Horizon, Host: Ted Simons

November 18, 2010

Host: Ted Simons

Economic Impact of SB 1070

  • A new report blames Arizona’s immigration law for more than $140-million in lost revenue. Senior Vice President and Economist for Elliott D. Pollack & and Company, the firm that conducted a study the report is based on, talks about the data.
  • Jim Rounds - Senior Vice President and Economist for Elliott D. Pollack & and Company
Category: Business/Economy

View Transcript
Ted Simons:
Good evening and welcome to "Horizon." I'm Ted Simons. A new report indicates that a boycott tied to Arizona's immigration law has cost the state more than $140 million in lost conference and convention business. The center for American progress released the study. It was conducted by Elliot D. Pollack & company, a local economic firm based in Scottsdale. Here with more about the study is Jim Rounds, senior vice president and senior economist for Elliot Pollack & company. Thanks for joining us. Good to see you. What did you look at in this study?

Jim Rounds:
Not only in total of economic activity but the GDP figure but in terms of the general fund tax collections and the things we were able to capture, what is the economic impact in tax revenue losses associated with those conferences and convention that is formally identified they weren't going to come to Arizona and then we took a look at reductions in bookings for future events -- that's pretty much a proxy for picking up what we're missing and we're not hearing about. When you add those together, it gives you a chance to approximate.

Ted Simons:
What did you find?

Jim Rounds:
We found that in -- we could only pick up what I think after look agent this quite extensively about half the economic losses in our particular analysis and so what it came down, to there's a lot of economic activity but ends up being the lost economic activity is one-tenth of a percent. Smaller than anticipated. The job losses in terms of 2700 job losses related to S.B. 1070 compares to 2.4 million jobs throughout the state but the bigger one is even if we double our estimated impact which again I think we caught half. So if we double it to capture half the activity, the impact to the general fund is going to be roughly $10 million this year, the following year and the year after that, for a total of about $30 million. It sounds impressive but when in the context of the overall general fund budget of about $6.5 billion, it's not that much.

Ted Simons:
Talk about though -- and we've heard this from tourism and convention folks on the program, not only what they're missing now, but the phone calls -- and you touched on this, the phone calls not coming that will impact in three, four years, somewhere along the line. Is there -- how close can you get to something like that?

Jim Rounds:
That's another area where we captured about half. The Phoenix convention center, they were down 33% in terms of bookings they were expecting. But the economy is a little bit better than last year and at worst, we thought they would have been about the same as last year. But down 33%, that means it's having an impact. But when you translate that into lost general fund tax collections while is sounds impressive. One, it's a transitory event. Arizona is carrying the water for the immigration reform. The next session, maybe more states will try to replicate what Arizona did with S.B. 1070 and a lot of other states will be getting that attention too. I think we captured about half the activity and it's a guestimate but gives you an idea the scale. It's not so much the exact estimate. If it was we lost $25 million versus $35 million or $40 million, the exact number doesn't matter. It's not nearly as big as some were portraying it to be. I think the biggest impact wasn't S.B. 1070. I think it was the legislature sweeping a large amount of tourism advertising money from the budget last year. That's impacts the -- impacted the state about three times more than S.B. 1070.

Ted Simons:
Could that be exponential?

Jim Rounds:
I think $30 million, when the state has a billion dollar deficit this year, $30 million is still significant but really, I think that's something that some conservative lawmakers could live with. The tourism losses could be three times that amount. Maybe more. Our calculation related to the sweeping of the funds last year, for every dollar we cut from the tourism budget, we lose about three. While it was used as a budget balancing tool, I think it worsened the situation and what I would like to see happen, the legislature restore the moneys in tourism and it will offset the impact of S.B. 1070.

Ted Simons:
The idea though -- and maybe it's included in the lost aspect, we can't figure out for now. But the idea people moving here, the idea of relocating. Whether it's business, whether it's families and residential, these things. Can you factor that in there?

Jim Rounds:
It's hard to factor in families moving here. The economy is such that it's worse in Arizona than it is across the nation but still a lot of individuals upside down in their homes, having a hard time finding jobs or managing wealth. They're not going to be moving to the state. When they get their financial house in order, they'll be interested in Arizona only after we create jobs. I don't think they're not coming because of S.B. 1070. I think it's impacted by the fact we don't have a diverse economic base but on the business side, I talked to site selection people and they said on occasion, one of the businesses that might be considering Arizona brought up the fact there's interesting things going on with S.B. 1070 and how we're dealing with immigration, how is that going? Now let's talk about the numbers and what you can provide in terms of tax credits or are you going to modify business taxes and things. It hasn't directly impacted us. At least talking to the people that bring businesses to Arizona.

Ted Simons:
It's in the conversation?

Jim Rounds:
Only in the beginning. I'm not worried about it right now. I'm worried if maybe we continue to push the edge of the envelope on immigration reform and continue to be in the news. Let's say 25 states decide to implement what we did last year and we take it one step further and leading the news across the country.

Ted Simons:
The 14th amendment, for example.

Jim Rounds:
If we decide to do that, I think there could be a cumulative effect over time. I would like to see that la -- lawmakers did what they thought they had to do, but they need to focus on jobs and I've heard certain lawmakers say that jobs will be the number one priority and immigration second. They need to take that seriously. We need to make changes.

Ted Simons:
The impact of state services from perhaps fewer illegals because of perhaps S.B. 1070. How is that factored in?

Jim Rounds:
That's not part of the math we provided to the center for American progress but thought it was relevant. We provided the math, we didn't write the report. I think that's critical because a lot of people don't understand that let's say you take a family of four, if you end up having a family of four and there's two kids in school, you have to be making well above median income before you're a net contributor to the state coffer. Until you hit a threshold, you're receiving more benefits than providing tax dollars. I don't want to say drain on general fund but that's how the math works out and that has to be considered and now that we have estimates for the losses in terms of that particular segment of the population and people do math, it's possible that the savings are going to be greater than the costs that we identified.

Ted Simons:
Last question, quickly here, you mentioned your report did the math and your clients went ahead and released the report. Sounds like they saw something that you either weren't emphasizes or you're emphasizes something they're choosing to put a lid on.

Jim Rounds:
There was a disconnect. The math is accurate, we provided accurate facts. This is something we're very good at. The problem is in interpreting the results. Their interpretation was more -- we lost $30 million over three years, it's a scare tactic. They tend to work in the shorter term. They want the other states to follow suit. Mine is there's a lot of unintended consequences associated with this, like having reductions in tourism employment. Well, who tends to be an employee in the tourism industry? Lower income individuals and including immigrants. Lowering -- lower income individuals, possibly immigrants. The dollar amount wasn’t the story. They thought that was the story. That's fine; they can promote it the way they want. But our job is to get the accurate facts out so our policy makers can make wise decisions.

Ted Simons:
All right Jim, great having you here.

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