Ted Simons: last Friday, Governor Jan Brewer released her budget plan for fiscal years 2010 and 2011. The governor called her far-reaching proposals to align state spending with revenues as the most significant budget reforms in Arizona history. Much has been done already to Arizona's structural deficit. In the last 12 months, state spending was cut by more than a billion dollars while the state workforce was reduced by nearly 10%. Now, with Arizona facing a $5 billion deficit, the governor is asking for more cuts, more borrowing and a temporary sales tax increase. Here now to talk about her budget proposal, and other things, is Governor Jan Brewer. Thanks for joining us.
Jan Brewer: Thanks for inviting me.
Ted Simons: Let's start with the state of the state speech, if we could. Doing the right thing means doing the hard thing. Don't act in self-interest. You mentioned ego and working together, doing honest work. What is your overriding message?
Jan Brewer: I think it was unity and that people understand that voters elect all of us to be down there and that they give us their trust to do the right things and put our political ambitions, if you will, on the back burner. More so today than at any time in the history of the state, given the catastrophic crisis we're facing. And I believe if you're -- if you work together and if you're honest and you're truth tellers, the people will understand. So I think it was about unity. Let's come together and work together to solve this problem.
Ted Simons: I want to get more to the unity aspect in a moment but the idea that be truth tellers and do these -- was that lacking last session, do you think?
Jan Brewer: I think a bit of it was. I think there was a lot of misrepresentation in regards to particular issues we were dealing with and that was unfortunate and when you don't have anyone singing of the same page in the hymnal, it doesn't work. So I'm very hopeful we'll see a new beginning.
Ted Simons: How does your budget that you released last week, how does that differ from the fatally flawed budget -- you called it fatally flawed, the legislature sent you last summer?
Jan Brewer: I think it addresses a lot more issues. Of course, last year I had anticipated, hopefully, we would get more revenue so we would not see the terrible devastation to some of the issues that are important to the people of Arizona. Like education and the vulnerable that live in our state. And knowing that we were going to be facing an even bigger deficit, if that money did not arrive that, we would be upside down and underwater, I -- it was -- it was not a solution at that time. Unfortunately, the way it was sent up to me, it didn't respond to the maintenance of effort issues that we are mandated to abide by from the federal government in education and AHCCCS. So I was forced to veto it or we would have lost our federal matching dollars which made it -- would have made it much more devastating. This year, now, we're moving into January 2010 and in the current budget, we're already $1.2 billion under water in the current budget. Going in, releasing my new budget, which is $3.4 billion short. So now we've got a $4.6 billion deficit, or $5 billion deficit, if you will, facing us. Because there are no more stimulus dollars and the checkbook is empty. The credit card is overcharged, and we're going to have to make some very difficult decisions and choices.
Ted Simons: Difficult decisions and choices, and some of your critics are saying -- often mentioned the most vulnerable, that many of the most vulnerable in your budget plan would get hit hard. How do you respond?
Jan Brewer: That's true. That is what going to happen. We weren't able to get additional revenue coming in to the state funds and when your checkbook is empty, it's no different from your budget at home or mine. When there's no money, you have to cut and that's what we're going to be forced to do. In my budget, I don't know if everybody understands, but the governor, she or he who governs has to present a balanced budget. The legislature doesn't have to present a balanced budget but it's incumbent upon the governor to do that. So I deliberated carefully and thoughtfully and made every effort to make things work. At least -- as least painful as possible and there's enough pain in it for everyone. It's just the times and we're going to have the courage to do those kinds of things that most of you probably would not like. But it's something that has to be done. When you have no money and you've used debt as a revenue source to balance the budget for so many years, it's important, I think, that the public understand that Arizona has a structural budget deficit. And we've had it for years. We continue to spend and spend over and beyond our revenues and now the time has come where we pay the piper. And we need to correct that in order to get Arizona turned around and on a path forward.
Ted Simons: But there's a line of thinking that says one way to correct that is to -- and look at the graphs. The income tax rates and how they've been cut steadily over the last 20 years, spending has gone up in many respects over the last 10-15 years. There are those who say it's impossible to get revenue and spending in line if taxes, income taxes in particular, but taxes in general are continually cut. There's no revenue for even a maintenance of effort if not the maintenance of effort the feds are looking for. Again, how do you respond.
