senate, correct?
Bob BurnsL Yes.
Ted Simons: And that's the same kind of idea? How would that work?
Bob Burns: What we're doing in the senate is working in the caucus rooms separate caucus rooms, we have -- we have a computer program that's -- that everybody has, Xcel spreadsheet. We'll put up a spreadsheet that shows the deficit for 2010 and 2011. We will start out with sort of the box concept of how much do you need to do in reductions, how much do you need to do as far as borrowing is concerned, how much do you need to do to raise revenue, and then come to balance. Then the devil is in the details. Then you've got to drop down into the actual line items of the budget and see where that -- where those reductions might be made. What are you going to borrow against or how are you going to borrow? The democrats, I have asked them, I spoke to their caucus today, and asked them to go and develop a plan, a budget plan in concept, OK? We don't vote in caucus. So we develop a plan, and the Republican caucus will be doing the same thing. We will establish a schedule so that we can put some deadlines in there. Once the conceptual plans are put together separately, then we will go to the appropriations committee and see how we can -- if there's any way we can take parts of one, parts of the other, come up with a consensus.
Ted Simons: Do you honestly believe there will be a way to take parts of one and parts of another and get a consensus? I mean, have we reached the point where that's just simply got to be done?
Bob Burns: Well, that's how we do it in the -- when we've done a Republican budget in a Republican caucus, that's how we do it. We take pieces that are favorable to one member as opposed to another, and we work it around until we finally get a package that people will support. It really isn't in my mind any different than what we've always done except that we have tried to accomplish that through our own caucus. Now we're broadening the arena, if you will, to include both caucuses, but what I believe has to happen is that there has to be a few members of this caucus, a few members of this caucus. It can't be all this, all that. It's got to be a mix. And that's what I'm trying to get to.
Ted Simons: Can it be a mix, especially coming from the majority, it takes sacrifice from the majority in order to get the kind of scenario we just heard from president burns. Is that possible? Can that really happen?
Kirk Adams: Well, it also takes sacrifice from the minority. No side -- any time you talk about trying to get to a bipartisan solution, that does not mean that the Republicans agree with whatever the democrats want. Or vice versa. It means both sides have to sacrifice some things to get there. Is it? Time will tell. I certainly hope it is. What I do know is possible is that the people of Arizona could have a full vetting of both detailed proposals, and know what we're choosing between. In reality, it's also an education process. Because it's not until you actually sit down and go through each of the options that are available to us and you figure out the ins and outs and figure out which ones actually work, which ones will never work, which ones might work. That's an education process that occurs, and the more members involved in that process, the better off we're going to be.
Ted Simons: You have a plan, and it was introduced before the session started, at least talked about before the session started, regarding future, I believe, phasing in 2012, tax cuts, income tax cuts included, all based on research from the Elliot Pollock group. We had Elliot on the show to talk about the ins and outs of it. So we don't have to go there, but democrats are saying it makes no sense, even if they're phased in for tax cuts to go into effect if the revenue simply isn't there. How do you respond?
Kirk Adams: Well, in reality, we will never solve our state budget deficit until the economy improves again. And when you're talking about the economy, you're really fundamentally talking about jobs. Almost 300,000 jobs lost since December 2007, that's like 11% of our work force. Unemployment statewide averaging are hovering around 9%. In some counties it's in excess of 20%. So the people of Arizona I think understand when we talk about job losses and the need to get jobs growing again in this state, so that's the premise for this. But we have done exactly what some in Democratic leadership suggested that we do last year, which is they were in favor of tax reductions on commercial property, for example. If it was delayed and phased in over a period of time. We've done that exactly. The truth of the matter is, they're opposed to tax relief for businesses. It doesn't matter when we do it or how we phase it in, they are opposed to it. And what the Pollock report clearly spells out is that Arizona is not in the game and has not been for quite some time, when it comes to business tax policy.
Ted Simons: But real quickly, I think as well what I'm hearing, at least, is not so much the concern regarding business tax, I'm sure there's some that don't want that to happen either. But even in the Pollock report, which we had a chance to look through and talk about, income tax reduction was not mentioned as being part of recommendations. Yet income tax reductions which we've had steadily it seems for the past 20-some-odd years, is included in your proposal. Is that something that could be looked at, or reformed, if it means losing the whole thing, would it be something you would look at to maybe --
Kirk Adams: you're correct in that the report is primarily focused on the attraction of base industries to the state. And there are several things that we can do immediately to have no fiscal impact and are not tax reductions. And that's what the bill contemplates doing. As it relates to income tax cuts, we felt it was important, again, delayed enactment and phased in over a period of time, not fully implemented until 2016, mind you, but it was important at the small business community, which is not taxed at the corporate income tax rate, which has stuck with us, which is also hurting like every other business. If we did not affect the personal income tax rate, we would not affect the 80% of small employers who pay their taxes at the personal income tax rate. So in our mind, it was a matter of balance and fairness as we approached tax policy for the entire state.