Jan Brewer: There's two philosophies in regards to that. Let me say from the beginning that I believe we do and can do some tax cuts but can't do them today. We can’t do them this year. They have to be delayed, in my opinion. I think it's not responsible if you say today when we're so far in debt that we go out and cut more revenue sources out of the budget currently. I think it's important we go in and address those issues of corporate income tax and corporate personal taxes and income taxes in order to encourage businesses and be more competitive with the states that surround Arizona. So that those businesses will come to Arizona and provide good paying jobs for people here. Therefore, you've got a healthy economy. That's part of the economic development that was in my -- that was in my speech.
Ted Simons: Indeed. But also in the speech is the idea of sending to voters -- I guess in May -- the idea of some 300 and some odd thousand people in Arizona losing their health insurance. A variety of ways. Is that -- there are those who say that hurts Arizona's image. Cutting taxes may be attractive but if you cut taxes and try to attract people to a place where there's so little in the way of social services is defeating the purpose.
Jan Brewer: I think people have gotten accustomed if you will to have those kinds of programs or entitlements that Arizona has provided. Certainly, a lot of states have not gone to that degree of providing healthcare to their population. Arizona under the direction of the previous administration and the legislature and the voters determined that's what they wanted and at the point in time in regard to that, it was alluded that that would be paid for out of the tobacco tax revenue which paid for part of it. But it didn't pay for the whole program with all the growth that's taken place. It couldn't keep up with it. So then that cost $900 million to be taken out of the general fund to pay for that population. You know, we cannot sustain it. We do not have the money. There again, you have to make difficult decisions and I'm hoping that the legislature will see fit to send that back to the voters and have them reconsider that voter initiative that was passed.
Ted Simons: We had democratic leadership on last week along with Republican leadership in the legislature but the democrats said it didn't make sense to ask voters to reconsider what they've already approved because the legislature continues to cut taxes and doesn't find ways to fund these things.
Jan Brewer: The bottom line, we need to come together and understand the situation that the state of Arizona is in. We have to balance the budget. We have to do what's right for Arizona in order to get the state turned around. Difficult choices. It's going to take a lot of courage and I believe strongly that if you tell the people the truth, you're honest, give them the facts, give them that opportunity. We cannot sustain it. There's no other way to go. The bottom line is that we have to do many difficult things, make a lot of difficult decisions in order to get the budget turned around and we'll do it if we can come together and work collectively together.
Ted Simons: Is there some concern with the number of people that could be off of insurance, if -- you know, the referendum and these things happen, is there concern that those folks are going to pass their healthcare costs onto the rest of us and negatively impact the economy. Because there's some talk of that being a consequence of these folks leaving insurance.
Jan Brewer: Well, there's always consequences to every decision you make and unfortunately, we don't have a lot of choices. That's one area where we can obtain $900 million that we desperately need in order to balance the budget. Many of the areas of the budget of which we get to deal with are areas in which we can't go below the maintenance of effort. So I have a very, very small portion of that budget where we can make these cuts. I was not part that have problem. I did not create that problem. I did not support that on the initiative when it was voted on. You know, but the people did. And I trust the voters. I also trust the voters, if you will, to be able to look at it and say we made a mistake. Maybe we didn't get the right kinds of information. We believe it was all going to be paid for through the tobacco settlement. It wasn't all paid for by the tobacco settlement and that growing population just grew by leaps and bounds. We cannot sustain what we normally provide.
Ted Simons: If the voters, though, vote in the other direction that you would hope they would vote and decide they want to keep these services and these folks having health insurance, what happens? Where does the money come from?
Jan Brewer: It doesn't come from anywhere. The bottom line, if we don't have a balanced budget, we'll not have any kind of creditability in the -- in the United States as being a healthy state and it will devastate every business and every family in the state of Arizona. These are tough times. These are critical times. And this is responsible that we get the message out to everybody so that everybody understands that we have to make right decisions quickly or Arizona is going to fail. And this just didn't happen in the last couple years. This happened over, you know, six, seven -- seven years of that insatiable spending and now it's time to pay the piper.
Ted Simons: Last question regarding AHCCCS and these sorts of things. What happens to those people? Where do they go?
Jan Brewer: They'll probably end up going to the health clinics in the community or to the emergency room.
Ted Simons: Which will cost, won't it? Won't it cost the rest of us in increasing healthcare cost?
Jan Brewer: It very well could.
Ted Simons: But that's --
Jan Brewer: Very well could.
Ted Simons: But that's the situation you're taking?
Jan Brewer: Right. I have no choice. I have to balance the budget. I put my budget out there which is balanced and many difficult decisions were made. It's a plan that works and will turn the state around. It's open for negotiation and open for the legislature to come forward and look at it. Put other ideas on the plan -- on the table, so we can work things out. But clearly, this is the budget that the governor presented and it's balanced.
Ted Simons: You mentioned sale leasebacks and continuing with that particular aspect of -- were you surprised at how much money that raised here recently?
Jan Brewer: Well, we anticipated it would raise approximately that amount of money and we did get a good interest rate and financing on all of that. So we're very, very pleased with that. But we cannot continue. We have to, today, and probably next year, do some more debt financing in order to get us through these difficult times. But it's not a way to balance a budget, to use debt financing as revenue. It's just ridiculous.
Ted Simons: It's ridiculous, but it's being done and you're saying it has to be done.
Jan Brewer: It has to be done. These are the things and the gimmicks that we all talk about. The gimmicks and the magic and midnight rollovers and those things that when I was in the legislature, I worked very, very hard to get rid of the rollovers when I was there and finally were able to achieve that. And get a rainy day fund, a budget stabilization fund so we would have the dollars there for exactly this particular time. Unfortunately, it wasn't even raining and they spent the rainy day fund.
Ted Simons: Indeed. I want to mention juvenile corrections as well. Moving those from the state over to the counties, why is that a good idea?
Jan Brewer: I think it's a good thing. We looked at the department of juvenile corrections and it appeared that it was not serving the juvenile offenders in there. Some were held there that had already paid their time, if you will, and it was costing an enormous amount of money. Some 450 kids and 900 employees, the ratio was just out of whack. Our facilities are not functional. They are run down and unkempt. And so we know that juvenile corrections prior, that before the state took them over, were always at a county level. And so in an effort to save us the money, we decided and determined -- I decided and determined -- we would accept that responsibility back.
Ted Simons: And yet a Coconino supervisor says that this is just a cost shift, that we’re going to have to take all this stuff on and that the counties now will have to take these costs on to be able to afford them.
Jan Brewer: He's right. Last year I protected the counties and cities from robbing and stealing from them. They balanced their budgets and made hard decisions but we didn't get any relief on a state level. We have no other choice. We're going to have to do cost shifting. Times are tough the times are tough. And it's sometimes a difficult message to get out to people because they don't have all the information we give to them. But if we're going to do and change the way Arizona does business, we've got to do it now. And if we don't, we're in a hole so deep we won't -- we won't be able to climb out of it probably for 15 years.
Ted Simons: Is that message, do you think, getting across to the legislature? I ask that because my follow-up question, just referring it to the ballot couldn't pass the legislature last session. What has changed? And you're asking them for a two-thirds vote. Forget the referral, just do it yourself.
Jan Brewer: I'm calling on the legislature to come together in unity and to be a statesman and forget the partisanship. I think it's really, really important and I hope that given the realization of exactly what we're facing and knowing this is what's going to happen, the budget is pretty clear cut, the one I presented, that it will make them realize they have to do it. And the bottom line is that we need it done by January. We need it done by January. For the 2010 budget. And then move forward to the 2011 budget. I have to have $1.4 billion or I will have to cut another $1.4 billion out of the budget. So if we have any of those legislators that are concerned about any particular budget area that is important to their constituents like education, public safety, those kinds of things, they better -- they better think twice. And let me mention, we only missed getting the referral out to the voters by one vote. We were short one vote and not one democrat voted for it. Not one democrat.
Ted Simons: The Democrats, though -- and I asked about that when they were on the program.
Jan Brewer: Did you?
Ted Simons: Yes, I did. And the response seems to be that it's always linked with something. Why would it make any sense to go ahead and in this case, for a sales tax increase, why would that make sense when already in the pipeline, it was perhaps not as long a pipeline back over the summer as it is now, starting in 2012 and phasing into 2016, the idea of all of these tax cuts. And so from where they're sitting, they're saying it makes no sense for us. My impression was if it were just that one cent sales tax, they would be more willing to listen than if it always goes along with tax cuts.