Ted Simons: When the democrats say that they might be willing to listen to the governor's idea of a one cent sales tax increase, but it doesn't make sense to them if the increase goes in along with tax cuts phased in or otherwise, if that's approved as well, because it's speculation as to when the economy will recover, etc., when they say that, it sounds like the link is a nonstarter. Does it have to be linked?
Bob Burns: The two --
Ted Simons: The two ideas?
Bob Burns: Well, I don't think so, no. I mean, they're not linked because -- especially because one ends when the other starts. Almost. I mean, it's a phase-in of the reductions, a delayed enactment of the reductions, the proposed tax increase is a temporary, and so obviously there's certainly room for debate as to what the dates are, and that might change in the process of the debate. But it's sort of like, you know, you put one in to get you through the short term, you start the second to hopefully improve the health of the economy in the long run. Which is the what we really need.
Kirk Adams: To be clear, from a leadership perspective, speaking for myself, and the rest of the house leadership team, we are not linking the two together. We're not linking a sales tax vote with a job recovery bill.
Ted Simons: We heard a little bit from the governor regarding the concept of getting along, making the hard choices, and these sorts of things. We also heard from lawmakers regarding that as well, divisiveness in general. Had a chance to speak to one lawmaker in particular regarding divisiveness actually within the caucus. Let's hear what he had to say.
Jay Tibshraeny: There seems to have been a lot of divisiveness, even in just my party, the Republicans not working in a cooperative manner, a lot of divisiveness, a lot of name-calling, I think we need to move beyond the name-calling and sit down and roll up our sleeves on constructive agreements. There was a legitimate differences of opinion between the governor's office and the legislative leadership. I would like to see them come together and coalesce, and bring in the democrats too and coalesce behind some solutions we can all grasp. And that has not happened yet.
Ted Simons: That idea of President Burns, obvious lay new start, everyone is optimistic and there's a good feeling , they’ll probably start and go away soon-- they don't have to go away. Those kinds of criticisms, no one seems to get along, the loggerheads of everything. Can that change?
Bob Burns: Well, first of all, it's not everybody not getting along. A lot of people get along. It's a small minority that doesn't get along, possibly. And this process, when we come in every two years with a new group of people, there's an adjustment period that has to take place. And this time it took an entire session, I believe, to do that. And part of that was because we had a change in governors in the middle. Which created a considerable amount of confusion. And the transition was really tough for the governor to bring in new people and get them in place. And so we're all -- that's all gone. That's behind us now. So I think we can pull this stuff together, and there's a lot better, I believe, in our house at least, better communication with the minority party. I hope to continue to build on that, and so, you know, this is a process we're not very -- if ever, is 100% happy with what the result is. It just doesn't work that way.
Ted Simons: Is there a better communication with the minority party? On both sides that you can see, is there maybe a lessening of those kinds of name-calling and rock-throwing from the sidelines, or as we saw -- the governor barely finished her speech, and it seemed like there were some cat calls and rocks were starting to throw already.
Kirk Adams: Well, you know, to some degree we've already entered the silly season of campaign season. And so there will be some political posturing and the things that are natural to the process of elections and certainly we have very high-stakes elections coming up. I think our challenge is leadership and our challenge is legislators as to focus as much as possible on the job in front of us, and let the elections take care of themselves later. And not bring in electioneering into this historically different time that we're having in the state so we can make the appropriate choices for Arizona now, and then let the elections happen as they do.
Ted Simons: With those choices on the table, and they’ve been on that table for an awfully long time, something is going to have to get done, do you see the middle rising up? Do you see both extremes, caucuses basically saying, we can't deal with that right now, we've got to deal with the middle? We've got to make the hard choices. Possible?
Kirk Adams: Well, you know, in this process, anything is possible. I will tell you that if you look at the work that we did this last year, we solved -- we put forward budgets -- budget adjustments to the tune of $5.5 billion in calendar year '09. That's a lot of work. The problem we face was the floor was dropping out from under us each and every month. 46 out of 53 Republicans voted to get the voters a chance on additional revenue. We didn't have a single democrat out of 37 that would give the voters that same opportunity. And as we move into this next year, I do feel frankly, cautiously optimistic that we can get enough votes together to make those choices so the voters have their say, and we can enact the necessary spending reductions.
Ted Simons: Cautiously optimistic?
Bob Burns: Well, I think you've got to be optimistic. We've got to solve this problem. And this is the state of Arizona. I think we can do it. We just got to put our nose to the grindstone. I think it's important that we work to get this job done sooner than later for everybody's benefit. People in the legislature, candidates for the next election, the citizens of Arizona, everybody benefit ifs we get this over and done with quickly.
Ted Simons: All right. Gentlemen, great discussion. Thank you so much for joining us on "Horizon."
Kirk Adams: Thank you.
Bob Burns: Thank you.