Jan Brewer: I think we're at the point now, the tax cuts they're talking about previously, were done, they've been enacted and I believe there's any tax cuts to be seen in the future, they'll be down the road. The bottom line is we don't have a choice. They need to come to me and to the leadership in the legislature what they want to cut, not what do they want to increase. That is the problem.
Ted Simons: I know that repeatedly on this program and repeatedly everywhere it seems, the democratic leadership say we just want to meet and discuss and negotiate. I think today they sent a letter, they're formally requesting all four leadership teams together. The only way to get necessary votes and true negotiations between their leadership, Republican leadership and you, true negotiations have yet to happen. True?
Jan Brewer: Well, I -- we have -- we have -- all five of us collectively together and certainly we have met individually with them or both of the leadership of the minority in my office and vice versa with the leadership in the senate. The bottom line, they need to come and bring me a plan. They haven't brought a plan. They don't have a plan. They just come and have a want list. I can't accept want lists. There's no money to provide anything to them. They need to bring me a plan and a plan that tells me what they're willing to cut. They need to bring something to the table they're willing to cut. We have no money. The checkbook is empty. It's empty. It's done.
Ted Simons: So if they brought you a plan with options on cutting certain things, along with ideas of saving other things, that is something that could be negotiated?
Jan Brewer: Absolutely.
Ted Simons: And/or Republican leadership all sitting at the same table?
Jan Brewer: I believe so.
Ted Simons: They say they can't get your attention though. Where are they getting this?
Jan Brewer: I don't know, you might believe it's a political arena down there, but, you know, we have met and just met last week and I'm willing to sit down and talk with them. I'm sure that the leadership in the house and senate, the majority leadership is willing to sit down and talk with them. We sat down with them last year. I did. You know, but we need them to bring solutions. We don't need to deal with political rhetoric. We're dealing with all the people of Arizona and not only dealing with today, we're dealing with our future, we're dealing with the future in regard to education and public safety and those vulnerable people out there that depend on that little small safety net to give them a little help and then we have to be responsible. We have to be job creators. You know, we have to create jobs and we have to be able to have skilled people in the workforce. We've got a lot on our plate. But we can get it done if there's unity. But --
Ted Simons: But with unity, comes compromise. Are you seeing compromise on both sides? From the Republican leadership, are you looking for things they're willing to save or not cut quite so much or look at tax loopholes that need to be closed. There's a lot of money in other tax loopholes or tax credits, if we can call them that. Are you willing to look at that stuff?
Jan Brewer: Absolutely, absolutely. Like I said, the suggestion box is wide open. The suggestion box is wide open. But you can't come with a want list. You've got to come with the cut list. We have no money and I don't know how many times we can say that. Right now, we need -- and I would like to see the legislature and I call them into special session sometime in January, just to look and take care of the $1.2 billion deficit that I've got to solve to get us out of this fiscal year. That's a lot of money when you think you're dealing with a $6.5 billion revenue to cut another 1.2 out of it? And then, we need to solve a $3.4 billion deficit out of a $6.7 billion revenue stream. This is serious stuff. When you look at those numbers, it's shocking, astonishing. Shocking. We need earnest people coming forward, having the courage to do what's right. And we need to solve it together. Each and every one of us.
Ted Simons: Are you are optimistic that this is going to happen? You can be cautiously optimistic but are you pessimistic? What do you think? What's going to happen?
Jan Brewer: I would like to believe given the circumstances and reality of everything we're facing and I think the people of Arizona understands that there will be a solution and that we will get it resolved. It's dreadful to think if we don't, what will happen?
Ted Simons: And you think that message is getting across?
Jan Brewer: I do. I do. You know, when you look and you sit and talk to your financial officer over at DOA and he tells you we're borrowing a billion dollars a day. A billion dollars a day just to make the state function and we pay it back every day but we have to borrow it every day. Who would have ever thought? I was in the legislature and our budget wasn't even a billion dollars and today we've mortgaged everything and borrowing money and out of whack and we have a structural deficit. So we look at these times as a challenge. We have to, and this is a great opportunity to get rid of that structural deficit and do the cuts we need and make it better to do business in Arizona.
Ted Simons: We'll stop you right there. Good to see you. Thanks for joining us.
Jan Brewer: Thank you.